frsbog_mim_v41_complete.pdf

FEDERAL RESERVE B O A R D

WASHINGTON

OFFICE OF VICE GOVERNOR

July 2, 1934.

Enclosed I am handing you correspondence discussed at the recent conferonco of Governors and Chairman, to wit : l e t t e r from Honorable Joseo Jonos, of tho Reconstruction Financo Corporation, to me under date of Juno 22, 1934, and my reply under date of Juno 36, 1934.

You w i l l note that I mado my reply as much along the sp ir i t of the discussion had i n tho confer onco as I could. I understood tho expressions of tho conference to moan that tho Roscrvo Banks should not have jo in t action with the Reconstruction Finance Corporation i n tho making of these loans hut that f u l l cooperation between the two agencies i n the interes t of making the loons could woll bo had.

I be l i eve that th i s cooperation i n each bank w i l l prevent harmful competition between the Reconstruction Finance Corporation and your bonk, tho appearance of an applicant before tho Reconstruction Finance Corporation who had boon declined by your bank, and tho p o s s i b i l i t y of a c r i t i c a l review of any act ion of your bank by the Reconstruction Finance Corporation.

I am expressing myself f r e e l y on t h i s subject f e e l -ing that you are primarily interested in your bank doing a f i n e job i n the in teres t I f the small indus tr ia l i s t s of your d i s t r i c t , and that you w i l l work out tho d e t a i l s of coopera-t i o n to af f irmat ive ly accomplish tho desired ends.

m t h ny regards, I am

Sincerely yours,

Governor.

Enclosures

TO GOVERNORS A£D CHAIRMEN OF ALL F. R. BASKS.

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

X-7948-a

C O P Y

RECONSTRUCTION FINANCE CORPORATION

Washington

June 22, 1934.

Dear Governor Black:

I t eg to enclose herewith copy of our regulations for industrial loans. These can he altered i f and as required.

I t seems to me that as far as i s pract ical under the law, the HFC and Federal Reserve Banks should consider these loans j o i n t l y , i . e . , Fed-oral Reserve Industrial representatives and RFC Loan Committeemen s i t t i n g as a jo int Loan Committee i n considering industrial loans, inv i t ing the cooperation of "banks, and especial ly the "bank having the account of the applicant. In th is way, greater speed w i l l he accomplished, with each agency taking such part ic ipat ion i n the loan as may he agreed upon at the time of making the loan. By th i s procedure a greater spread i n the credit r i sk would also ho obtained.

Inasmuch as our o f f i c e s , with few exceptions, are i n Federal Reserve Bank buildings, industr ia l loan applicants could he directed to a common o f f i c e for "Industrial Loans"; the Advisory Loan Committee, composed of representatives of the RFC and the Federal Reserve Bank, determining whether the loan would he recommended, and i f so , what agency would make i t , or how i t would he participated in; Federal Reserve Bank management, as wel l as the RFC Board, necessari ly reserving the r ight to adopt, a l t e r , change, modify, or re jec t recommendations of the Loan Committee.

There w i l l undoubtedly he loans which Federal Reserve Bank manage-ment w i l l he w i l l i n g to make, in cooperation with hanks, and i n which the RFC w i l l have no part . On the other hand, there w i l l probably bo loans i n which the Federal Reserve and the RFC w i l l part ic ipate i n connection with banks.

I f somo such procedure as t h i s i s not agreeable to the Federal Reserve Board and the several Federal Reserve Banks, the RFC w i l l , at a l l events, cooperate with Federal Reserve and other banks and lending agencies, with a view to f a c i l i t a t i n g such loans.

Sincerely yours,

(signed) Jesse H. Jones Chairman

Honorable Eugene R. Black Governor, Federal Reserve Board Washington, D. C.


O P T X-7948-13

FEDERAL BESEBVB BOARD

Washington

June 26, 1934.

Honorable Jesse Jones, Chairman, Reconstruction Finance Corporation, Washington, D. C.

Dear Mr. Jones:

Your l e t t e r of the 22nd re la t ive to cooperation i n the matter of making loans to industry was today considered at our conference.

The conference f e l t that the law covering loans to industry "by the Reserve Banks s p e c i f i c a l l y defines the func-t ions and duties of the Reserve Banks i n the matter of making such loans. This law also provides for a Statutory Advisory Committee composed of indus tr ia l i s t s and defines i t s duties and powers.

The conference was of opinion that the Federal Re-serve Banks cannot waive the duties or obligations imposed by law by any form of co l la tera l agreement. I t be l i eve s , however, that the Federal Reserve Banks w i l l f ind many ways i n which they and the Reconstruction Finance Corporation agencies can be of mutual help by cooperation i n exchanging information and expeditiously handling the applications that w i l l come under the new l e g i s l a t i o n . To a considerable extent cooperation a l -ready ex i s t s i n f a c t , and i t i s the f e e l i n g of the conference that such further working arrangements as may be necessary or desirable w i l l be developed most speedily and s a t i s f a c t o r i l y as the work progresses i n each bank.

In the end wo are a l l s tr iv ing to aid industry and to that end we w i l l cordial ly cooperate. In th i s way wo w i l l help to a id recovery.

With my regards, I am

Sincerely yours,

(Signed) E. R. Blade Governor.


FEDERAL RESERVE BOARD WASHINGTON

A D D R E S S OFFICIAL 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 ^ 7 O 4 9

J u l y 3, 1934.

SUBJECT: F ina l Dispos i t ion of Applicat ions under Section 32.

Dear S i r :

The Board has w r i t t e n to a number of ind iv idua l s who have

f i l e d app l i ca t ions under Section 32 of the Banking Act of 1933, ad-

v i s i n g them tha t i t was unable to f i n d tha t the r e l a t i o n s h i p s cov-

ered by the r e spec t ive app l ica t ions were not incompatible with the

pub l ic i n t e r e s t , and s t a t i n g , pursuant to Section 17(g) of Regula-

t i on E, tha t i t was prepared to give considera t ion to any f u r t h e r

f a c t s or arguments which the app l ican t s might d e s i r e to submit i n

connection with t h e i r app l i ca t ions . In the circumstances, such

app l i ca t ions cannot "be regarded as f i n a l l y disposed of u n t i l d e f i -

n i t e advice i s received i n each case tha t the app l ican t has brought

h i s r e l a t i o n s h i p s i n t o compliance with the requirements of t h a t

sec t ion ; and the purpose of t h i s l e t t e r i s to o u t l i n e the s teps

which w i l l he nccossary to accomplish that r e s u l t .

1. Where r e p l i e s have been received by the Board s t a t i n g

t h a t the app l i can t i s res igning from one of the i n s t i t u t i o n s involved

i n h i s a p p l i c a t i o n , a copy of such rep ly w i l l be forwarded to you i n

order tha t you may a s c e r t a i n when the r e s igna t ion becomes e f f e c t i v e

and advise the Board i n order to complete i t s r e co rds .


X-7949 : - 2 -

2. tlhere the applicant writes to you instead of to the

Board s tat ing that he i s resigning from one of the i n s t i t u t i o n s i n -

volved, i t w i l l be appreciated i f you w i l l ascertain when the res ig -

nation takes e f f e c t and advise the Board i n order that i t s records

may he complete .

3. Where an applicant writes the Board requesting further

consideration of the application, you w i l l receive from the Board a

copy of the applicant's l e t t er and a copy of such reply thereto as

the Board may make so that , i f the application i s denied, you may

ascertain what steps the applicant takes pursuant to the Board's

reply and advise the Board in order to complete i t s records.

4 . In the remaining cases , unless i t appears that there

i s some reason why the matter should he dealt with otherwise, i t

w i l l he appreciated i f you w i l l ascertain what act ion the applicant

takes in view of the Board's l e t t e r and advise the Board, i n order

that the matter may he closed.

The above procedure contemplates that , i n each case, your

f i l e s , as well as those of the Board, w i l l contain evidence that the

matter i s closed and that the relat ionships i n question have been

brought into conformity with the requirements of the sect ion.

Very truly yours,

Chester Morril l , Secretary.

TO ALL F. R. AGENTS.



A D D R E S S OFFICIAL C O R R E S P O N D E N C E T O T H E FEDERAL R E S E R V E B O A R D X-7950

July 3, 1934.

SUBJECT: Statements for the Press.

Dear Sir:

There are transmitted herewith, for your information,

copies of press statements ent i t l ed "Securities company within

provisions of sections 20 and 32 of Banking Act of 1933" and

"Membership in Federal Reserve System of trust companies doing

substant ia l ly no "banking business", which have been prepared for

release to the press Saturday morning, July 7, 1934. The re-

lease date has been f ixed s u f f i c i e n t l y in advance in order to

permit a l l Federal reserve agents to receive copies of the

Board's rulings prior to their publication, and i t should be

stated, in th is connection, that the statements w i l l be incor-

porated in the Federal Reserve Bul let in for the month of July.

Very truly yours,

L. P. Bethea, Assistant Secretary.

Inclosures

TO ALL F, R. AGENTS.


7

X-7951

F E D E R A L P. E S E R VT.3 B O A R D

STATEMENT FOR THE PRESS

For re lease in morning papers of July 7, 1934.

SECURITIES COMPANY WITHIN PROVISIONS OF SECTIONS 20 and 32 of BANKING- ACT OF 1933.

The Banking Act of 1933 was enacted on June 16, 1933, and

Section 20 of that Act became e f f e c t i v e June 16, 1934, and reads i n

part as fol lows;

"Sec. 20. After one year from the date of the enactment of th i s Act, no member bank sha l l be a f f i l i a t e d in any manner described i n sect ion 2(b) hereof with any corporation, associat ion, business t r u s t , or other similar organization engaged prin-c ipa l ly i n the i s sue , f l o t a t i o n , underwriting, public sa le , or distr ibution at wholesale or r e t a i l or through syndicate part ic ipation of stocks, bonds, debentures, notes, or other s ecur i t i e s . * * * * .

The Federal Reserve Board recently considered the question

whether a trust company which was a f f i l i a t e d with a member bank with-

i n the meaning of the provisions of section 2 (b) of the Banking Act

of 1933 and which was engaged i n the business of i ssuing and s e l l i n g

^ mortgage bonds was a corporation carrying on the kind of business de-

scribed i n sect ion 20 of the Banking Act of 1933. The business of

the company involved was as fo l lows:

The trust company made loans secured by f i r s t mortgages on

improved real e s ta te and the obligations secured by such mortgages were

assigned to one of t wo corporate trustees , i n accordance with the terns &

of a trust agreement, to secure the payment of bonds of the trust coo-

pany which were issued and sold to the public by the trust company. It Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

X-7951

— 2 —

appeared that these bonds were issued s e r i a l l y i n denominations of

$100, $500, or $1000 each; that the bonds "bore interes t payable semi-

annually; that at the time of the Board's consideration of the matter

the rate of interest on such bonds then being issued was 4§$; that

the bonds were negotiable in form; that the bonds were the direct

obligations of the trust company; that in addition to obligations

secured by mortgages certain secur i t ies of spec i f ied c lasses might

be deposited with the trustees to secure the payment of such bonds;

that i t was the pract ice of the trust company to authorize the i ssue

of such bonds in s er i e s of $1,000,000 or l e s s , although the whole

amount of each series might not in every case be sold; and that i t

was the practice of the trust company to issue the ser ies of bonds

with maturities of either f i v e or ten years. It a lso appeared

that the trust company received deposits to some extent and did a

considerable amount of trust business . However, i t appeared that

the principal business of the trust company was the malring of mort-

gage loans and the issuance and sa le of i t s mortgage bonds.

After careful consideration of th is matter the Board ruled,

in view of a l l the f a c t s involved, that the trust company was engaged

principal ly in the i s sue and sa le of secur i t i es within the meaning of

Section 20 of the Banking Act of 1933, and that, in view of the a f f i l -

ia t ion of the trust company with a member bank, appropriate act ion

should be taken to comply with the requirements of Section 20 of the

Banking Act of 1933.


X-7951

*" 3 **

Section 32 of the Banking Act of 1933 reads in part

as fo l lows:

"Sec. 32. From and a f t e r January 1, 1934, no o f f i c e r or director of any member tank shal l be an o f f i c e r , director, or manager of any corporation, partnership, or unincorporated associat ion engaged primarily i n the business of purchasing, s e l l i n g , or negotiating securi -t i e s * * * unless in any such case there i s a permit therefor issued by the Federal Reserve Board; and the Board i s authorized to i ssue such permit i f i n i t s judgment i t i s not incompatible with the public i n t e r e s t , and to revoke any such permit whenever i t f inds a f t er reasonable notice and opportunity to be heard, that the public in teres t requires such revocation."

In the case discussed above i t a lso appeared that directors

of the trust company were also directors of a member bank. In view

of the f a c t s described above, the Board also ruled that the trust

company was engaged primarily i n the business of s e l l i n g or negotia-

t ing s ecur i t i e s within the meaning of Section 32 of the Banking Act

of 1933.


X-7952

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


For re lease i n morning papers of July 7, 1934.

M-embtcpswtp IB FEDERAL RESERVE SYSTEM OF TRUST COMPANIES DOING- SUBSTANTIALLY HO BANKING BUSINESS

During the past several years the Board has taken the

pos i t ion that i t would not admit to membership i n the Federal

Reserve System trust companies which do substantial ly no com-

mercial banking business, but recently i t reviewed the question

and decided that i t should give consideration to applications

for membership from trust companies of this type. Accordingly,

the Federal Reserve Agent at each of the Federal reserve banks

has been requested to inform any trust company i n h is d i s t r i c t

that may have been advised that i t would not be admitted to

membership because i t was doing substantial ly ho commercial

banking business that the Board w i l l give consideration to i t s

application for membership i f i t desires to f i l e one.


X-7953

INTERPRETATION OF BANKING ACT OF 1933

(Copies to "be sent to a l l Federal reserve "banks)

Ju ly 3, 1934.

Mr* Lewis B, Williams, Federal Reserve Agent, Federal Reserve Bank of Cleveland., Cleveland, Ohio.

Dear Mr * Will iams:

This r e f e r s t o Mr# F l e t c h e r ' s l e t t e r of Apri l 9, 1934,

with inolosures , i n regard t o the question whether the method used

by The ___________ Bank and Trust Company, , i n handling de-

pos i t s of funds accumulated f o r bona f i d e t h r i f t purposes i s i n

accord with the provisions of sec t ion 19 of the Federa l Reserve Act

and of the Board's Regulation Q« I t i s understood t h a t the bank r e -

t a i n s the savings pass books issued upon the deposi t of funds and

t h a t the funds evidenced thereby may be withdrawn i n whole or i n

pa r t by check or by non-negotiable r e c e i p t . I t i s a lso understood

t h a t i t i s the content ion of the bank t h a t i t s r e t e n t i o n of a pass

book c o n s t i t u t e s the bank or any employee thereof the agent of the

drawer f o r the purpose of present ing the pass book whenever a with-

drawal i s made, and t h a t t h i s procedure i s permiss ible under the

law and t he Board's r e g u l a t i o n s .

Under the d e f i n i t i o n contained in Section V(a) of the

Board's Regulation Q, a deposi t may not be c l a s s i f i e d as a "savings

deposi t" i f i t does not cons i s t of funds i n respec t t o which t he


X-7953

pass book or other form of r ece ip t evidencing such depos i t must be

presented to the bank whenever a withdrawal i s made. A depos i t i n

respec t t o which the pass book or other form of r e c e i p t i s r e t a ined

by the bank or by an o f f i c e r , employee, or agent t h e r e o f , r a t h e r

than by the depos i to r , does not comply with t h i s requirement . Ac-

cordingly, i t i s the opinion of the Board t h a t such a deposi t does

not c o n s t i t u t e a "savings depos i t " , but must be considered a deposi t

payable on demand.

In a r u l i ng published on page 609 of the Federal Reserve

Bul le t in f o r August, 1927, t he Board considered the ques t ion whether

accounts of a c e r t a i n member bank which were sub jec t t o check wi th-

out the p re sen ta t i on of the pass book, which i n some cases was r e -

ta ined by the bank i n order to make i t unnecessary f o r the deposi tor

t o present the pass book with each withdrawal, might proper ly be

c l a s s i f i e d as savings accounts f o r reserve purposes, and the Board

ruled "that such deposi ts could not be so c l a s s i f i e d . The Board

s t a t ed t h a t a pass book i s the depos i t o r ' s r e c e i p t , t h a t the apparent

purpose of i t s r e t e n t i o n by the bank was t o render the account sub-

j e c t to check without the necess i ty of present ing the pass book, and

t h a t an account subjec t t o check in such manner could not proper ly

be c l a s s i f i e d as a savings account wi th in t h e meaning of sec t ion 19

of the Federal Reserve Act .

I t i s bel ieved t h a t the p r inc ip l e s involved i n t h a t r u l -

ing are proper ly appl icable to the i n s t a n t s i t u a t i o n and tha t the


r e t e n t i o n of a savings pass book by a member bank f o r a continuing

period of time i n order to avoid the neces s i t y of the d e p o s i t o r ' s

present ing such pass book each time a withdrawal i s made i s not in

accord with the purpose of sec t ion 19 of the Federal Reserve Act

and does not comply with t he requirements of Regulation Q« Accord-

ing ly , i t i s the opinion of tho Board tha t deposi ts represented by

savings pass books which are r e t a ined by t he bank cannot be regarded

as "savings depos i t s" f o r the purpose of determining whether i n t e r e s t

may l awfu l ly be paid the reon . For s imi lar reasons, such deposi ts

may not be considered "savings accounts" f o r the purpose of comput-

ing reserves the reon .

I t i s noted t h a t Mr. , Cashier of the Branch

of the Federal Reserve Bank of , i n his l e t t e r t o Mr. F le tcher

of Apri l 6, 1934, s t a ted t h a t he has expressed the opinion to the

Pres ident of The Bank and Trust Company t h a t an out-of-town

customer may draw a check aga ins t h i s savings account# provided the

pass book i s a t tached t o such check, thereby c o n s t i t u t i n g the p resen t -

ing bank the agent of the ho lde r . In the Board's opinion, the drawl-

ing of negot iable checks aga ins t a savings deposi t i n the manner

described and the payment of such checks accompanied by the pass

book by the drawee bank is not prohib i ted by the law or the Board's

Regulation Q, provided, of course, t h a t the passbook i s promptly

re turned to the deposi tor and i s not t h e r e a f t e r r e t a ined by the bank

as a bas i s f o r f u t u r e withdrawals.

Very t r u l y yours,

(Signed) Chester Morr i l l

Chester Morr i l l , Secre ta ry .



A D D R E S S OFFICIAL C O R R E S P O N D E N C E T O T H E FEDERAL R E S E R V E B O A R D

X-7954

July 5, 1934.

Subject: Eight of National Banks to Purchase Stocks so le ly for the Account of Customers.

Dear Sir:

There i s inclosed herewith for your information a copy

of a l e t t e r addressed "by the Comptroller of the Currency under

date of June 28, 1934, to a l l national bank examiners with regard

to the question whether national banks may lawful ly purchase and

s e l l stocks s o l e l y upon the order and for the account of customers.

Very truly yours,


Inclosure

TO CHAIRMEN OF ALL FEDERA.L RESERVE BANKS.


(Copy) X-7954-a

TREASURY DEPARTMENT Off ice of Comptroller of the Currency

Washington June 28, 1934.

No. 62

TO ALL NATIONAL BAM EXAMINERS:

The question as to whether national hanks are permitted under the law to purchase and s e l l stocks so le ly upon the order of and for the account of customers has received the serious considerat-i o n of my department. In my annual Report to Congress, Page 11, I made t h e fol lowing comment on Section 16:

"Section 16, amending paragraph 7 of sect ion 5136, Revised Statutes, as amended (U.S.C., t i t l e 12, sec . 34: supp. 71, t i t l e 12, sec. 24), provides i n part that 'The business of dealing in investment secur i t ies by national hanks shal l he l imited to purchasing and s e l l i n g such secur i t ies without recourse s o l e l y upon the order and for the ac-count of customers, and i n no case for i t s own account. ' The section also defines 'investment s e c u r i t i e s ' as being marketable obligations evidencing indebtedness of any person, copartnership, associat ion, or corporation i n the form of bonds, notes and/or debentures. I t would appear from tho language that a national bank i s prohibited from per-forming the service of purchasing or s e l l i n g corporate stocks for the account of one of i t s customers. Since th is does not entai l the in -vestment by the bank of i t s own funds and the bank merely acts i n an accommodation capacity, i t i s bel ieved that i t was not the intention of Congress to penalize the public located in communities removed from the money centers i n disposing of or purchasing secur i t i e s i n the form of corporate stocks for investment purposes."

The further provision in the same sect ion provides, "the re-s t r i c t i o n of t h i s sect ion as to dealing in investment s ecur i t i e s shall take e f f e c t one year a f ter the date of tho approval of th i s Act". The Act was approved June 16, 1933.

A b i l l c lar i fy ing th is sect ion f a i l e d of passage at the las t Congress. My contact with Congress convinces me that my statement with reference to the intention of that distinguished body was correct and that only the rush of c los ing business prevented the passage of t h e b i l l . I have th i s day hold that national banks have the right to purchase and s e l l stocks so le ly upon the order and f o r the account of customers. This does not mean that national banks may do a brokerage business and any charge must not exceed the actual cost of servic ing.

Please acknowledge receipt of th i s l e t t e r .

Respectfully,

(Signed) J . F. T. O'CONNOR,

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

J . . ' 1 6


A D D R E S S OFFICIAL C O R R E S P O N D E N C E TO T H E F E D E R A L R E S E R V E BOARD X**7955

July 5, 1934.

Subject: Statement Regarding Section 7 of the Securit ies Exchange Act of 1934.

Dear Sir:

At i t s recent (conference with the Chairmen and Governors of

the Federal reserve "banks the Federal Reserve Board considered the new

respons ib i l i t i e s placed upon the System by the Securit ies Exchange Act

of 1934. This act gives the Federal Reserve Board authority to deter-

mine the margins to be required by brokers and dealers i n extending

credit to their customers, and also empowers the Board, within certain

l imitat ions , to prescribe rules and regulations, including margin re-

quirements , for loans extended by other persons, including banks, for

the purpose of purchasing or carrying secur i t i es registered on national

secur i t i e s exchanges.

Margin requirements do not become e f f e c t i v e before October 1,

1934, and the Board's regulations on the subject w i l l not be issued

for several weeks.

In the case of brokers the law lays down a standard of mar-

gins , which s h a l l const i tute the basis of the Board's regulat ions,

although the Board i s given authority to prescribe lower requirements,


<• 2 " X-7955

i f i t deems i t necessary or appropriate for the accommodation of com-

merce and industry, with due regard to the general credit s i tuat ion in

the country, and to prescribe higher margins i f i t deems i t necessary

or appropriate i n order to prevent the excessive use of credit to

finance transactions in s ecur i t i e s . In the case of other lenders on

secur i t i e s , including banks, no standard i s s p e c i f i c a l l y la id down

i n the law, the margins to be prescribed being l e f t to the Board's

discret ion.

The fundamental principle by which the Board i s to be

guided i n determining margin requirements and i n formulating i t s

regulations i s stated i n the law. The Board i s directed to enforce

i t s new powers for the purpose of preventing the excessive use of

credit for the purchase or carrying of s ecur i t i e s . This principle

i s in l ine with the provisions of the Banking Act of 1933, which

i n several sect ions places special respons ibi l i ty on the Federal

reserve banks and the Federal Reserve Board in connection with ex-

cess ive use of bank credit i n the security markets. The law imposes

upon the Federal Reserve Board no duties in connection with the super-

v i s i o n of the stock exchanges or the prevention of undesirable prac-

t i c e s among members of such exchanges. Responsibil i ty for these mat-

ters i s placed upon the Securit ies and Exchange Commission. The

Federal Reserve Board's duty under this act re lates c h i e f l y to the

determination of margins to be required on security loans, a power

to be exercised as a part of the Federal Reserve System's general

credit pol icy of controll ing undue credit expansion i n the security

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

% 1 8

X-7955

In so far as "banks are concerned, the Federal Reserve Board's

authority under t h i s act re la tes to loans made for the purpose of pur-

chasing or carrying secur i t i e s registered on national secur i t i e s exchanges.

I t does not apply, therefore, to loans made so le ly for industr ia l ,

agricultural , or commercial purposes, regardless of the question

whether these loans are secured or unsecured, and, i f secured, regardless

of the character of the c o l l a t e r a l . The determining factor i s the pur-

pose of the loan and not the nature of the security offered. If a loan

i s col lateraled "by stocks or other equity secur i t i e s and i s made for

the purpose of purchasing or carrying secur i t i e s registered on a

national secur i t i e s exchange„ i t comos under th i s sect ion of the ac t ;

i f i t i s made for any other purpose, then i t i s exempt. The Board's

power under th i s section, furthermore, does not apply to loans on

exempted s e c u r i t i e s , which are defined "by the law as including among

other secur i t i e s obligations of the United States , or of any State or

p o l i t i c a l subdivision, and such other secur i t i e s as the Securit ies and

Exchango Commission may declare to "be exempted secur i t i e s . The power

of the Board i s further l imited "by exemptingiiiank loans on secur i t i e s

ojsher than equity secur i t i e s , which means i n pract ice that i t i s not

applicable to loans on bonds, except bonds such as those having con-

version p r i v i l e g e s , and there are certain other exemptions. In gen-

eral , the law, i n so far as i t applies to control over banks, i s

intended to prevent the banks from being used for the purpose of


- 4 - X-7955

circumventing the margin requirements prescribed f o r loans extended

by "brokers to the ir customers, and to prevent undue expansion of "bank

credit employed i n the s e c u r i t i e s markets.

General "backing pract ices i n re la t ion to loans for indus-

t r i a l , agr i cu l tura l , or commercial purposes are not a f f e c t e d "by t h i s

Act.

P lease transmit copies of t h i s l e t t e r to a l l the "banks i n

your Federal Reserve D i s t r i c t .

Very tru ly yours,

Chest3r M o r r i l l , Sec re t a ry .

TO ALL P. B. AGENTS.



A D D R E S S OFFICIAL C O R R E S P O N D E N C E TO T H E F E D E R A L R E S E R V E BOARD

30-7956

July 6, 1934.

SUBJECT; Code Word Covering New Issue of Treasury B i l l s

Dear Sir:

In connection with telegraphic transactions in

Government secur i t i e s between Federal reserve "banks, the

fol lowing code word has "been designated to cover a new

i s sue of Treasury B i l l s :

This word should be inserted i n the Federal Re-

serve Telegraph Code Book, fol lowing the supplemental

code word "NOXLUT" on page 172.

"NOXLUVO11 - Treasury B i l l s to be dated July 11, 1934, and to mature January 9, 1935.

Very truly yours,

J . C. Noell , Assistant Secretary.

TO GOVERNORS OF AI& F. R, BANES. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


A D D R E S S OFFICIAL C O R R E S P O N D E N C E TO T H E FEDERAL R E S E R V E BOARD

X-7957.

July 7, 1934 .

Dear Sir:

There are "being transmitted to you, under

separate cover, twenty-five copies of Public No. 438 -

73d Congress, "An Act to authorize the Secretary of the

Treasury to purchase s i l v e r , i ssue s i lver c e r t i f i c a t e s ,

and for other purposes", known as the "Silver Purchase

Act of 1934", approved on June 19, 1934,

Very truly yours


TO ALL FEDERAL EESEEVE AGENTS (No copies to governors and, no extra copies to "banks)



A D D R E S S OFFICIAL 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 BOARD

X-7958.

July 7, 1934,

Dear Sir:

There are being transmitted to you, under separate

cover, twenty-five copies of Public No. 479 - 73d Congress,

"An Act to encourage improvement in housing standards and

conditions, to provide a system, of mutual mortgage insurance,

and for other purposes", known as the "National Housing Act",

approved on June 27, 1934.

sect ion (d) of Section 402 and to subsections (a) (t>)

of Section 505 of the act .

Your attention i s invited to the provisions of sub-

Very truly yours,

Assistant Secretary.

TO ALL EBDBBAL EE SERVE AGENTS (No copies to governors and no extra copies to banks,)


X-7959

INTEEPEETA.TION OP BACKING ACT OF 1933

(Copies to be sent to a l l Federal Reserve Banks)

July 6, 1934.

Mr. W. W. Hoxton, Federal Reserve Agent, Federal Reserve Bank of Richmond, Richmond, Virginia.

Dear Mr. Hoxton:

This re fers to your l e t t e r of March 13, 1934, making cer-

ta in inquiries with regard to the procedure you should fol low in

reporting poss ible v io lat ions of the provisions of Section 32(g)

of the Federal Reserve Act.

With reference to loans or extensions of credit made to

i t s own executive o f f i c e r s by a State member "bank in your d i s t r i c t ,

you should, as indicated in your l e t t e r , proceed in accordance with

the provisions of the Board's circular l e t t e r of July 22, 1933,

(X-7518).

In cases where i t appears from information which has come

to your attent ion through reports of examination or other o f f i c i a l

sources that a State member hank or a national bank In your d i s -

t r i c t has made a loan to an executive o f f i c e r of another State mem-

ber bank i n your d i s t r i c t or has permitted that o f f i c e r to become

indebted to i t within the purview of Section 22(g) of the Federal

Reserve Act, you should ascertain whether the particular executive

o f f i c e r has f i l e d with the chairman of the board of directors of


Mr. W. W. Hoxton — 2 X-7959

h i s bank a report of the kind required "by Section 22(g) of the

Federal Reserve Act. I f such a report has not "been furnished, you

should report the matter in the usual manner to the Board and the

loca l United States Attorney as a possible v io la t ion of Section 22(g).

I t i s suggested that you consider the advisabi l i ty of obtaining

through your examiners the required information as to whether a loan

to an executive o f f i c e r which comes to the attent ion of your o f f i c e

has been reported to the chairman of the board of directors of the

member bank of which he i s an executive o f f i c e r , e i ther at the time

of the next examination of the member bank by which the executive

o f f i c e r i s employed or by correspondence in connection with the

examination of the bank making the loan.

Where i t appears from such information that an executive

o f f i c e r of a State member bank i n another Federal reserve d i s t r i c t

has obtained a loan or extension of credit from a State member bank

or a national bank in your d i s t r i c t , you should bring to the atten-

t ion of the Federal Reserve Agent for that d i s t r i c t such fac t s as

you may have in your possession regarding the transaction in question

and that Federal Reserve Agent should thereupon proceed in accordance

with the procedure above set forth .

However, where you have been advised that executive o f -

f i c e r s of a national bank in your d i s t r i c t have borrowed from or have

become indebted to a State member bank i n the same or another Federal


Mr. W. W. Hoxton — 3 X-7959

reserve d i s t r i c t , the Board i s of the opinion that i t i s only neces-

sary for you to report such d e t a i l s of the transaction as you may

have to the chief national bank examiner for your d i s t r i c t for such

action as he considers advisable. In th i s connection, your attent ion

i s directed also to the Board's l e t t e r of February 8, 1928, (X-5072).

The Board appreciates that there may be cases in which ex-

ecutive o f f i c e r s of State member banks w i l l borrow from non-member

banks and that, except with the cooperation of the State banking

authori t ies , information regarding such cases would not be avai lable

to you. Accordingly, i t i s suggested that, i f you have not already

done so, you acquaint the State banking authorit ies in your d i s t r i c t

with the provisions of Section 22(g) of the Federal Reserve Act and

request that, i f i t i s f eas ib l e to do so, they furnish you from time

to time with any information they may have readily available regard-

ing loans by non-member banks to executive o f f i c e r s of State member

banks. If the State authorit ies do not f e e l that they can furnish

you with such information they may be wi l l ing to take the matter up

i n each case with the State member bank involved.

Very truly yours,

(Signed) Chester Morrill

Chester Morrill , Secretary.


X-7960 * <1

INDUSTRIAL ADVISORY COMMITTEE

FIRST FEDERAL RESERVE DISTRICT

FEDERAL RESERVE BAM OF BOSTON

Heme Business A f f i l i a t i o n

Albert M. Creighton, Chairman Director, Boston Woven Hose and Rubber Co Boston, Mass.

President, Nashua Manufacturing Co., Boston, Mass,

President, Nashua Gummed and Coated Paper Co., Nashua, New Hampshire.

Director, Gri f f in Wheel Co., Boston, Mass.

President, Eastern Manufacturing Co., Bangor, Maine.

Robert Araory

Winthrop L. Carter

Carl P. Dennett

Edward M. Graham

Ju ly 11, 1934.


X-7960

INDUSTRIAL ADVISORY COHI1ITE5

SSCQitO BBD2RAL BSS3RVS DISTRICT

FED3RA1 B3S3RV5 BAHK OF HSf YORZ

Hame

William E. Pouch, Chairman

John A. Hartford, Vice Chairman

John B. Clarlc

Albert A. Hopeman

C. R. Palmer

Business A f f i l i a t i o n

President, Concrete Steel Compaq, Hex? York, If. Y.

President, Great Atlantic and Pac i f i c Tea Company, Hen York, F. Y.

President, Clark Thread Company, Newark, IT. J .

A. W. Hop email and Sons, Rochester, H. Y.

President, d u e t t Peabody and Compare, Troy, H. Y.

July 20, 1934


1 2 8 X-7960


THIRD FEDERAL RESERVE DISTRICT

FEDERAL RESERVE BAM OF PHILADELPHIA

Name Business A f f i l i a t i o n

J . Ebert But ter nor th , Chairman Vice-Pres ident , H. W. Buttei-trorth and Sons Co., Ph i l ade lph ia , Pa,

Charles E. Brinley P re s iden t , American Pul ley Co., Ph i lade lph ia , Pa.

John S. Chipman Pres iden t , Chipman Kn i t t i ng M i l l s , Easton, Pa.

Vice-Pres ident , Rosedale M i l l s , Reading, Pa,

W. F. R. Iviurrie P res iden t , Hers hey Chocolate Company, Hershey, Pa.

Richard D. Wood Pres iden t , M i l l v i l l e Manufacturing Co., M i l l v i l l e , H. J . , (Main O f f i c e , Ph i l ade lph ia . )

July 20, 1934.


X-7960 2 9

DTDUS TRIAL ADVISORY COMMITT33

FOURTH ZEDERAL RESERVE DISTRICT

FEDERAL RESERVE BAM OF CLBVELAITO

Hame Business A f f i l i a t i o n

F. A. Smythe, Chairman President, Thew Shovel Company, Lorain, Ohio.

Daniel R. Davies, Vice Chairman

Frank B. Bel l

Edward. C. Folsom

H. L. gutter

President, Acme Machinery Company, Cleveland, Ohio.

President, Edgewater Steel Company, Oakmont, Pa,

President, Ottawa River Paper Company, Toledo, Ohio.

President, Railway Materials Company, Toledo, Ohio.

President, Black and Clawson Company, Hamilton, Ohio.

July 20, 1934.


X-7960

IEDUSTRIA.L ADVISORY COMMITTEE

FIFTH O E m i i R3S3RV3 DISTRICT

FSDHRAL RES3RV3 BAI1K CST RICHMOND

Hame Business A f f i l i a t i o n

J. G« Holtzclaw, Chairman President, Virginia Electr ic & Porrer Co. , Richmond, Virginia.

Overton D. Dennis Dominion Oil Company, Richmond, Virginia.

Harvey W. Moore Sect 'y , Treas,, & Manager, Brown Manu-facturing Company, Concord, ST. C.

George 3. Protest , Jr . Sect'y & Treas., Bar11ett-Eayward Company, Baltimore, Md.

Walker D. Stuart President, Richmond Hardware Co., Richmond, Virginia.

July 20, 1934.


X-7960


SIXTH INDERAL RESERVE DISTRICT

FEDERAL RESERVE M M OF ATLANTA

lame Business A f f i l i a t i o n

John Sanford, Chairman President, Armour Fer t i l i zer Works, Atlanta, Georgia.

Wm. A. Parker , Vice Chairman President, Beck & Gregg Hardware Company, Atlanta, Georgia.

A. R. Forsyth Executive Vice-President, Gulf States Steel Company, Birmingham, Alabama.

Ernest T. George President, Seaboard Refining Company, Hew Orleans, Louisiana.

I . C. Milner Executive Vice-President, Gate City Cotton Mil ls , Atlanta, Georgia.

July 20, 1934.


X-7960


SEVENTH FEDERAL RESERVE DISTRICT

FEDERAL RESERVE BAM OF CHICAGO


Max Epstein, Chairman Chairman, General American Tank Car Corporation, Chicago, I l l i n o i s .

Major Howard Greene President, Milwaukee Drug Co., Milwaukee, Wisconsin.

R. R. Monroe President, Des Moines Foundry and Machinery Co., Des Moines, Iowa.

William R. Odell, Jr. Treasurer, International Harvester Company of America, Chicago, I l l i n o i s .

George W. Young Vice President, Marshall Field and Co., Chicago, I l l i n o i s .

July 11, 1934.


1-7960


EIGHTH FEDERAL RESERVE DISTRICT

FEDERAL RESERVE BAM OF ST. LOUIS

ITame Business A f f i l i a t i o n

William K. Norris, Chairman President, McQoay-Norris Manufacturing Co St . Louis, Mo.

Jacob Van Dyke, Vice Chairman President, Western Text i le Products Co., St. Louis, Mo.

H. E. Finch, Secretary-Treasurer, American Snuff Co., Memphis, Tenn.

Henry S. Gray, Secretary-Treasurer, Louisvi l le Cement Co Louisv i l l e , Ky.

Maurice Weil, President, Woil-Kaltor Manufacturing Co., St. Louis, Mo.

July 24, 1934.


X-7%0 <>,

INDUSTRIAL ADVISORY COISIITTEE

UIUTH FEDERAL RESERVE DISTRICT

FEDERAL RESERVE BAM OF MIiTOAPOLIS

Name

John Bush,

Business A f f i l i a t i o n

Cleveland C l i f f s Mining Co., Negaunee, Mich

C. 0. F o l l e t t , Vice President, Fargo Mercantile Co., Fargo, 1ST. D.

Harvey Jewett, Jewett Grocery Company and Jewett Drug Co. , Aberdeen, S. D.

Albert Miller, President and General Manager, Miller Broom Cc LaCrosse, Wis.

Sheldon V. Wood, President, Minneapolis Electr ic Stool Castings Co., Minneapolis, Minn.

July 23, 1934.


*

X-7960

I3TOUSTRIAL ADVISORY COMMITTEE

TENTH FEDERAL RESERVE DISTRICT

FEDERAL RESERVE BAM! OP KANSAS CITY

Uame Business A f f i l i a t i o n

R. L. Gray, Chairman President, Sheffield. Steel Company, Kansas City, Missouri.

Walter J. Berkomtz Secretary-Treasurer, Berkowitz Envelope Company, Kansas City, Missouri.

D. Bruce Forrester Vice-President and General Manager, General. Box Company, Kansas City, Missouri.

Ed S. Miller President, Miller Cereal Company, Omaha, Nebraska.

L. F. Rooney Vice-President, Manhattan Construc-t ion Company, Muskogee, Oklahoma.

July 20, 1934,


X-7960 o


ELEVENTH FEDERAL RESERVE DISTRICT

FEDERAL RESERVE BAM Cg DALLAS

Hame Business Aff i l ia t ion .

Clarence Ousley, Chairman President, Globe Laboratories, Fort Worth, Tex.

Lewis R. Ferguson Vice-President and General Manager, Lone Star Cement Co., Dallas, Tex.

Will B. Marsh President, Chronister Lumber Co., Woodhurst, Tex. (P.O. Forest, Tex.)

President, Lyon Gray Lumber Co., Dallas, Tex.

President, Oak Cl i f f Lumber Co., Dallas, Tex.

President, The Trinity Lumber Co., Dallas, Tex.

Charles R. Moore President, Austin Bridge Co., Dallas, Tex.

W. B. Wise President and General Manager, Merchants and Farmers Compress Co. Greenville, Tex.

July 20, 1934.


Of-

X-7960


TWELFTH FEDERAL RESERVE DISTRICT

FEDERAL RESERVE BAM OF SA1T FRA3TCISC0


Stuart L, Rawlings, Chairman Calaveras Cement Company, San Francisco, California.

Ralph Burns ide Receiver, Pac i f i c Spruce Corporation, Portland, Oregon

Shannon Cranial1 President, California Hardware Company, Los Angeles, California.

Henry D. Nichols President, Tubbs Cordage Company, San Francisco, California,

H. L. Terwilliger Manager, Ingersoll Rand Company, San Francisco, California.

July 26, 1934.



ADDRESS OFFICIAL 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 BOARD X—7961

July 14, 1934.

SUBJECT: Code Word Covering Hew Issue of Treasury B i l l s .

Dear Sir:


Government secur i t i es between Federal reserve "banks, the

following code word has been designated to cover a new

i ssue of Treasury B i l l s :

"N0XMA2T" - Treasury B i l l s to be dated July 18, 1934, and to mature January 16, 1935,

This word should be inserted in the Federal He-,

serve Telegraph Code book, following the supplemental

code word "HOXLUVO" on page 172.

Very truly yours,

J. C. Noel l , Assistant Secretary.

TO GOVEBETOES 03* ALL I . E. BAMS. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


A D D R E S S OFFICIAL 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-7962

July 14, 1934

SUBJECT: Expense, Main Lines, Leased Wire System, June, 1934,

Dear Sir;

Inclosed herewith you w i l l find two mimeo-graphed statements, X-7962-a and X-7962-b, covering i n de ta i l operations of the main l ines , Leased Wire System, during the month of June, 1934.

Please credit the amount payable by your bank for your share of the expense of the Leased Wire System, to the Federal Reserve Bank of Richmond in your daily statement of credits through the Gold Set-tlement Fund for the account of the Federal Reserve Board, and advise the Federal Reserve Bank of Richmond by wire the amount and purpose of the credi t ,

Very truly yours,

Fiscal Agent

Inclosures.

TO GOVERNORS OF ALL F. R. BANKS


<

X-79b2-a REPORT SE:~r^7 CLASSIFICATION AND NUMBER QP WORDS TRANSMITTED OVER 1L4I2T LIEES

OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF JUNE, 1934.

Words sent by Net Federal Business New York charge- reserve reported able to other bank Per cent of total

From by banks F. R. Banks ( l ) business Bank business (*)

Boston 32,444 1 , 5 H 33,955 4.15 New York 157,110 — 157,110 19.21 Philadelphia 29,971 1,691 31,662 . 3.87 Cleveland 53,930 1,679 55,609 6.80 Richmond 54,462 1,805 56,287 6.88 Atlanta 53,542 1,738 55,280 6.76 Chicago 91,686 2,448 94,134 11.51 St. Louis 67,476 2,091 69,567 8.50 Minneapolis 34,596 1,756 36,352 4.44 Kansas City 72,276 1,683 73,959 9.04 Dallas 57,866 2,666 60,532 7.4o San Francisco 90,299 3,315 93,614 11.44

Total 795,678 22,383 818,061 100.00

F. R. Board "business 407,518

Reimbursable business Incoming & Outgoing . . . . . . . . . . . . . . .

Total words transmitted over main l ines

(*) These percentages used in calculating the pro rata share of leased wire expense as shown on the accompanying statement (X-7962-b),

(1) Sumber of words sent by New York to other F. R. Banks for their sole benef i t charged to banks indicated in accordance with action taken at Governors' Conference November 2-4, 1925.

1,225,579

782,986

2,008,565


X-7962-b

REPORT 07 EXPENSE Mil" LIKES INDERAL BE SERVE LEASED WIRE SYSTEM, JUEB, 193%.

Retire- Ooer- Pro rata Payable to ment ators' share of Federal

Operators' Contribu- over- Wire Total total Reserve Name of Bank sa lar ies tions time rental expenses expenses Credit s Board

Boston $260.00 $ 23.40 $ - $ ~ $283.40 $637.59 $283.40 $354.19 Hew York l,3%5-80 121.12 5.00 - 1,471.92 2,951.37 1,471.92 1,479.45 Philadelphia 225.00 20.25 - - 245.25 594.58 245.25 349.33 Cleveland 306.66 27.60 — — 334.26 1,044.73 334.26 7IO.47 Richmond 262.00 17.10 - 230.000&) 509.10 1,057.02 509.10 5%7.92 Atlanta 270.00 24.30 - — 294.30 1,038.59 294.30 744.29 Chicago %,467.60(f) 375.75 - 4,843.35 1,768.36 4,843.35 3,074.99(*) St. Louis 195.00 17.55 .75 - 213.30 1,305.92 213.30 1,092.62 Minneapolis 200.07 18.01 — 218.08 682.15 218.08 464.07 Kansas City 287.00 25.83 —• - 312.83 1,388.88 312.83 1,076.05 Dallas 251.OO 22.59 - — 273.59 1,136.92 273.59 863.33 San Francisco 380.00 34.20 - 4l4 .20 1,757.61 4I4.20 1,343.41 Federal Beserve Bd. - — 15,765.56 15,765.56 — mm

Total $8,450.13 $

1 ro

—-4

O

$ 5.75 $15,995.56 $25,179.14 $15,363.72 $ 9,413.58 $9,025.13

Less Reimbursable Charges: 9,815.42 3,074.99(a) $15,363.72 $5,950.14

(&) Main l i n e rental , Bichmond-Wiashington (#) Includes sa lar ies of Washington operators (*) Credit (a) Amount reimbursable to Chicago



A D D R E S S OFFICIAL. 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-7963

July 17, 1934.

SUBJECT: Section 32 - Information to "be Submitted by Member Banks Operating Under Blanket Permi t .

Dear Sir:

In i t s telegram of June 23, 1934, Trans. 2015, the Federal Re-

serve Board advised you that i t had issued a permit under Section 32

of the Banking Act of 1933 authorizing any member bank or banks to

have correspondent relationships with any dealer or dealers in connec-

t ion with underwriting and dealing in municipals and other obligations

of the kinds exempted from the restr ict ions of Section 5136 of the Re-

vised Statutes.

In that telegram the Board stated that:

n* * *instead of formal applications usually required, each member bank which exercises pr iv i l ege granted herein shal l promptly furnish to Federal Reserve Agent of d i s t r i c t in which member bank i s located such information concerning i t s operations under th i s permit as Federal Reserve Board may require, and Board wi l l at an early date advise as to informa-t ion which must be submitted. Upon receipt of required i n -formation, each Federal Reserve Agent w i l l be expected to review promptly f a c t s involved in each correspondent re lat ion-ship covered by th is permit in h is d i s t r i c t , and to advise Board of any case in which facts are such as to indicate that permit should be revoked as to particular relat ionship. Each Federal Reserve Agent i s requested to review a l l correspondent relationships covered by this permit in his d i s t r i c t , and ad-v i s e Board, not la ter than November 15, 1934, whether in h i s opinion i t w i l l be compatible with the public in teres t to renew this permit, s tat ing reasons for his opinion. • * *.lt


X-7963

You are requested to advise a l l member "banks in your d i s t r i c t

that each, such hank avai l ing i t s e l f of the priv i lege granted "by the.

permit above referred to must submit to you promptly information des-

cribing the nature of the relationship and the fol lowing detai led

information regarding each syndicate operation in which i t part ic ipates:

1. A description of the i s sue , including the name

of the i ssuer , the nature of the obligations (whether bonds,

notes, or other obl igat ions) , the amount of the i s sue , the

maturity, and the rate of in teres t ;

2. The names of the other manbers of the syndicate

or group which participated in the transaction;

3 . The amount of the issue subscribed for by the reporting

member bank;

4. The amount of the issue actual ly taken by the reporting

member bank;

5. The price paid for the securi t ies by the member bank,

and the price at which they were sold to the public.

6. The extent to which the member bank's part ic ipat ion

has been disposed of at the time of i t s report to the Federal

Reserve Agent and the extent, i f any, to which the member bank

proposes to retain the secur i t ies for i t s own account.

If i n any case you f e e l that the information submitted i s not

s u f f i c i e n t to enable you to form a conclusion as to whether or not the


X-7963

- 3 -

permit in the particular case i s in the public in teres t , you are re -

quested to obtain such additional information from the member bank as

you deem advisable.

The information to be obtained i s intended to supplement the

information available to you from reports of examination and other

sources and a s s i s t you in advising the Board as requested i n the l a s t

trro sentences quoted above from i t s telegram of June 23, 1934, Trans.

2015.

Very truly yours,

Y f ) Chester Morrill ,

Secretary.

TO ALL F. B. A&MTS.


FEDERAL RESERVE BOARD WASHINGTON X-7964

A D D R E S S OFFICIAL C O R R E S P O N D E N C E T O July 19, 1934: • T H E F E D E R A L R E S E R V E B O A R D

SUBJECT; Holidays during August, 1934.

Dear Sir:

The Federal Reserve Board has been advised that the following holi-

days w i l l "be observed by Federal reserve banks and branches during August:

Wednesday, August 1

Thursday, « 2

Tuesday, « 7

Tuesday, " 28

Denver

Nashvil le Memphis

St. Louis Kansas City

San Francisco Los Angeles

Colorado Day

Primary Election Day

On the dates given the o f f i c e s mentioned w i l l not part ic ipate in

either the transit or the Federal reserve note clearing through the Gold

Settlement Fund. Please include transit clearing credits for the o f f i c e s

concerned on each of the holidays with your credits for the following busi-

ness day. No debits covering shipments of Federal reserve notes should be

made for account of the Federal Reserve Banks of St. Louis or Kansas City

on August 7 or for San Francisco on August 28.

Please not i fy branches.

Very truly yours,

' J». C. Assistant Secretary.

TO GOVERNORS OF ALL F. R. BAMS. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis



X-7965

July 20, 1934

SUBJECT; Code Word Covering New Issue of Treasury B i l l s .

Dear Sir:

In connection with telegraphic transactions i n

Government secur i t i es between Federal reserve banks, the



This word should be inserted in the Federal Re-

serve Telegraph Code book, following the supplemental code

word "HOXMAIT" on page 172.

"UOXMED" - Treasury B i l l s to be dated July 25, 1934, and to mature January 23, 1935.

Very truly yours,

J. C. Noell , Assistant Secretary.

TO GOVERNORS OF ALL F. R. BASKS,




X-7966

July 25, 1934.

SUBJECT: New Issue of Federal Farm Mortgage Corporation Bonds.

Dear Sir:

In connection with telegraphic transactions "between Federal

reserve "banks covering Government s ecur i t i e s , the fol lowing code

word has been designated to cover a new issue of Federal Farm Mortgage

Corporation Bonds:

This code word should "bo inserted i n the Federal Reserve Tele-

graph Code "book fol lowing the supplemental code word "HOWCELL" on

page 172.

"NOWCENS" - Federal Farm Mortgage Corporation 3$ Bonds of 1944-49, to be" dated May 15, 1934, and to mature May 15, 1949.

J . C. Hoell , Assistant Secretary.

Very truly yours,

TO GOVERNORS OF ALL F. R. BAMS.




X-7968

J u l y 26, 1934.

SUBJECT; Examination of S ta t e Member Banks i n Connection wi th the Required C e r t i f i c a t i o n t o the Federa l Deposit Insurance Corporat ion.

Dear S i r :

There i s inc losed f o r your in format ion a copy of

a l e t t e r which the Board has addressed t o the Federa l Re-

serve Agent a t t he Federa l Reserve Bank of St# Louis with

regard t o the examination of S ta te member banks i n connec-

t i o n wi th the r equ i red c e r t i f i c a t i o n t o t h e Federa l Deposit

Insurance Corporat ion, i n view of the amendment, t o Sect ion

12 B of t he Federa l Reserve Act extending the time w i t h i n

which t he permanent insurance fund may become e f f e c t i v e .

Very t r u l y ypurs,

Chester M o r r i l l , S e c r e t a r y .

I n c l o s u r e .

TO ALL FEDERAL RESERVE AGENTS Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

COPY X-7968-a

Ju ly 26, 1934.

Mr. John 8 . Wood., Federal Reserve Agent# Federal Reserve Bank of S t . Louis, S t . Louis, Mo.

Dear Mr. Wood:

Reference i s made to your l e t t e r of Ju ly 17, 1934, regard-

ing examinations of Sta te member banks in connection with the r e -

quired c e r t i f i c a t i o n to the Federal Deposit Insurance Corporation

and reques t ing au thor iza t ion to make such examinations commencing

October 1, 1934.

The Board f e e l s t h a t r epor t s of examination made as of

October 1, 1934, or subsequent t h e r e t o , may proper ly be used as a

bas i s f o r c e r t i f i c a t i o n i n connection with app l i ca t ions of Sta te mem-

ber banks f o r the purchase of stock i n the Federal Deposit Insurance

Corporation p r io r to Ju ly 1, 1935, provided, of course, such repor t s

ind ica te t h a t a thorough examination has been made and f a i r l y r ep re -

sent the condi t ion of the banks at the time of c e r t i f i c a t i o n . Before

making f i n a l recommendations with regard to c e r t i f i c a t i o n , t h e r e f o r e ,

i t w i l l be expected t h a t you w i l l review the r epo r t s of any examina-

t i ons made p r io r t o January 1, 1935, f o r the purpose of determining

whether, s ince the date of examination, the re has been any change i n

the condit ion of the bank which would render the quest ion of c e r t i f i -

ca t ion doub t fu l . In case of doubt, e i t h e r as to whether the condi t ion


Mr. John S. Wood - 2 - X-7968-a

of the bank as r e f l e c t e d in the repor t of examination warrants ce r -

t i f i c a t i o n t o t he Federal Deposit Insurance Corporation, or whether

there has been any subsequent change i n the condi t ion of the bank

which would r a i s e a quest ion as to whether t he a s se t s of the bank

are adequate t o enable i t t o meet a l l of i t s l i a b i l i t i e s t o deposi-

t o r s and other c r e d i t o r s , another examination should be made t o serve

as a bas i s f o r the required c e r t i f i c a t i o n *

I t i s assumed t h a t the program of examinations w i l l be so

arranged t h a t whenever poss ib le examinations of banks dependent upon

seasonal l i q u i d a t i o n w i l l be made subsequent t o the l i q u i d a t i o n

period#





FEDERAL PRESERVE BOARD WASHINGTON


X-7969

July 37, 1934

SUBJECT; Code Word Covering New Issue of Treasury B i l l s ,

Dear Sir:


Government secur i t i e s between Federal reserve hanks, the

following code word has "been designated to cover a new

i ssue of Treasury B i l l s ;

This word should he inserted in the Federal Re-

serve Telegraph Code hook, following the supplemental

code word "NOXMED" on page 172.

"NOXMIX" - Treasury B i l l s to be dated August 1, 1934, and to mature January 30, 1935

Very truly yours

J . C. Noell , Assistant Secretary.



X-7970

INTERPRETATION OF BANKING ACT OF 1953 ^

(Copies to be sent t o ' a l l Federal reserve banks)

Ju ly 27, 1934.

Mr. , Cashier The Bank of ,

Dear S i r :

Your l e t t e r of June 8, 1934, addressed t o the Comptroller of

the Currency, regarding the renewal of matured c e r t i f i c a t e s of deposi t

has been r e f e r r e d to the Federal Reserve Board f o r r e p l y .

I t i s understood t h a t i n view of the f a c t t h a t many of the

customers of your bank are unable t o get i n t o town on the exact date of

the ma tu r i t i e s of t h e i r c e r t i f i c a t e s of deposi t , you wish to be advised

whether you may l awfu l ly renew a c e r t i f i c a t e of deposi t p r i o r t o i t s

matur i ty , da t ing the new c e r t i f i c a t e as of the date of matur i ty of the

o r ig ina l c e r t i f i c a t e * I t i s noted t h a t you s t a t e t h a t a l l c e r t i f i c a t e s

presented a f t e r matur i ty are renewed as of the date presented, and t h a t

i n t e r e s t i s paid only t o t he date of matur i ty of t he o r i g i n a l c e r t i f i c a t e .

Upon the b a s i s of the information submitted i t appears t h a t t he

p rac t i ce which you suggest involves merely the making of a new con t rac t

of deposi t with respect to the funds in quest ion which i s t o take e f f e c t

on the date of matur i ty of the o r i g i n a l c e r t i f i c a t e and t h a t no p a r t of

the funds evidenced by the o r ig ina l c e r t i f i c a t e i s withdrawn u n t i l the

matur i ty of the renewal c e r t i f i c a t e . There i s no provis ion of law which

would preclude the adoption of t h i s procedure and the Federal Reserve

Board has no ob jec t ion t h e r e t o .

Very t r u l y yours, (Signed) Chester Morr i l l

Chester Mor r i l l , Secre ta ry .



X-7971 A D D R E S S OFFICIAL 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

July 30, 1934.

Dear S i r ;

There are being forwarded to you today,

under separate cover, one hundred copies of the

provisions of the National Housing Act, approved

June 27, 1934, which a f f e c t the Federal Reserve

System*

Copies of the National Housing Act were

sent you under date of Ju ly 7, 1934.


TO ALL F. R. AGENTS

(No copy t o Governors and no ex t ra copies to banks one copy to be sent t o Mr. K i t z m i l l e r . )

S. R. Carpenter, Ass is tan t Secre tary .



ADDRESS OFFICIAL 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-7972

August 2, 1934

Dear Sir:

There are being forwarded to you today under

separate cover, for the use of your bank, three copies

of part 17 of the hearings before the Committee on

Banking and Currency of the United States Senate on

stock exchange pract ices . Copies of part 16 of these

hearings were forwarded to you under date of June 7,

1934.

" " ' / V v S. R. Carpenter,

Very truly j^yrs

S. R. Carpenter, Assistant Secretary

TO ALL F. R. AGENTS

(No copies to .Governors or extra copies to banks; one copy to be sent to Mr. Kitzmil ler . ) Digitized for FRASER

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


ADDRESS OFFICIAL C O R R E S P O N D E N C E T O T H E FEDERAL R E S E R V E BOARD

X-7974

August 3, 1934.

SUBJECT: Code Word Covering New Issue of Treasury B i l l s .

Dear Sir:


Government secur i t i es between Federal reserve banks,

the following code word has been designated to cover a

new i ssue of Treasury B i l l s :

"HOXMOB" - Treasury B i l l s to be dated August 8, 1934, and to mature February 6, 1935.



code word "NOXMIX" on page 172.

Very truly yours,

J . C. Hoell, Assistant Secretary.



X-7975

August 6, 1934.

Dear S i r :

There i s inc losed, f o r your informat ion, a copy

of a l e t t e r addressed to the Federal Reserve Agent a t

the Federal Reserve Bank of Atlanta under date of Ju ly 27,

1934, concerning the scope of examinations to be made of

p r iva t e banks or bankers under the provis ions of Section 21

of the Banking Act of 1933.


Chester Mor r i l l , Secre ta ry .

Inc losure .

TO ALL F. E. AGENTS


X-7975-a *

Copy-

J u l y 27, 1954.

Mr. Oscar Newton, Federa l Reserve Agent, Federa l Reserve Bank of A t l a n t a , A t l a n t a , Ga.

Dear Mr. Newton;

Reference i s made to your l e t t e r of Ju ly 3, 1954, concerning the

scope of examinations to be made of p r i v a t e banks or bankers under the p ro -

v i s i o n s of Sec t ion 21 of the Banking Act of 1933. You s t a t e t h a t in many-

i n s t a n c e s p r i v a t e bankers who have expressed a p r e f e r e n c e t o be examined by

the Federa l Reserve Bank a r e engaged in o ther a g r i c u l t u r a l , m e r c a n t i l e , o r

manufactur ing a c t i v i t i e s , and t h a t , while they probably a t tempt to segrega te

the a s s e t s p e r t a i n i n g t o t h e i r banking o p e r a t i o n s , the laws of the S t a t e of

Georgia a r e such t h a t , in case of inso lvency , a l l a s s e t s would be pooled f o r

the b e n e f i t of a l l c r e d i t o r s , and the d e p o s i t o r s , t h e r e f o r e , would have no

l i e n on the s o - c a l l e d banking a s s e t s . In the c i rcumstances , you r e q u e s t i n -

s t r u c t i o n s as to whether the examinations should cover a l l a s s e t s and l i a b i l -

i t i e s of the p r i v a t e banker , or only those p e r t a i n i n g to the banking opera-

t i o n s .

The Board i s advised t h a t t he laws of the S t a t e of New York r e q u i r e

every p r i v a t e banker t o i n v e s t in the bus iness permanent c a p i t a l in s t i p u l a -

t ed amounts, and provide f o r the segrega t ion of such c a p i t a l and of d e p o s i t s

r ece ived and the a s s e t s acqui red through the investment of such f u n d s , and,

f u r t h e r , t h a t the a s s e t s so acqui red w i l l be f i r s t a v a i l a b l e t o s a t i s f y the

c la ims of d e p o s i t o r s . S imi la r laws a r e sa id to be in f o r c e in Connec t i cu t ,


58

Mr. Oscar Newton - 2 X-7975-a

and, perhaps , o the r S t a t e s . Where such laws e x i s t , i t would appear t h a t

the examinations r e q u i r e d under the p rov i s ions of Sec t ion 21 of the Bank-

ing Act of 1933 should be conf ined to the banking o p e r a t i o n s of the p r i v a t e

banker , whether or no t he has o ther a s s e t s and l i a b i l i t i e s . Where the bank-

ing a s s e t s of the p r i v a t e banker , however, a re a v a i l a b l e t o s a t i s f y the

claims of any and a l l c r e d i t o r s , and in the event of insolvency unsecured

d e p o s i t o r s would be on an equal f o o t i n g with o the r g e n e r a l c r e d i t o r s , i t would

appear t h a t , in a d d i t i o n to an examination of the a s s e t s and l i a b i l i t i e s a r i s -

ing from the banking o p e r a t i o n s , t he examination should inc lude such i n v e s t i -

ga t ion of o the r a s s e t s and l i a b i l i t i e s as i s necessa ry to determine the t r u e

condi t ion of the bank.

In the Board ' s l e t t e r of June 26, 1934 (X-7936) i t was s t a t e d

t h a t inasmuch a s , under the terms of Sec t ion 21, a l l r e p o r t s of cond i t i on

a re to be made and publ i shed a t the same t imes and in the same manner and

with l i k e e f f e c t and p e n a l t i e s as a re now provided by law in r e s p e c t of

n a t i o n a l banking a s s o c i a t i o n s t r a n s a c t i n g bus iness in the same l o c a l i t y ,

such r e p o r t s of c o n d i t i o n , in a l l c a se s , and without r ega rd to the a u t h o r -

i t y which may make the examinations r e f e r r e d to in Sec t ion 21, should be

made to the Comptrol ler of the Currency and publ i shed in the same manner

as r e p o r t s of c o n d i t i o n of n a t i o n a l banks. In the c i rcumstances , i t i s

wi th in the power of the Comptroller of the Currency to p r e s c r i b e the

form of such r e p o r t s . Presumably, the purpose of examinat ions under

the terms of the s e c t i o n i s to determine the t r u e cond i t i on of the bank,


59 X-7975-a

Mr. Oscar Newton - 5.

v e r i f y the accuracy of such r e p o r t s of condi t ion as may be made, and d i s -

c lose any i r r e g u l a r i t i e s t h a t may be sub jec t t o p e n a l t y . There fo re , the

mat ter has been d iscussed with the o f f i c e of the Comptroller of the Cur-

rency to a s c e r t a i n the Comptro l le r ' s requirements with r e s p e c t t o the

form of the r e p o r t of condi t ion by p r i v a t e bankers , and wi th a view to the

adoption of reasonably uniform procedure in the examinations conducted by

the Comptroller of the Currency and the examiners f o r the Federa l Reserve

banks under the terms of Sect ion 21.

In connection with the c a l l f o r r e p o r t s of condi t ion as of June

30, 1934, the Comptroller forwarded to p r i v a t e bankers the same form

(Form 2130 - Ca l l No. 340) t h a t was forwarded to n a t i o n a l banks. This

form inc ludes the i tems "Other a s s e t s " and "Other l i a b i l i t i e s " and provides

f o r the i t e m i z a t i o n of such a s s e t s and l i a b i l i t i e s under schedules "M" and

"N" which a re not a p a r t of the statement to be publ i shed . I t i s probable

t h a t a l e t t e r of i n s t r u c t i o n s w i l l be forwarded to p r i v a t e bankers by the

Comptroller a t the time of the next c a l l f o r r e p o r t s of cond i t i on , advis ing

them t h a t they should l i s t under the item "Other a s s e t s " a l l a s s e t s o the r

than those p e r t a i n i n g d i r e c t l y to banking ope ra t ions , and under the item

"Other l i a b i l i t i e s " a l l l i a b i l i t i e s o ther than those p e r t a i n i n g d i r e c t l y

to banking ope ra t i ons . Some provis ion may a l so be made to provide f o r a

s tatement of the ou t s ide worth of p a r t n e r s in cases involv ing p a r t n e r s h i p .

The form f o r r e p o r t s of condi t ion i s r ev i sed from time to t ime, and, of

course , the Comptroller may f i n d i t necessary or de s i r ab l e to r e v i s e the


; 6 X-7975-a

Mr. Oscar Newton - 4 .

gene ra l form or to p repare a s p e c i a l form f o r r e p o r t s of p r i v a t e bankers

in connection with f u t u r e c a l l s .

The Comptrol ler of the Currency concurs in the Board ' s opinion

t h a t examinat ions under the terms of Sect ion 21, where d e p o s i t o r s a r e on

the same f o o t i n g as o the r genera l c r e d i t o r s , should inc lude an examination

of the a s s e t s and l i a b i l i t i e s p e r t a i n i n g t o the banking o p e r a t i o n s of the

p r i v a t e banker in the same manner and t o the same e x t e n t as i f an examina-

t i o n were being made of a n a t i o n a l bank or a S t a t e member bank, and t h a t

the examiner should conduct such f u r t h e r i n v e s t i g a t i o n s or examination as

may be necessa ry to s a t i s f y himself as to the accuracy of any s t a tements

made with r e s p e c t to o the r a s s e t s and the soundness of the va lues r e p r e -

sented the reby , or the ex t en t of o the r l i a b i l i t i e s of the p r i v a t e banker .

As s t a t e d , t he Comptroller of the Currency may f i n d i t necessa ry

or d e s i r a b l e to p r e s c r i b e s p e c i a l forms f o r r e p o r t s of cond i t ion of p r i v a t e

bankers , and, l i k e w i s e , f u t u r e exper ience may i n d i c a t e t h e n e c e s s i t y f o r

more d e t a i l e d and exhaus t ive examinat ions . In any e v e n t , a l l examinat ions

under Sect ion 21 of the Banking Act of 1935 should be conducted with the

f a c t i n mind t h a t the i n t e r e s t s of d e p o s i t o r s a re i n e x t r i c a b l y in te rming led

with those of a l l o the r c r e d i t o r s wherever such i n t e r e s t s a re no t s p e c i f i -

c a l l y segregated by law.

Very t r u l y your s ,

(Signed) Chester M o r r i l l ,



FEDERAL RESERVE BOARD 61

WASHINGTON


X-7976

August 7, 1934

SUBJECT: New Issues of Home Owners 1 Loan Corporation Bonds.

Dear S i r :

In connection with te legraphic t ransac t ions between Federal r e -

serve "banks covering Government s e c u r i t i e s , the fol lowing code words

have t e e n designated to cover new issues of Home Owners 1 Loan Corpora-

t ion Bonds:

"NOWCENT" - Home Owners* Loan Corporation l i $ Bonds, Ser ies C, 1936, to be dated August 15, 1934 and to mature August 15, 1936.

"UOWCEPH" - Home Owners« Loan Corporation Bonds, Ser ies D, 1937, to be dated August 15, 1934 and to mature August 15, 1937.

"NOWCIA" - Home Owners 1 Loan Corporation 2$ Bonds, Ser ies E, 1938, to be dated August 15, 1934 and to mature August 15, 1938.

These code words should be i n s e r t e d i n the Federal Reserve

Telegraph Code book on page 172


' J . C. No e l l , ' J . C. Noell , Ass i s t an t Secre tary . /

TO GOVERNORS OF ALL F. R. BANKS Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


A D D R E S S OFFICIAL C O R R E S P O N D E N C E T O X—7977 T H E F E D E R A L R E S E R V E B O A R D

August 8 , 1934.

SUBJECT: Reports of Examination of S t a t e Member Banks.

Dear S i r :

In view of the added r e s p o n s i b i l i t i e s of the Federal Reserve

Board under the p rov is ions of the Banking Act of 1933 and other recent

l e g i s l a t i o n , the Board f e e l s t ha t i t i s des i rab le to have a v a i l a b l e copies

of current r epo r t s of examination of a l l S ta t e member banks, and you a r e

requested, t h e r e f o r e , to continue to forward to the Board a copy of each

repor t of examination of a S ta te member bank made by your examiners. This

supersedes i n s t r u c t i o n s given i n the Board's l e t t e r of J u l y 26, 1930,

X-6665, to forward only analyses of r epo r t s of examination unless i n some

exceptional case i t was des i red tha t the Board should have before i t a

complete r epor t of examination, which i n s t r u c t i o n s were subsequently modi-

f i e d on December 7, 1933, X-7702, to request the submission of r epo r t s of

examination of S ta te member banks f o r considerat ion i n connection with the

c e r t i f i c a t i o n to the. Federal Deposit Insurance Corporation requi red under

the provis ions of Section 12B of the Federal Reserve Act .

Inasmuch as the various Federal reserve banks w i l l be us ing a

uniform and de t a i l ed repor t of examination, i t i s not considered neces-

sary to continue to forward, with such r epor t s of examination a d e t a i l e d


X-7977 6,3

~2—

ana lys i s on I . R. B. Form 212, and accordingly a d r a f t of a proposed

memorandum form (F. B. B. Form 513) to "be t ransmit ted with the r epo r t s of

examination of S ta te member "banks made "by examiners of the rese rve "bank#is

a t tached .

Attached a l s o i s a revised ana lys i s form (F. B. B. Form 212) fo r

use i n forwarding to the Board analyses of r epo r t s of examinations of S ta te

member banks made independently "by S t a t e "banking a u t h o r i t i e s .

I t w i l l be apprecia ted i f you w i l l review the d r a f t s of these

forms and forward your suggestions and comments thereon to Mr. Paulger ,

Chief of t he Board's Divis ion of Examinations.


Chester M o r r i l l , Secre tary .

Inc losures .

TO ALL F. B. AGENTS,


X-7978.

August 10, 1934.

SUBJECT: Correspondence with Attorney General regarding Section 21 of the Banking Act of 1935.

Dear S i r ;

There a r e inclosed herewith f o r your informat ion

copies of a l e t t e r and i t s inc losure addressed by the f e d e r a l

Reserve Board to the Attorney General of the United S t a t e s and

of a r ep ly received from the Acting Attorney General with r e -

gard to t he nece s s i t y for examinations under sec t ion 21 of the

Banking Act of 1933 of persons who a rc author ized to r ece ive

depos i t s "but a r e not p resen t ly engaged in the business of r e -

ce iv ing depos i t s . You may adVise persons i n t e r e s t e d i i s imi la r

cases of the substance of the inclosed correspondence t u t i t id

suggested tha t you do not d i sc lose the correspondence or the f

substance thereof to o thers .

Vdry t r u l y yours ,

Chester Mor r i l l , Secre tary .

Inc losures .

TO CHAIRMEN OF ALL F. B. BAMS.


2 6 X~7978~a.

Copy. J u l y 30, IS34.

The Honorable, The Attorney General, Washington, D. C.

S I E:

There i s inclosed herewith an excerpt from a l e t t e r

received by the Federal Reserve Board from the A s s i s t a n t Federal

Reserve Agent a t the Federal Reserve Bank of Ph i l ade lph ia , which

r a i s e s the questiori whether a person author ized to engage in the

business of r ece iv ing depos i t s , but not no* engaged i n accept ing

any deposi ts j i s required by sec t ion 21(a) (2) of the Banking Act

of 1933 to submit to per iod ic examination and to make and pub l i sh

pe r iod ic r e p o t t s of condi t ion.

I t i s the view of the Federal Reserve Board t h a t sa id

sec t ion 2 l ( a ) (2) does not, embrace a person who has not been engaged, \

s ince June 16, 1934, "in thL business of r ece iv ing deposi ts subjec t

to check or to repayment upon^presentat ion of a passbook, c e r t i f i c a t e

of depos i t , or o ther evidence bf debt , or upon reques t of the de-

p o s i t o r " , even though such norsot was engaged i n such business p r i o r

to t ha t da t e . Consequently, the Aoard f e e l s t h a t the f a c t t h a t a v

person i s au thor ized to engage i n s t ^ h a business i s not s u f f i c i e n t

to b r ing such person wi thin the scope',ô£ the p rov is ions under d i s -

cuss ion, and t h a t the person who i s t h ^ subjec t of t h i s inqu i ry and

who i s not p r e s e n t l y engaged i n the business of r ece iv ing depos i t s

i s not requ i red to submit to examination and to make and pub l i sh


X-7978-a

: 6 6

The Honorable, The Attorney General

repor ta of condi t ion .

However, s ince an expression of opinion "by the Board votild

not. prevent a prosecut ion for v i o l a t i o n of such provis ions i f your

Department should take a view contrary to tha t expressed above, i t

mi l l "be apprec ia ted i f you w i l l advise the Board whether you concur

i n i t s cons t ruc t ion of the provis ions of sa id sec t ion 21(a) ( 2 ) ,

and whether i t i s necessary f o r Spi r id ion Furcich of S tee l ton ,

Pennsylvania, to submit to examination and to make and pub l i sh

pe r iod i c r epo r t s of condit ion so long as such person does not accept

depos i t s of the k ind r e f e r r e d to i n sa id sec t ion 21(a) ( 2 ) .

Respec t fu l ly ,

(Signed) Chester Mor r i l l

Chester M o r r i l l , Secre tary .

Inc losure


X-7973~"b : 6 7

EXCERPT FROM LETTER RECEIVED BY FEDERAL RESERVE BOARD FROM AS SI STUM FEDERAL RESERVE AGENT AT FED-

ERAL RESERVE BAH OF PEILADELPHIA.

"Supplementing our l e t t e r of June 23, 1934, r e l a -t i v e to your l e t t e r X-7936, wo 'beg leave to advise you tha t Spi r id ion Furcich, a p r i v a t e "banker of Steel ton* Pennsylvania, who requested tha t we examine h i s "bank pursuant to the provis ions of Section 21 of the Banking Act of 1933, was examined "by one of our examiners on J u l y 16, 1934.

"The examiner repor ted tha t t h i s p r i v a t e banker has no d e p o s i t a n d according to the banker ' ; s ta tement , had not received deposi ts f o r severa l yea r s . However, he de-s i r e s to r e t a i n the r i g h t to r ece ive depos i t s , which r i g h t he may exerc ise a t any time. In v i e ? of t h i s s i t u a t i o n , we presume tha t we should continue- to conduct send- nnu.al examina t ion of the p r i v a t e banker ' s "busi ...jvs so louf as he ntxo the r i g h t to rece ive deposit*-' or ru i t i l he sho-JLd withdraw ..is reques t tha t we conduct the oxaminaticu r o -auired "by Sect ion 21 of the Ac t . "


Copy

OFFICE OF THE ATTORNEY GEMBHkL

Washington, D. C.

August 2, 1934.

The Federal Reserve 7 :ard,

Washington, D. C.

Gentlemen:

I have your l e t t e r of Ju ly 30, s t a t i n g your view t h a t a person "authorized" to engage i n the ""business of r ece iv ing depos i t s sub jec t to check," e t c . , who may a t some f u t u r e time r ece ive such depos i t s t u t p r e sen t ly has none and has received none f o r s eve ra l yea r s , i s not sub jec t to Sect ion 21 (a) (2) of the Banking Act of 1933, i n the sense tha t he must now sub-mit to examination and f i l e r epo r t s as p re sen t ly engaging i n such "business. You have submitted the matter to me p a r t i c u l a r -l y because the s t a t u t e , while imposing a duty upon the Board, provides f i n o and imprisonment fo r v i o l a t i o n s .

I am glad to inform you tha t I ccnciir : u the conclu-s ion which you have reached ana to aS-vure you t h a t i t vould not be the purpose of t h i s Department to i n s t i t u t e ny prosecut ion under such circumstances. Of course, i f the ind iv idua l he re -a f t e r does r ece ive such deposi ts he amut then comply with the s t a t u t e .

Respec t fu l ly ,

(Signed) Harold M. Stephens,

Act ing Attorney General.



ADDRESS OFFICIAL 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-7979.

August 11, 1934.


Dear S i r :

In connection with te legraphic t r ansac t ions i n

Government s e c u r i t i e s "between Federal r e se rve "banks, the



"HOXMUL" - Treasury B i l l s to "be dated August 15, 1934, and to mature February 13, 1935.

This word should "be in se r t ed i n the Federal Re-

serve Telegraph Code hook, fol lowing the supplemental

code word "HOXMCB" on page 173.

y t r u l y yours,

J . C. Noel l , Ass i s t an t Secre tary .

TO GOVERNORS OF ALL F. R. BASKS. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

C O P Y X-7981

70

TO: Secretary Morgenthau.

FROM: Mr. Oliphant .

Be: Sale of "building s i t e to Federa l Reserve Board,

I t i s my opinion tha t you a re given au tho r i ty "by sec t ion 5 of the

Act of May 25, 1926, as amended, (44 S t a t . 633; Feb. 24, 1928, d 94,

45 S t a t . 137; Feb. 16, 1931, c . 203, sec. 2, 46 S t a t . 1164; U. S. C.,

T i t l e 40, sec . 345) to s e l l a t p r i v a t e sa le to the Federal Reserve

Board, proper ty of the United Sta tes described as squares E-87 and

£-88, located on Cons t i tu t ion Avenue between 20th and 21st S t r e e t s ,

2T»W., Washington, D. C.

The Federal Reserve Board i s author ized to purchase t h i s proper ty

under the provis ions of sec t ion 4 of the Act approved June 19, 1934,

(Public ITo. 417, 73rd Congress) which reads as fo l lows:

"SEC. 4 . Section 10 of the Federal Reserve Act, as amended, i s f u r t h e r amended by changing the per iod a t the end of the t h i r d paragraph thereof to a comma and i n s e r t i n g t h e r e a f t e r the fo l low-ing : "and such assessments may include amounts s u f f i c i e n t to p ro-v ide f o r the a c q u i s i t i o n by. the Board i n i t s own name of such s i t e or bui ld ing i n the D i s t r i c t of Columbia as i n i t s judgment alone s h a l l be necessary f o r the purpose of providing s u i t a b l e and adequate quar ters f o r the performance of i t s f unc t i ons . A f t e r approving such p l ans , es t imates , and spec i f i c a t i ons as i t s h a l l have caused to be prepared, the Board may, notwithstanding any other provis ion of law, cause to be constructed on t he s i t e so acquired by i t a tra.ildi.ng s u i t a b l e and adequate i n i t s judgnent f o r i t s purposes and proceed to take a l l such s teps as i t may deem necessary or appropr ia te i n connection with the cons t ruc t ion , equip-ment, and fu rn i sh ing of such bu i ld ing . The Board may mainta in , enlarge , or remodel any bui ld ing so acquired or constructed and s h a l l have so le control of such bu i ld ing and space t h e r e i n . "


— 2 — 71 The proper ty i n question had "been leased by the Government i n

1918 and upon t h i s proper ty the Government had constructed c e r t a i n

temporary "buildings. Authori ty for the purchase of the proper ty was

given by the following provis ions of the Act of June 12, 1922, (42

S t a t . 646):

"The commission i n charge of the S t a t e , War and Navy Departments Buildings * * * i s hereby authorized and d i r e c t e d to acqui re * * * the following squares of land f o r pub l ic purposes , to w i t , the whole of squares known as numbers east of e ighty-seven; east of e igh ty -e igh t ; * * * Provided f u r t h e r , That the squares authorized to be acquired he re in s h a l l be under the control of the Superintendent of the S t a t e , War, and Navy Departments Buildings.1 1

By the Act of February 26, 1925 (43 S t a t . 983) the commission

i n charge of the S t a t e , War and Navy Department Buildings and the

o f f i c e of Public Buildings and Grounds were consolidated to form the

o f f i c e of Public Buildings and Public Parks of the Nat ional Cap i t a l ,

The Superintendent of the S ta t e , War and Navy Departments Bui ld ings ,

under whose control the proper ty i n question had been p laced , was

invested with the powers and dut ies formerly held by the commission

and was designated Direc tor of Public Buildings and Publ ic Parks of

the National Capi ta l . Subsequently, by Executive Order 6166 of June

10, 1933, the func t ions of the o f f i c e of Publ ic Buildings and Publ ic

Parks were t r a n s f e r r e d to the Of f i ce of National Parks , Buildings

and Reservations of the National Cap i ta l , which o f f i c e by the Act

of Congress approved March 2 , 1934 (Public No. 109 - 73rd Congress)

became known as the Nat ional Park Service .

I t w i l l appear from the s t a t u t e s here out l ined t h a t the proper ty

which the Government proposes to s e l l t o the Federal Reserve Board i s

now under the "cont ro l" of the National Park Service . I t does not


necessa r i ly fo l low from t h i s tha t the National Park Service has

au thor i ty to dispose of the p roper ty . In the case of Farmers Bond

and Mortgage Company v . Walker (1929 ) 207 Iowa 696 , 223 N. W. 497,

the Court used the fol lowing language;

"The word ' c o n t r o l ' has var ious s i g n i f i c a t i o n s , depend-ing on the circumstances and connection i n which i t i s used . 2 Words and Phrases , F i r s t Ser ies , p . 1549; 1 Words and Phrases , Second Se r i e s , p . 1021. The word may "be so used as wi th the context t o imply and confer complete dominion and ownership with the consequent power of d i s p o s i t i o n . Welsh v . G i s t , 101 Md. 606, 61 A. 665. Of i t s e l f , however, the word i s o r d i n a r i l y the equivalent of 'manage', ' d i r e c t ' , ' gove rn ' , • s u p e r v i s e ' , as confer r ing the usua l power of a t r u s t e e , and, wi th respect to r e a l property a t l e a s t , without power of d i s -p o s i t i o n . Bramell v . Cole. 136 Mo. 201, 37 S. W. 924, 58 Am. S t . Rep. 619; Randall v . Josse lyn . 59 Vt. 557, 10 A. 577; Wolffe v . Loe"b. 98 Ala. 426, 13 So. 744."

The question "before the Court i n In r e Lyman (D. C. , S. D. New

York - 1893) 55 F. 29, concerned the r i g h t of the United S ta tes Trea-

sury Department to i n t e r f e r e with the Cour t ' s possess ion of a c e r t a i n

room i n the Post Of f i ce Building. In defense of i t s a c t i o n the

Treasury Department r e l i e d upon the f a c t tha t i n appropr ia t ion a c t s

the bu i ld ing was r e f e r r e d to as "under control of the Treasury Depart-

ment". I t was determined "by the Court, however, t ha t the "cont ro l"

invested i n the Treasury r e l a t e d only to the "care , maintenance and

r e p a i r " of the bu i ld ing and did not expend to supervis ion over i t s use

and occupation.

That the word "control" as used i n t he Act of June 12, 1922, was

intended to include only the duty of care and maintenance, becomes

evident upon examination of sec t ion 1 of the Act of March 3, 1883,

which created the commission i n charge of the S t a t e , War and Navy


Department Building. This sec t ion provided as fo l lows :

"The Pres ident i s hereby authorized and d i r ec t ed to des ig-na te from the Engineer Corps of the Army or the Navy, an o f f i c e r well q u a l i f i e d f o r the purpose, who s h a l l "be de t a i l ed to ac t as superintendent of the completed por t ions of the S t a t e , War, and Navy Department Bui ld ing, under the d i r e c t i o n of the Secre ta r i es of S t a t e , War, and Navy, who a re hereby cons t i tu ted a commission f o r the purposes of the care and supervis ion of sa id "building, as h e r e i n a f t e r s p e c i f i e d . Said o f f i c e r sha l l lave charge of sa id "building, and a l l the engines, machinery, steam and water supply, hea t ing , l i g h t i n g , and v e n t i l a t i n g appara tus , e l e v a t o r s , and a l l other f i x t u r e s i n sa id "building, and a l l necessary r e p a i r s and a l t e r a t i o n s t h e r e o f , as wel l as the d i r e c t i o n and control of such f o r c e of engineers , watch-men, l a b o r e r s , and others engaged about the bu i ld ing or the apparatus under h i s supervis ion; of the c leaning of the cor-r i d o r s and water c l o s e t s ; of the approaches, s idewalks, lawns, cour tyards , and a reas of the bu i ld ing , and of a l l rooms i n the sub-basement which contain the b o i l e r s and other machinery, or so much of s a i d rooms as may be indispensable to the proper performance of h i s dut ies as here in provided."

The "maintenance and pro tec t ion" of the other temporary bui ld ings

erected during the War had been ent rus ted to the commission by the Act

of March 28, 1918 (40 S t a t . 483; June 4 , 1918, c . 93, 40 S t a t . 588)

and convenience requi red t h a t , when i n 1922 the temporary bu i ld ings

on squares E-87 and E-88 were acquired, the "maintenance and p r o t e c -

t ion" of these bu i ld ings a lso should be given to the commission. I t

i s necessary to conclude tha t the use of the word "cont ro l" was a

shorthand method of accomplishing t h i s r e s u l t , In view of the f a c t

tha t the commission never had any powers other than those necessary i n

the care and maintenance of publ ic bu i ld ings , i t i s absurd to suppose

tha t Congress intended that as to c e r t a i n i so l a t ed proper ty the commis-

sion should have a l so the power of d i s p o s i t i o n .

I t i s my opinion tha t the power to s e l l the p roper ty i n quest ion

i s no t , t h e r e f o r e , i n the National Park Service, but i n yourse l f by


•"5**

v i r t u e of the Act of May 25, 1926, as amended. Pe r t i nen t p rovis ions

of t h i s Act are as fol lows:

"Be i t enacted "by the Senate and House of Respresenta t ives of the United S t a t e s of America In Congress assembled. That, to enable the Secretary of the Treasury to provide su i t ab l e accomodations i n the D i s t r i c t of Columbia f o r the executive departments, and independent establ ishments of the Government not under any executive department, and f o r courthouses, p o s t -o f f i c e s , immigration s t a t i o n s , customhouses, marine h o s p i t a l s , quarant ine s t a t i o n s , and other publ ic bu i ld ings of the c l a s s e s under the control of the Treasury Department i n the S t a t e s , T e r r i t o r i e s , and possessions of the United S t a t e s , he i s hereby authorized and d i rec ted to acqu i re , by purchase, con-demnation, or otherwise, such s i t e s and addi t ions to s i t e s as he may deem necessary, and to cause to be cons t ructed thereon, and upon lands belonging to the Government convenient-l y loca ted and ava i l ab le f o r the purpose (but exclusive of m i l i t a r y or naval r e s e r v a t i o n s ) , adequate and s u i t a b l e bu i ld ings f o r any of the foregoing purposes, g iv ing p re fe rence , where he considers condi t ions j u s t i f y such ac t i on , to cases where s i t e s f o r publ ic bui ld ings have h e r e t o f o r e been acquired or author ized to be acquired, and to enlarge , remodel, and extend e x i s t i n g publ ic bui ld ings under the control of the Treasury Department, and to purchase bu i ld ings , i f found to be adequate, adaptable , and su i t ab l e f o r the purposes of t h i s Act, together with the s i t e s t h e r e o f , and to remodel, en large , or extend such bu i ld ings and provide proper approaches and other necessary improvements to the s i t e s t he r eo f . When a bu i ld ing i s about to be constructed on a s i t e he re to fo re acquired and such s i t e i s found by the Secretary of the Treasury to be unsu i t ab le f o r i t s intended purpose, he i s hereby f u r t h e r au thor-ized and empowered to acquire a new s i t e i n l i e u thereof by purchase, condemnation, exchange. or otherwise, and except i n case of exchange to dispose of the present s i t e by publ ic sa l e and to execute the necessary qui tc la im deed of conveyance:* * * *

"Sec. 5 . * * *

"In ca r ry ing in to e f f e c t the provis ions of t h i s Act, i f the Secre tary of the Treasury deems i t to be to the bes t i n -t e r e s t s of the Government to construct Federal bu i ld ings to take the p lace of e x i s t i n g Federal bu i ld ings , he i s hereby authorized to cause the present bu i ld ings to be demolished, i n order t h a t the s i t e s may be u t i l i z e d i n whole or i n pa r t f o r such bu i ld ings , or where i n h i s .judgment i t i s more advantageous to construct a Federal bu i ld ing on a d i f f e r e n t


s i t e i n tho same c i t y , t o s o i l any such bui ld ing or bui ld ings and t h e s i t e or s i t e s t ho roo f , a t such time and on such terms as ho deems proper, and to convey ttio same t o tho r e spec t ive purchasers thereof by the usual qui tc la im deed, and to depos i t the proceeds of t h e s a l e s thereof i n the Treasury as mi sce l l a -neous r e c e i p t s , and t o charge aga ins t the t o t a l sum of $150,000,000 hereinbefore authorized only the r e spec t ive ne t excess cos t , i f any, over and above the proceeds of such s a l e s , of providing such new s i t e s and bu i ld ings . " (Underscoring suppl ied)

I t w i l l be observed t h a t there are two provis ions of t h i s Act which

give t h e Secre tary of t h e Treasury a u t h o r i t y t o s e l l p roper ty of t h e

Government under c e r t a i n circumstances. The quest ion as t o which of

those two provisions i s appl icable t o the f a c t s of the present case

may f o r the moment be d e f e r r e d . Let i t be assumed t h a t , ac t ing i n r e -

l iance on the a u t h o r i t y of ono of those provis ions , you wore to give a

qui tc la im deed t o tho Federal Rosorvo Board covering tho proper ty i n

question and i t wore then determined t h a t the necessary a u t h o r i t y f o r

the execution of t h i s deed ex is ted not i n you but i n an o f f i c i a l of the

National Park Serv ice . Even i n t h a t case, I be l i eve i t extremely doubt-

f u l t h a t you would have submitted yourself t o any danger of personal

l i a b i l i t y . I t i s wel l e s tab l i shed t h a t a publ ic o f f i c e r i s not l i a b l e

f o r mistakes of judgment i n the performance of a d i s c r e t i o n a r y a c t .

Kendall v . Stokes (1845) 3 How. 87, 11 L.Ed. 506. And the Secre tary

of t h e I n t e r i o r Department, of which the National Park Service i s a p a r t ,

in h i s wi re less to the President dated Ju ly 13, 1934, would seem t o have

expressed h is approval of your giving such a deed. In view of the s t a t u s

of the Federal Reserve Board as an independent establ ishment of the Gov-

ernment, i t i s doubt fu l i f the Board could show any damage from the

o f f i c i a l ac t of an o f f i c e r of the Government. Cer ta in ly i n executing

a qui tc la im deed you would warrant nothing, except perhaps by impl ica t ion


that you had au thor i ty to execute the deed, and i t has been held

that a publ ic o f f i c e r i s not l i a b l e f o r dece i t i f i n executing a

contrac t he represen t s tha t the contrac t may he v a l i d l y made "by him,

since the other con t rac t ing par ty i s equally "bound to know the law and

to know i t c o r r e c t l y . Commercial Trust Company v . Burch (D.C., S. D.,

G-a. — 1920) 367 F. 907. Of course, the Federal Reserve Board may

re fuse to accept the deed unless i t i s accompanied by another deed

executed by an authorized o f f i c e r of the National Parks Service .

Of. United S t a t e s v . Jonas (La. 1874) 19 Wall. 598, 22 L.Ed. 177.

But tha t ques t ion i s not involved i n t h i s memorandum.

The quest ion remains as to whether au thor i ty to s e l l the proper ty

i n quest ion i s given you by sec t ion 1 or sec t ion 5 of the Act of May

25, 1926. These sec t ions appear to be mutually exclus ive . Sect ion 1

provides t h a t when proper ty acquired as a s i t e f o r a Federal b u i l d -

ing i s determined by you to be unsu i tab le , you may dispose of t ha t

property at publ ic sa l e and acquire other p roper ty . Sect ion 5 provides

t.aat i n cons t ruc t ing a new Federal bu i ld ing to rep lace an e x i s t i n g

one, you may s e l l the e x i s t i n g Federal bu i ld ing and s i t e at such time

and upon such terms as you may deem proper .

The scope of each of these provis ion^ becomes apparent i n the

l i g h t of the purpose f o r which the provis ion was enacted. At the time

of the passage of the Act of May 23, 1926, there had been no regu la r

appropr ia t ion f o r publ ic bui ld ings since 1913. During the War i t was

necessary to put the monies provided f o r pub l ic bu i ld ings l a r g e l y t o

other purposes, and as a consequence the Government found i t s e l f the


owner of numerous bui ld ing s i t e s which, i n the course of years , had

become unsui tab le f o r t he purposes f o r which they were o r i g i n a l l y ac-

qui red . I t was, t h e r e f o r e , provided i n sec t ion 1 t h a t when a new

bui ld ing was about t o be b u i l t and the Secretary of the Treasury de-

termined t h a t the bui ld ing s i t e provided t h e r e f o r had become unsu i tab le ,

he might dispose of t h a t s i t e a t publ ic s a l e . In con t ras t t o t h i s ,

the provis ion under considera t ion i n sec t ion 5 was not designed t o care

f o r an unusual s i t u a t i o n ; i t was enacted t o enable the Secre tary genera l ly

t o rcplaco Federal bui ld ings which had bocome obso le te . Provision was

made t h a t the Secre tary might s o i l ex i s t ing bui ld ings and t he s i t e s

thereof i n connection with the cons t ruc t ion of now bui ld ings on d i f f e r e n t

s i t e s in t he same c i t y .

I t w i l l be soon t h a t t he present case c l e a r l y f a l l s wi th in the

provisions of sec t ion 5, s ince i t i s contemplated t o s e l l t o the Federal

Reserve Board not only a bui ld ing s i t e but the Federal bui ld ings now

standing upon t h a t s i t e . These bui ld ings are l a r g e l y occupied, I under-

stand, by t h e Federal Trade Commission, f o r which a new bui ld ing i s

being provided.

That t h i s proper ty may v a l i d l y be sold t o t h e Federal Reserve Board

a t p r iva te sa le I have l i t t l e doubt. Section 5 provides t h a t s a l e s s h a l l

be made by the Sec re t a ry "a t such times and upon such terms as he deems

proper", and i t sooms hardly probable t h a t any court would apply t he

requirement of publ ic sa le contained i n sec t ion 1 t o s a l e s under the

provisions of s ec t i on 5 . In t h i s connection the case of United S ta tes

v . Jonas, supra, should bo noted and d i s t i ngu i shed . I t was decided i n

t h a t case t h a t the ac t of March 3, 1863, providing f o r the s a l e of


proper ty acquired by the United Sta tes i n the c o l l e c t i o n of debts

had the e f f e c t of amending the Act of May 29, 1930, i n so fa r as i t

required t h a t the S o l i c i t o r of the Treasury should obtain the Secre-

t a r y ' s approval to the s a l e of such proper ty . I t was contended by

the Government t h a t the re was no c o n f l i c t between the s t a t u t e s , s ince

the l a t e r s t a t u t e might be confined i n i t s e f f e c t t o unproductive

p roper ty . The court dismissed t h i s content ion with the statement

t h a t "no good reason can be assigned why the d i spos i t i on of unproduc-

t i v e lands should be subjec t to the approval of the s ec re t a ry , and

other proper ty , which, in t h i s case, consisted of valuable r e a l e s t a t e

i n the City of New Orleans, with bui ldings on i t , be l e f t t o the sole

d isposal of the subordinate o f f i c e r , " I t i s p l a i n l y evident t h a t t h i s

language i s not appl icable t o the present case, s ince t he r e i s a

va l id reason f o r supposing t h a t Congress intended t o requ i re t h a t

sa les under sec t ion 1 should be publ ic , while permi t t ing s a l e s under

sec t ion 5 t o be made i n such manner as the Secretary might deem proper#

The bui ldings t o be sold under sec t ion 5 are government bui ld ings which

are customari ly purchased by Sta tes or mun ic ipa l i t i e s , many of which

are forbidden by law t o bid a t public pa les , while the s i t e s t o be sold

under sec t ion 1 are e i t he r vacant lande or lands containing bui ld ings

su i t ab l e f o r pubchase by anyone,

T/Vhile i t has been the general p rac t i ce of the Procurement Division

i n ac t ing under sec t ion 5 to s e l l Federal Buildings and s i t e s a t publ ic

s a l e , yet exceptions have r e g u l a r l y been made when the circumstances

required t h a t p r iva t e sales should be he ld . In view of the f a c t t h a t


-10-

the Federal Reserve Board was created by Act of Congress, and is# as

has been s t a t e d , an independent establishment of t h e Government, i t

would seem evident t h a t i n the present case an exception t o the general

adminis t ra t ive p rac t i ce might appropr ia te ly be made*


tv. • 8 0

.C-758S

August 15, 1934.

StrBJSCr: Sxclubion fro?- Banking Quarters of Member Banks and 3axJ:s V/hose Deposits are Inr.ured toy the Fed-eral Deposit Insurance Corporation of Off ices o* Oth ? :v Organ! zati ons.

Dear Sir:

An amendment to ex is t ing law has teen proposed for the purpose

of excluding from the hanking quarters of member hanks and other hanks

whose deposits are insured hy the Federal Deposit Insurance Corporation

any other organization whose a c t i v i t i e s might embarrass such hanks or

might render the supervision of the hanks more d i f f i c u l t . As submitted,

the proposed amendment would prohibit any bank, banking assoc iat ion , or

trust company, and any other organization or person engaged i n the bank-

ing, building and loan, brokerage, s e c u r i t i e s , insurance, indemnity or

trust business, or in Ihn bvainess of receiving deposits , or engaged i n

issuing or s e l l i n g -i- tes ov other evidences of indebtedness, from oc-

cupying any part of t>o quarters in Which any or the business of a member

bank or bank whose dop -: i t s are insured under sect ion 1233 of the Federal

Reserve Act i s conducted.

Tan proposed pr . - in i t ios rc ild |idt include organization# which,

R6 tenants, simply occ-mj-* s w c e in other parts of the hank bui lding, and

Sppl ies only to or?*?*»iizatiotts which share space i n the tytrMn^ quarters

or occupy r.-ijoiniru^ r.pac<.;, access to which i s poss ible through the bazfe-

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

«* 2 •*

X-7532

l a order f t i.vi:z îro proper consideration to thv pro.

j.. jfc.od ^,âic!iuont, i t w i l l "be appreciated i f you w i l l make a» i n v e s t i " t i r -

i a your d i s t r i c t of the extent to which other organizations maintain o f -

f i c e s i n the banking quarters of member banks and other banks whose

deposits are insured by the Federal Deposit Insurance Corporation, f.id

what the e f f e c t on such organizations and the banks might be i f the pro-

posed amendment were enacted into law. In making the requested i n v e s t i -

gation, i t i s not bel ieved necessary or desirable to c ircular ize State

member banks, as i t i s believed that, from your general information and

from information avai lable to your examiners, an approximate idea may be

obtained as to the extent the State member banks share their quarters with

other organisations. I t aoy a lso be poss ible in conversations with the

chief national bank examiners aad the supervising exaîiners for the Federal

Deposit Insurance Corporation to obtain further information as to tho ex-

tent of such pract ice i n other banks, and i t i s not wipes ted that you

should c ircularize the banks whose deposits are insured by the Federal De-

pos i t Insurance Corporation, as such inquiries ni£ht "c- nds i^-rprvted .

The Board a l so w i l l a ^ r o c i a t e your suggestions and comments, with • > - ,

special reference to the qu.estion the^fcor the purpose i s desirable and

wlxethdr the proposed anoaicfoant as described above i s s u f f i c i e n t l y co;xpre-

hensive, or whether, ojxfthe other haaflf i s too inc lus ive and Would

r e s u l t i n i n j u s t i c e t o some banks* -

Tory truly yours,

Chaster Morrill Secretary.


C O P Y X-7983

White House Washington, D. 0 . August 15th, 1934.

Dear Governor

I have accepted, with grea t r e luc t ance , your

r e s igna t ion as Governor of the Federal Reserve Board, e f f e c t i v e

today as requested "by you.

And now tha t you a r e leaving Washington and r e t u r n -

ing to At lan ta where you wi l l reassume the post of Governor of the

Federal Reserve Bank the re , I am glad you a re undertaking a new

and important add i t i ona l t a s k .

You can do much good "by presen t ing the recovery

program to the count ry ' s reserve "banks, commercial "banks and other

f i n a n c i a l i n s t i t u t i o n s ; "by acquaint ing them with the successive

s teps taken "by the Administrat ion which have r e s u l t e d i n the present

prosperous condi t ion of these i n s t i t u t i o n s and which make pos s ib l e

t h e i r cooperation wi th the Adminis t ra t ion i n i t s program of complete

"business r e h a b i l i t a t i o n .

I am pleased to th ink tha t your p o s i t i o n as Governor of

the Federal Reserve Bank a t At lan ta w i l l give you opportuni ty t o

undertake t h i s work, and tha t t ha t bank, together with the Federa l

Reserve Board, w i l l cooperate with you i n i t s performance.

In order tha t I may keep f u l l y informed as your work

p rogresses , I wish you would send me r epor t s from time to t ime.


I want a l so to express to you my deep personal ap-

p r e c i a t i o n f o r the f i n e se rv ice you have rendered a t a l l times

s ince you assumed the Governorship of the Federal Reserve Boards

The splendid record you have made e n t i t l e s you to the g r a t i t u d e ,

not only of those d i r e c t l y i n t e r e s t e d i n Government and "banking,

but to the mi l l ions of hank deposi tors throughout the country who

owe much to you because of the wise judgment you exercised i n the

c r i t i c a l times of not long ago.

The thanks of the e n t i r e country should, t h e r e f o r e ,

be conveyed to you along with t h i s expression of my own personal

apprec ia t ion . I am thankfu l , a l s o , fo r the reason tha t al though

you a r e leaving us here i n Washington, you s t i l l w i l l be as a c t i v e ,

or even more a c t i v e , i f such i s p o s s i b l e , i n the discharge of the

At lan ta Bank's r e s p o n s i b i l i t i e s and in taking on new dut ies which

w i l l help the whole country.

Very s incere ly yours ,

(Signed) Frankl in D. Roosevelt

Honorable Eugene Black, Governor, Federal Reserve Board, Washington, D. C.



A D D R E S S OFFICIAL C O R R E S P O N D E N C E TO T H E FEDERAL R E S E R V E BOARD X-7984.

August 17, 1934.

Dear S i r :

Refe r r ing to the Board's l e t t e r of J u l y 3,

1934, (X-7949), i n regard to the f i n a l d i s p o s i t i o n of

app l i ca t ions under Section 32, a t t e n t i o n i s ca l l ed to

the f a c t t h a t the phrase "beginning a t l i n e 5 on page 1

thereof reading "pursuant to Section 17(g) of Regulation

R," should read "pursuant to Section IV(h) of Regulation

R,".

A l l ava i l ab le copies of t he foregoing l e t t e r

should be corrected accordingly.


Chester Mor r i l l , Secre ta ry ,

TO ALL F. R. AGENTS. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


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

Xp-7985

August 18, 1934.


Dear S i r ;

In connection with t e legraphic t r ansac t ions i n

Government s e c u r i t i e s "between Federal rese rve hanks, the

fol lowing code word has been designated to cover a new

i s s u e of Treasury B i l l s :

"NOXNAT" - Treasury B i l l s to "be dated August 22, 1934, and to mature February 20, 1935.

This word should be i n se r t ed i n the Federal Re-

serve Telegraph Code book, fol lowing the supplemental code

word "HOXMUL" on page 172.

Very t r

Ass i s tan t Secre tary .

TO GOVERNORS OF ALL F. R. BANKS. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


86

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 TO t h e f e d e r a l r e s e r v e b o a r d

X-7986

August 18, 193^

SUBJECT: Expense, Main Lines, Leased Wire System, J u l y , 193^*

Dear S i r :

Inclosed herewith you w i l l f ind two mimeo-graphed statements, X-7986~a and X-7986-b, covering in deta i l operations of the main l i n e s , Leased Wire System, during the month of July, 193^«

Please c r e d i t the amount payable "by your bank f o r your share of the expense of the Leased Wire System, to the Federal Reserve Bank of Richmond in your da i ly statement of c r e d i t s through the Gold Set-tlement Fund fo r the account of the Federal Reserve Board, and advise the Federal Reserve Bank of Richmond by wire the amount and purpose of the c r e d i t .


F i sca l Agent

Inc losures

TO GOVERNORS OF ALL F. R, BAMS, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

4

REPORT SHOWING CLASSIFICATION AM) NUMBER OF WORDS TRANSMITTED OVER MAI IT LIHES OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MOITTH OF JULY, 193%,

X-7986-a

From

Business reported by banks

Words sent "by Hew York charge-able to other F. R, Banks ( l )

Net Federal reserve bank business

Per cent of t o t a l Bank business (*)

Boston New York Phi lade lph ia Cleveland Richmond At lan ta Chicago S t , Louis Minneapolis Kansas City Dallas San Francisco

Total

30,307 136,776

27,923 52,965 49,130 52,796 85,137 70,527 36,155 70,510 51,692 82,280

7^6,298

1,370

1,542 1,472 1,507 l ,6o4 1,964 1,506 1,372

1 $ h m . 19,613

31,677 136,776

29,465 54,437 50,637 54,400 87,101 72,033 37,527 71,960 54,159 85,739

765,911

4 . i 4 17.86

3.85 7*11 6.61 7»10

11.37 9.40 4 .90

7.07 11.19

100.00

F. R. Board business . . . . . . . . 345,4)9 1,111,350

Reimbursable business Incoming & Outgoing . . 671,200

Total words t ransmi t ted over main l i n e s . . . . . . . . . . . . . . . . . . . . . . . . . . 1,782,550

(*) These percentages used in ca l cu la t ing the pro r a t a share of leased ? i r e expense as shown on the accompanying statement (X^-7986-b).

( l ) Number of words sent by New York to other F. R. Banks fo r t h e i r sole b e n e f i t charged to banks ind ica ted in accordance with ac t ion taken a t Governors1 Conference Nobember 2-4, 1925.

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

X-7986-b

REPORT OF EXPENSE MAI 17 LIKES FEDERAL RESERVE LEASED WIRE SYSTEM, JULY, 1S31+.

R e t i r e - Oper- Pro r a t a Payable t o ment a t o r s ' share of Federa l

Opera tors ' Contr ibu- over- Wire Total t o t a l Reserve STame of Bank S a l a r i e s t i o n s time r e n t a l expenses expenses Cred i t s Board

Boston $260.00 $ 23.40 $ - $ - $283.40 $645.11 $283.40 $361.71 Hew York 1,345.80 121.12 3.00 - 1,469.92 2,783.00 1,469.92- 1,313.08 P h i l a d e l p h i a 225.00 20.25 - - 245.25 599.92 245.25 354.67 Cleveland 306.66 27.60 - —» 33^.26 1 ,107.90 3 3 4 . 2 6 773.64 Richmond 190.00 17.10 230.00(&) 437.10 1,029.99 437.10 592.89 A t l a n t a 270.00 24.30 - — 294.30 1,106.34 294.30 812.04 Chicago 4 ,468 .38 ( f ) 373.43 7-00 - 4,848.86 1,771.70 4,848.86 3,077.16c*) S t . Louis 195.00 17.55 - - 212.55 1 ,464.73 2 1 2 . 5 5 1,252 .18 Minneapolis 211.25 18.00 - 229.25 229.25 534.28 Kansas Ci ty 287.00 25.83 - - 312.83 312.83 1,151.90 D a l l a s 251.OO 22.59 - — 273.59 1,101.67 273.59 828.08 San Franc isco 380.00 34.20 — - 414.20 1,743.66 414.20 1,329.46 Federal Reserve Bd. — — 15,637.6? 15,637.65 —

Total $8,390.09 $725.1+2 $10.00 $15,867.68 $24,993-19 $15,582.28 $9,355.51 $9,303,93

Less Reimbursable Charges: 9 ,410.91 3,077.16 (a) $15,582.28 $6,226,77

(&) Main l i n e r e n t a l , Richmond-Washington (#) Inc ludes s a l a r i e s of Washington opera tors (*) Credi t e

(a) Amount reimbursable t o Chicago

00 00


FEDERAL RESERVE BOARD WASHINGTON 89


X-7987

August 18, 1934.

SUBJECT: Prel iminary Draf t of Regulation Ee Extension and Maintenance of Credit "by Brokers, Dealers , and Members of Secur i t i e s Exchanges.

Dear S i r :

There i s enclosed herewith a prel iminary d r a f t of Regulation T —

Extension and Maintenance of Credit "by Brokers, Dealers , and Members of

Secur i t i e s Exchanges. There a r e a lso enclosed drafts of a proposed agree-

ment to be signed by nonmember banks wishing to qua l i fy under the Secur i -

t i e s Exchange Act of 1934 to make loans to brokers, and c e r t a i n r e l a t e d

documents.

You w i l l note tha t these a re prel iminary d r a f t s and tha t t h e y a r e

not f o r p u b l i c a t i o n . I t i s the Board's des i r e to have the b e n e f i t of f u l l

and f r e e c r i t i c i sms of these d r a f t s and suggestions as to t h e i r improvement

i n any respect tha t may seem des i r ab l e . You a r e requested t h e r e f o r e i n -

formally to submit copies to r ep resen ta t ives of s e c u r i t i e s exchanges i n

your D i s t r i c t and to other persons whd a r e in your judgment q u a l i f i e d to

o f f e r u s e f u l suggest ions . I t i s requested tha t you obta in suggest ions and

c r i t i c i sms from such persons in wr i t ing and transmit the o r i g i n a l s thereof

to the Board as soon as they a r e received and t h a t , i n add i t ion t h e r e t o ,

you f u r n i s h to the Board i n wr i t i ng your own c r i t i c i s m s and suggest ions and


X-7987 g 0

— 2 —

the substance of any add i t i ona l c r i t i c i s m s and suggestions which you may

rece ive ve rba l ly from other sources.

I t i s a lso suggested tha t i f poss ib le you ar range f o r a conference

to which you would i n v i t e r epresen ta t ives of the exchanges and a t which the

substance and form of the regu la t ion would be d iscussed. While summary r e -

por t s of the proceedings of such conferences should be t ransmi t ted to the

Board, i t i s not intended tha t these should take the p lace of the w r i t t e n

comments reques ted . Whenever p r a c t i c a b l e , i t w i l l be apprec ia ted i f you

w i l l n o t i f y the Board of any general conference of t h i s charac ter i n time

f o r members of the Board or i t s s t a f f to a t t end i f they des i r e to do so .

You w i l l note tha t the margin requirements p resc r ibed by t h i s regu-

l a t i o n a r e those out l ined i n the Secur i t i e s Exchange Act of 1934. At tent ion

i s c a l l e d , however, to the f a c t t ha t the Board has au tho r i t y t o p re sc r ibe

d i f f e r e n t margin requirements and tha t the inc lus ion of the s t a t u t o r y

formula i n t h i s prel iminary d r a f t of the regu la t ion i s not to be taken as

ind ica t ing tha t the Board has decided to promulgate t h i s p a r t i c u l a r s tandard.

Since the r egu la t ion must become e f f e c t i v e October 1 , and p a r t i e s

i n t e r e s t e d should have p r i o r to such date as much time as poss ib l e to become

fami l i a r wi th the new r egu l a t i on , you a r e requested to have a l l suggest ions

and c r i t i c i sms i n the hands of the Bo&rd a t the e a r l i e s t p o s s i b l e moment, and

i n any event not l a t e r than September 1.

Very t r u l y yours

€Z\j j y " ) Chester Morr i l l

Secre tary .

TO ALL P. R. AGENTS Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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 TO 7 9 Q 8 t h e f e d e r a l r e s e r v e b o a r d

August 20, 1934.

SUBJECT: Holidays dur ing Septemberj 19344

Dear S i r ;

On Monday, September 3, Labor Day, t h e o f f i c e s of t h e Federa l

Reserve Board and a l l Federa l r e s e r v e banks and branches m i l be c l o s e d .

The Board has been advised t h a t ho l idays a l s o w i l l be observed

by Federa l r e se rve banks and branches during September, as f o l l o w s :

Monday, Sep t , 10, San Franc isco Admission Day Los Angeles ( C a l i f o r n i a )

Wednesday, Sep t . 12, Balt imore Defenders Day (Maryland)

On the da te s given the o f f i c e s mentioned w i l l no t p a r t i c i p a t e

i n e i t h e r the t r a n s i t or t h e Federa l r e s e r v e note c l e a r i n g through the

Gold Se t t lement Fund. Please inc lude t r a n s i t c l e a r i n g c r e d i t s f o r t h e

o f f i c e s a f f e c t e d on each of t h e hol idays wi th your c r e d i t s f o r t h e f o l -

lowing bus iness day* No d e b i t s covering shipments of Fede ra l r e s e r v e

notes f o r the Fede ra l Reserve Bank of San Franc isco should be inc luded

i n your no te c l e a r i n g of Monday, September 10*

P lease n o t i f y b ranches .


S. R» Carpenter A s s i s t a n t S e c r e t a r y .

TO GOVERNORS OF ALL FEDERAL RESERVE BANKS. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

X-7989

There i s quoted below an a r t i c l e appearing i n t h e August 19, 1934,

e d i t i o n of t h e New York Times:

LOAN PLANS "WIN BANKERS' FAVOR

Conferences With S t a t e Groups Here Expected t o Promote Indus t ry Program

Credi t Survey Speeded

Reserve O f f i c i a l s t o Explain th-;. Methods t o North J e r s e y I n s t i t u t i o n s '

Heads This Week.

The s e r i e s of conferences of bankers from var ious s e c t i o n s of NeVr

York S t a t e he ld l a s t week i n t h e Federa l Reserve Bank i s expected t o

give impetus t o the program of supplying working c a p i t a l loans t o i n -

d u s t r y th rough t h e coopera t ion of f i n a n c i a l i n s t i t u t i o n s and t h e Reserve

Banks under t h e r e c e n t amendment t o t h e Federa l Reserve Act . Upward of

600 bankers a r e es t imated to have a t t ended t h e meetings he ld f rom Tues-

day t o Fr iday and t h e meeting i p Rochester yes t e rday a f t e r n o o n . A f i n a l

meeting t o be he ld i n Buf fa lo next Saturday w i l l complete t h e coverage

of t h e S t a t e .

V i r t u a l l y t h e e n t i r e banking s t r e n g t h of the S t a t e has been brought

i n t o con tac t wi th t h e program by t h e meetings and d e t a i l e d exp lana t ions

of the mechanics of the loans and the p o l i c i e s involved have been made


- 2 - X-7989 * . •

a v a i l a b l e *

To Survey Credi t Needs.

As a r e s u l t of t h e meetings bankers i n t h e var ious r e g i o n a l groups

have agreed t o undertake surveys of t h e c r e d i t needs of t h e i r l o c a l i -

t i e s and to r e p o r t back t o t h e i r group l e ade r s da t a which can be em-

ployed by t h e Federa l Reserve Bank i n making more e f f e c t i v e t h e campaign

The bankers a r e expected t o l i s t t h e i n d u s t r i a l o r g a n i z a t i o n s i n t h e i r

r e s p e c t i v e c i t i e s and towns which would be e l i g i b l e f o r working c a p i t a l

loans and t o i n d i c a t e which of t he se a r e i n need of c r e d i t and which

could be expected to q u a l i f y . I t i s expected t h a t t h e r e s u l t s of the

survey w i l l be ready w i t h i n t e n days t o two weeks.

These conferences of the New York S ta te bankers , which were he ld

under the ausp ices of the New York S t a t e Bankers Assoc i a t i on , w i l l be

fol lowed t h i s week by a s e r i e s of meetings of bankers f rom Northern New

Je r sey , which d i s t r i c t i s inc luded i n the New York Reserve Bank's a r e a .

Meetings of t h e New J e r s e y bankers w i l l be held on Tuesday, Wednesday

and F r iday and groups of about 100 a re expected t o a t t e n d each c o n f e r -

ence*

Bankers Are E n t h u s i a s t i c .

The meetings d i s c l o s e d a g e n e r a l l y e n t h u s i a s t i c a t t i t u d e on t h e

p a r t of those who a t t ended , a l though many bankers were d o u b t f u l i f

numerous borrowers e x i s t e d i n t h e i r l o c a l i t i e s who were not a l r e a d y

r e c e i v i n g adequate c r e d i t through t h e usua l channels or could q u a l i f y

under the new program.


3 -94

Bankers who a re f a m i l i a r wi th the program say t h a t some misunder-

s tand ing has a r i s e n over t h e r e l a t i v e l y small amount of loans thus f a r

r e p o r t e d made by t h e Reserve Banks. They p o i n t out t h a t t h e program

i s j u s t g e t t i n g under way and t h a t t h e publ i shed t o t a l of ^214,000

r e p r e s e n t s only loans t h a t have a c t u a l l y been made, whereas i f t h e

t o t a l of loans arranged f o r were shown i t would be l a r g e r . I t i s ex-

pected t h a t from now on t h e f i g u r e s may r i s e more r a p i d l y -

Another misapprehension t h a t has appeared i n some q u a r t e r s i s t h a t

t he loans may be made only u n t i l Dec. 31. This t ime l i m i t a p p l i e s t o

the d i r e c t loans t o i n d u s t r y being iaade by the Recons t ruc t ion Finance

Corporat ion under the Loans t o I n d u s t r y Act, bu t t h e r e i s no t ime l i m i t

on t h e Fede ra l Rese rve ' s opera t ions under t h i s measure.



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 w 7 9

August 25, 1934

SUBJECT: Ass i s t an t Federal Reserve Agents a t Branches of Federal Reserve Banks.

Dear S i r :

I t has come to the a t t e n t i o n of t h e Federa l Reserve Board

t h a t the r e p r e s e n t a t i v e s of the Federa l Reserve Agents a t c e r t a i n

of the "branches of the Federal r e s e r v e banks have been g iven

b lanke t a u t h o r i t y to i s s u e Federal r e s e r v e no tes under c e r t a i n

c o n d i t i o n s wi thout ob t a in ing s p e c i f i c a u t h o r i t y i n each case from

t h e o f f i c e of the Federa l Reserve Agent,

In o rder to i n s u r e compliance wi th t h e requirement of t h e

s t a t u t e t h a t t he c o l l a t e r a l s e c u r i t y f o r Federa l r e s e r v e no tes

s h a l l not be l e s s than the amount of such n o t e s , the Federa l Re-

serve Board i s i n c l i n e d to b e l i e v e t h a t no Federa l r e s e r v e no tes

should be i s s u e d by Ass i s t an t Federal Reserve Agents or Act ing

A s s i s t a n t Federa l Reserve Agents at branch Federal r e s e r v e banks

except upon s p e c i f i c a u t h o r i t y or wi th the s p e c i f i c consent of

the Federal Reserve Agent or an A s s i s t a n t Federa l Reserve Agent

a t the head o f f i c e of t h e bank i n each case . However, b e f o r e

i s s u i n g i n s t r u c t i o n s to t h i s e f f e c t , t h e Federa l Reserve Board

•will be g lad to r e c e i v e your comments as to the f e a s i b i l i t y of

such a requ i rement . Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

X-7992

- 2 -

The Board i s a l so informed t h a t Act ing A s s i s t a n t Federa l

Reserve Agents a t the "branches of t h e Federa l r e s e r v e "banks a re

regarded as employees of the r e s p e c t i v e "banks. I n t h i s connect ion

the Board d e s i r e s to c a l l a t t e n t i o n to t h e requirement of s e c t i o n 16

of the Federa l Reserve Act t h a t a l l Federa l r e s e r v e no tes and a l l

gold c e r t i f i c a t e s and l awfu l money i s sued to or depos i t ed wi th any

Federal Reserve Agent s h a l l "be h e l d by such Agent i n t h e j o i n t

custody of h imse l f and the Federa l r e s e r v e "bank t o which he i s

a c c r e d i t e d . I n view of t h i s p r o v i s i o n of law the Board f e e l s t h a t

Acting A s s i s t a n t Federal Reserve Agents p a r t i c i p a t i n g i n such j o i n t

custody should be r e s p o n s i b l e to the Agent and independent of t h e

Federal r e s e r v e bank i n so f a r as i s c o n s i s t e n t wi th the p r a c t i c a l

s i t u a t i o n . They should be on the p a y r o l l of the Federal Reserve

Agent and s o l e l y r e s p o n s i b l e to him f o r the proper performance of

t h e i r d u t i e s . During such pe r iods as they a r e not engaged wi th t h e i r

d u t i e s as Acting A s s i s t a n t Federa l Reserve Agents, however, they may

be d e t a i l e d by the Federa l Reserve Agent to perform such f u n c t i o n s

f o r t h e bank as t h e Federal Reserve Agent may cons ider a d v i s a b l e .

I t i s suggested t h a t you make such changes i n your arrangements wi th

r e s p e c t to Acting A s s i s t a n t Federal Reserve Agents a t branches as

may be necessa ry to conform to the views expressed h e r e i n wi th r e -

gard t o t h i s m a t t e r .



TO ALL F. R. AGENTS (Except Boston and P h i l a d e l p h i a )




X-7993

August 25, 1934.

SUBJECTs Code Word Covering New I s sue of Treasury B i l l s .

Dear Si rs

In connect ion with t e l e g r a p h i c t r a n s a c t i o n s i n

Government s e c u r i t i e s between Federa l r e s e r v e banks, t h e

fo l lowing code word has been des igna ted t o cover a new


"NOXNER" - Treasury B i l l s t o be da ted August 29, 1934, and t o mature February 27, 1935

This word should be i n s e r t e d i n t h e Fede ra l Re-

serve Telegraph Code book, fo l lowing t h e supplemental

code word "NOXNAT" on page 172.

Very t r u l y yours ,

S. R. Carpenter , A s s i s t a n t S e c r e t a r y

TO GOVERNORS OF ALL F . R. BANKS.


FEDERAL RESERVE BOARD * 9 8 WASHINGTON


X-7994

August 25, 1934.

SUBJECTi Adminis t ra t ion of S e c u r i t i e s Exchange Act of 1934.

Dear Si rs

P r io r t o October 1, 1934, the Board w i l l i s sue r e g u l a t i o n s under

the S e c u r i t i e s Exchange Act of 1934 concerning t he ex tens ion and main-

tenance of c r e d i t by brokers , dea l e r s , and members of s e c u r i t i e s ex-

changes. I t i s expected t h a t the pub l i c a t i on of t h i s r e g u l a t i o n may

give r i s e t o numerous i n q u i r i e s and t h a t i f a l l such i n q u i r i e s are r e -

f e r r e d t o the Board r e p l i e s w i l l be unavoidably delayed• In order t o

e l iminate as much delay as pos s ib l e , i t i s hoped t h a t most of the ques-

t i ons can be disposed of a t the Federal rese rve banks and wi th t h i s i n

mind i t i s suggested t h a t , i f you have not a l ready done so, you des ignate

a t your bank some member or members of your s t a f f , inc luding i f pos s ib l e

someone i n co rn s e l 1 s o f f i c e , t o become f ami l i a r wi th the S e c u r i t i e s Ex-

change Act of 1934, t h e Board's r e g u l a t i o n s thereunder and the bus iness

p r a c t i c e s of members, b rokers , and dea le r s to which such r e g u l a t i o n s

r e l a t e . This procedure should help to minimize the number of ques t ions

upon which i t w i l l be necessary f o r the Board t o i s sue formal r u l i n g s .


f r l o v u X f Chester M o r r i l l ,

Sec re t a ry .

TO ALL FEDERAL RESERVE AGENTS. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


99


X-7995

August 30, 1934.


Dear S i r :

In connection with t e legraphic t ransac t ions i n

Government s e c u r i t i e s between Federal reserve "banks, the



"UOXEIG-" - Treasury B i l l s to "be dated September 5, 1934, and to mature March 6, 1935.

This word should be i n se r t ed i n the Federal Re-

serve Telegraph Code book, fo l lowing the supplemental

code word "UOXHER" on page 172.


S. B. Carpenter, Ass i s t an t Secre tary .

TO GOVERNORS OF ALL F. R. M S .


100

X-7996



September 1, 1934• For immediate r e l e a s e

Vice Governor Thomas, of the Federal Reserve Board, today i ssued

the fo l lowing s ta tement :

"The Federal Reserve Board, under the terms of t h e S e c u r i t i e s

Exchange Act of 1934, i s requi red t o i s sue by October 1, 1934

r e g u l a t i o n s r e l a t i n g t o the extension and maintenance of c r e d i t i n

connection with the purchasing and carrying of s e c u r i t i e s . A p re -

l iminary d r a f t of these r e g u l a t i o n s , prepared by the s t a f f but not

p rev ious ly considered by the Board, was fu rn i shed f o r comments and

suggest ions t o a l im i t ed number of persons, but not f o r p u b l i c a t i o n .

The Federal Reserve Board has not yet decided upon the terms of the

r e g u l a t i o n s , and p a r t i c u l a r l y i t has not e s t a b l i s h e d margin r e q u i r e -

ments * In the p re l iminary d r a f t , f o r t he purpose of d i s cus s ion ,

the margin requirements used are those p resc r ibed i n the law as a

b a s i s f o r the Board's determinat ion of margins. I t i s the Board 's

expec ta t ion t o i s sue the r egu la t i ons during September."




X-7997

September 4, 1934.

SUBJECT; C l a s s i f i c a t i o n of Loans under T i t l e I of the Nat iona l Housing Act .

Dear S i r :

There i s a t t ached f o r your i n fo rma t ion a copy

of a l e t t e r addressed by t h e Board under da te of Septem-

ber 4, 1934, t o t he Federa l Reserve Agent a t t he Federa l

Reserve Bank of Cleveland, wi th regard t o the c l a s s i f i -

c a t i o n by examiners f o r the Federa l r e s e r v e banks of

loans made under the p rov i s ions of Sec t ion 2, T i t l e I

of the Nat iona l Housing Act .


Chester M o r r i l l S e c r e t a r y .

I n c l o s u r e .

TO ALL FEDERAL RESERVE AGENTS.


• 103

C O P Y X-7997-a

September 4, 1934.

Mr• L. B. Williamsj Federal Reserve Agent, Federal Reserve Bank of Cleveland, Cleveland, Ohio.

Dear Mr. Williams:

Reference i s made to your l e t t e r of August 20, 1934, concern-

ing loans made by banking i n s t i t u t i o n s under the provis ions of Sect ion

2, T i t l e I of the National Housing Act and, p a r t i c u l a r l y , the c l a s s i f i -

ca t ion of such loans by examiners f o r the Federal Reserve Banks.

The National Housing Act provides f o r the insurance of such

loans, under the condit ions imposed, t o an amount not to exceed 20 per

cent of the t o t a l amount of the loans, advances of c r e d i t , and purchases

made by each approved f i n a n c i a l i n s t i t u t i o n f o r the prescr ibed purposes.

Under Section 3, T i t l e I of the Act, the Administrator i s

authorized t o make loans to i n s t i t u t i o n s insured under Sect ion 2, upon

the s e c u r i t y of ob l iga t ions which meet the requirements prescr ibed under

Section 2, f o r the f u l l f ace value of the obl igat ions o f fe red as secur-

i t y , sub jec t t o such r a t e s , terms and condit ions as the Administrator

sha l l determine. Bu l l e t i n No. 1, issued by the Federal Housing Adminis-

t r a t i o n August 10, 1934, contains the fol lowing statement;

"Liquid i ty i s assured by an agreement of the Federal Housing Administrat ion incorporated i n the Contract of Insurance, t o advance cash t o any f i n a n c i a l i n s t i t u t i o n demonstrating the need f o r same, a t any time, up t o the f u l l face value of a l l outstanding insured notes i n good s tanding ."


Mr. L. B. Williams 2- X-7997-a

I t i s f u r t h e r expla ined i n the B u l l e t i n t h a t such r e d i s c o u n t

f a c i l i t i e s a re not in tended f o r use i n order t o o b t a i n government money

t o lend but a re t o a s su re the a b i l i t y of t h e f i n a n c i a l i n s t i t u t i o n t o

r a i s e cash a g a i n s t such r e c e i v a b l e s i n case of emergency#

The Board f e e l s t h a t the examiners f o r t h e Federa l Reserve

Banks should be i n s t r u c t e d t h a t no p a r t of the loans made under t h e

p rov i s ions of Sec t ion 2, T i t l e I of the Nat ional Housing Act should be

c l a s s i f i e d as slow, d o u b t f u l , or l o s s so long as t h e insurance provided

by t h e Federa l Housing Admin is t ra t ion adequate ly covers t h e loans or

po r t ions the reof which might otherwise be so c l a s s i f i e d . I t i s under-

stood t h a t s i m i l a r i n s t r u c t i o n s have been i s sued by the Comptroller of

t he Currency t o a l l n a t i o n a l bank examiners .

I t i s understood t h a t , i f you have not a l r e a d y done so, you

w i l l r e c e i v e copies of the r e g u l a t i o n s of the Federa l Housing Adminis t ra-

t i o n from t h a t o r g a n i z a t i o n .


(Signed) Chester M o r r i l l





X-7998

September 5, 1934

SUBJECT: Discount of ob l iga t ion entered in to to obta in working c a p i t a l f o r "business l o -cated i n another Federal reserve d i s -t r i c t .

Dear S i r :

For your information the re i s inclosed herewith a copy

of a telegram recen t ly received "by the Federal Reserve Board from

the Federal Reserve Bank of Cleveland, together wi th a copy of

the Board's r ep ly the re to , r e l a t i n g to the a u t h o r i t y of the

Federal reserve "banks to discount f o r a f inanc ing i n s t i t u t i o n an

ob l iga t ion entered in to f o r the purpose of obta ining working capi-

t a l f o r an es tab l i shed i n d u s t r i a l or commercial business located

i n another Federal reserve d i s t r i c t .


Chester Mor r i l l , Secretary.

Inc losures .

TO CHAIRMEN OF ALL FEDERAL RESERVE BAHKS.


105

C O P Y

T E L E G R A M

F E D E R A L R E S E R V E S Y S T E M

(Leased Wire Service) X-<7998-a

Cleveland, Ju ly 25, 1934.

Board

Washington

Request r u l i n g as to whether t h i s hank may handle t r ansac t i on

under subsect ion (B) of sect ion 13B with f inanc ing i n s t i t u t i o n

operat ing i n t h i s d i s t r i c t f o r u l t ima te b e n e f i t of customer of

such f inanc ing i n s t i t u t i o n located i n another d i s t r i c t .

We have urged f inanc ing i n s t i t u t i o n s to p a r t i c i p a t e i n

such c r e d i t s and i n p r a c t i c e A negative answer w i l l be ser ious

impediment to operat ions as A s imi lar r u l i n g would be under sec t ion

13. We be l ieve tha t due cons idera t ion must be given to f a c t t h a t

t r ade areas and Federal Reserve d i s t r i c t l i nes do not co inc ide

This p a r t i c u l a r l y t rue i n t h i s d i s t r i c t . Our counsel adv i ses :

"While above question not f r e e from doubt i n view of

f a c t tha t subsect ion (B) uses term 'such es tab l i shed i n d u s t r i a l

or commercial b u s i n e s s , 1 which phrase apparent ly r e f e r s to

phrase i n subsect ion (A) ' e s t ab l i shed i n d u s t r i a l or commercial

business loca ted in i t ' s d i s t r i c t , ' we be l ieve tha t i t was not

in t en t f o r congress to c rea te s i t u a t i o n i n which i n d u s t r i a l

business would be u n a b l e t o secure c r ed i t under 13B through


106 2. X-7998-a

i t ' s regular financing ins t i tu t ion "by reason of intervening Federal

Reserve d i s t r i c t l ine . Apparently congress intended industr ia l and

commercial businesses to secure credit from regular sources in co-

operation with reserve "banks, and only to have reserve "banks make

direct loans as l a s t resort . To further such pol icy , we bel ieve

that Mathematical construction of sect ion should be avoided and

f a i l to percoive any v io la t ion of policy in making l ibera l construc-

tion. If l ibera l construction i s given, wo be l ieve that proper

Federal Reserve bank i s that one in d i s t r i c t of which financing

in s t i tu t ion i s located. We recognize our opinion contrary to

regulation S, sect ion II , paragraphs (B) and (C)."

Early advice w i l l be appreciated sincc two cases of

type in question pending and others certain to ar ise by reason of

geographical locat ion of number of our principal c i t i e s .

Zurlinden


±07

C O P Y

T E L E G R A M


WASHINGTON X-7998-b

July 31, 1934.

ZURLINDEN CLEVELAND

Your wire July 25 requesting ruling whether under provisions of

subsection (b) of sect ion 13b of the Federal Reserve Act your

"bank may discount for a financing in s t i tu t ion operating in i t s

d i s t r i c t an obligation entered into for the purpose of obtaining

working capital for an established industrial or commercial busi-

ness located in another Federal reserve d i s t r i c t just across the

l ine dividing that d i s t r i c t from the Cleveland d i s t r i c t . Federal

Reserve Board i s of the opinion that your bank may lawfully make

such discount provided, of course, that other applicable require-

ments of law and regulation are met.

(Signed) Chester Morrill MORRILL.




X-7999

September 5, 1934

SUBJECT: Possible v io lat ions of the provisions of Section 21 of the Banking Act of 1933.

Dear Sir:

There i s inclosed herewith, for your information,

a copy of a l e t t e r addressed by the Board to the Federal

Reserve Agent at Dallas, with regard to possible v io lat ions

of the provisions of Section 21 of the Banking Act of 1933.

Very truly yours,

Yf)<rvuJJZ Chester Morrill ,

Secretary.

Inclosure.

TO ALL FEDERAL RESERVE AG-EM'S.


copy " 1.09 X-7999-a

August 25, 1934

Mr. C. C. Walsh, Federal Reserve Agent, Federal Reserve Bank of Dal las , , Dallas, Texas.

Dear Mr. Walsh;

This refers to your l e t t e r of July 23, 1934, advising

that on July 2, 1934, you wrote a l e t t e r to each of certain named

unincorporated hanks in the State of Texas ca l l ing i t s at tent ion

to the provisions of section 21 of the Banking Act of 1933, and

that you have not received rep l ies from any of them. You s ta te that

you are advising the Board of the status of these banks as shown by

your records in order that the Board may decide whether the fac t s

should be reported to the Department of Just ice and that you are

deferring making a report to the local United States Attorneys u n t i l

you receive the Board's instructions.

I t may be said in general that in a case in which the

fac t s i n the possession of a Federal Reserve Agent show that a per-

son or organization i s acting in v io la t ion of the provisions of

sect ion 21 of the Banking Act of 1933 he should make a report of the

matter to the loca l United States Attorney and to the Federal Reserve

Board for transmission to the Department of Jus t i ce , but unless the

facts within his knowledge are such as to make i t appear that a l l

the essent ia l elements of a v io la t ion of the s tatute are present

i t i s not believed that the matter i s one which should be reported.


X-7999-a Mr. C. C. Walsh - 2

As stated in the Board's l e t t er of June 26, 1934 (X-7936), the Board

does not f e e l that i t i s necessary under the law that Federal reserve

"banks or Federal reserve agents maks an invest igat ion in order to

determine what persons or organizations in their respective d i s t r i c t s

may be subject to the provisions of sect ion 21 of the Banking Act of

1933, and the s tatute does not impose any respons ib i l i ty upon a

Federal reserve bank or a Federal reserve agent to ascertain whether

any such person or organization i s complying with the requirements of

that sect ion. However, i f the fact that a person, firm, corporation,

associat ion, business trust or other similar organization, not sub-

jec t to examination and regulation under Federal law, has engaged in

the business of receiving deposits since June 16, 1934, i s disclosed

by the records of the Federal reserve bank or in the performance of

your duties and such person or organization has not submitted or

offered to submit to examination either by the Comptroller of the

Currency or by the Federal reserve bank, i t w i l l be appropriate for

you to ascertain, i f practicable, from the State banking authorit ies

whether such parson or organization i s subject to examination and

regulation under State law. If a f ter obtaining these f a c t s i t ap-

pears that a v io la t ion of the law has been committed by any such

person or organisation, the matter should be made the subject of a

report to the loca l United States Attorney and to the Federal Re-

serve Board for transmission to the Department of Just ice in accord-

ance with the usual procedure. Likewise, i f i t i s disclosed from the


Mr. C. C. Walsh - 3 X-7999-a

records of the Federal reserve tank or in the performance of your

duties , that s ince June 16, 1934, a person or organization has

engaged in the "business of receiving deposits and also that at the

same time such person or organization has engaged in the "business of

i ssuing, underwriting, s e l l i n g or distributing s ecur i t i e s , the matter

should "be made the subject of a report to the United States Attorney

and to the Board f o r transmission to the Department of Jus t i ce .

In view of the statement in your l e t t e r of July 33rd that

i t i s poss ible that some of the "banks named therein may have d i s -

continued receiving deposits prior to June 16, 1934, or for other

reasons are exempt from the provisions of the law, the Federal Reserve

Board i s not transmitting copies of your l e t t e r to the Department of

Just ice and i t i s suggested that each of these cases "be treated in

accordance with the views above expressed.

Very truly yours,

(Signed) Chester Morrill , Chester Morrill ,

Secretary.


FEDERAL RESERVE BOARD WASHINGTON 112


X-8000

September 7, 1934

SUBJECT: Maximum rate of interest on time and savings deposits.

Dear Sir:

The Federal Reserve Board has given careful consideration

to the repl ies received from the Federal reserve agents in response

to i t s telegram of July 3, 1934, Trans. 2023, with regard to in -

terest rates on time and savings deposits.

of the question, the Board has decided that no change should he

made at the present time in the maximum rate of interes t of 3$ on

time and savings deposits prescribed in Regulation %.

On the "basis of the information received and i t s own study

Very truly yours,




FEDERAL RESERVE BOARD 113 WASHINGTON

ADDRESS o f f i c i a l CORRESPONDENCE T O t h e f e d e r a l RESERVE BOARD

X-8001

September 8, 1934.

SUBJECT! Code Word Covering New Issue of Treasury B i l l s .

Dear S i r :


Government s e c u r i t i e s between Federal reserve banks, the


i s sue of Treasury Bi l l s?

"NOXNOW" - Treasury Bi l l s to be dated September 12, 1934, and to mature March 13, 1936.

This word should be inse r t ed i n the Federal Re-

serve Telegraph Code book, fol lowing the supplemental

code word "HQXNIG" on page 172.


J . C. UoeXx, Ass is tan t Secretary

TO GOVERNORS OF ALL F. R. BANKS.


X«-8002

FEDERAL RESERVE B C ^ S b e r 11, 1934 114 WASHINGTON


Dear S i r :

I t now seems a l toge ther probable t h a t the Federal Reserve Board

w i l l take ac t ion within a few days on Regulation T, and t h a t i n order t o

secure prompt d i s t r i b u t i o n the Board w i l l request the Federal reserve banks

to have the r egu la t ion p r i n t ed . In view of t h i s p r o b a b i l i t y an ex t ra copy

of the d r a f t of September 5, which w i l l be the bas is of the f i n a l regu la -

t i on , i s inclosed, and the suggestion i s made t h a t the necessary arrange-

ments fo r p r i n t i n g may be taken up in a prel iminary way i n advance of your

r ece ip t of the r egu la t i on in i t s f i n a l form*

of a l l na t iona l s e c u r i t i e s exchanges, and in addi t ion t o " a l l brokers and

dealers who t r a n s a c t a business in s e c u r i t i e s through the medium of any

such member"• For the purpose of making up the necessary mailing l i s t we

understand tha t one of the Federal reserve banks has used the 1934 mid-year

ed i t ion of "Secur i ty Dealers of North America", supplemented by l i s t s of

r eg i s t e r ed s ecu r i t y dealers obtained from the severa l S ta te Secur i t i e s Com-

missions in the s t a t e s comprising the d i s t r i c t .

I t w i l l be necessary to d i s t r i b u t e the r egu la t ion to a l l members



Inc losure .





X-8OO3

September 13> 193*+•

SUBJECT: Expense, Main Lines, leased Wire System, August, 193^*

Dear S i r :

Inclosed herewith you " i l l f i nd two mimeo-graphed s ta tements , X-8003-a and X-8003-b, covering in d e t a i l operat ions of the main l i n e s , Leased Wire System, during the month of August, 193^*

Please c red i t the amount payable by your bank fo r your share of the expense of the Leased Tire System, to the Federal Reserve Bank of Richmond in your da i ly statement of c r e d i t s through the Gold Set-tlement Fund fo r the account of the Federal Reserve Board, and advise the Federal Reserve Bank of Richmond by wire the amount and purpose of the c r e d i t .


F i sca l Agent.

Inc losures .

TO GOVERNORS OF ALL F. R. BAMS. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

X-8003-a REPORT SHOWISB CLASSIFICATION AED HJISER OF 70KDS TRANSMITTED OVER ilAIF LI1JES

OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF AUGUST, 1934.

Words sent by Met Federa l Business Hew York charge- r e se rve r epo r t ed ab le t o other bank Per cent of t o t a l

From by banks F. R. Banks ( l ) bus iness bank bus iness (*)

Boston 30,634 1,175 31,809 4.21 Hew York 137,817 - 137,817 18.24 P h i l a d e l p h i a 27,325 1,313 28,638 3.79 Cleveland 51,722 1,187 52,909 7.00 Richmond 49,701 1,262 50,963 6 .74 A t l a n t a 49,003 1,264 50,267 6.65 Chicago 84,300 1,415 85,715 11.34 S t . Louis 65,802 1,384 67,186 8.89 Minneapolis 35,375 1,259 36,634 4.85 Kansas City 67,936 1,180 69,116 9.15 Dal las 53,417 2,430 55,847 7.39 San Francisco 86,044 2,733 88,777 11.75

T o t a l , 739,076 16,602 755,678 100.00

F. R. Board bus iness 362,788

Reimbursable bus iness Incoming & Outgoing

Tota l r o rds t r a n s m i t t e d over main l i n e s

1 ,118 ,466

659,738

1 ,778,204

(*) 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 vrire expense a s sharrn on the accompanying statement (X-S003~b).

( l ) Kumber of Tords sent by l?ev York to other F. R. Banks f o r t h e i r so le b e n e f i t charged t o banks ind ica t ed in accordance » i t h a c t i o n taken a t Governors1 Conference November 2 -4 , 1925.

c :


X-8003-b

REPORT OF EXPE7S3S MAIF LIKES FEDERAL RESERVE LEASED TCEE SYSTEM, AUGUST, 193%.

Retire- Oper- Pro rata Payable to ment ators' share of Federal

Operators1 Contribu- over- Wire Total to ta l Reserve Uame of Bank Salaries t ions time rental exoenses expenses Credits Board

Boston $260.00 $ 23.40 $ - $ - $253.40 $661.44 $283.40 $378.04 New York 1,345.80 121.12 - 1,466.92 2,865.73 1,466.92 1,398.81 Philadelphia 225.00 20.25 - - 245.25 595-46 245.25 350.21 Cleveland 306.66 27.60 - — 334.26 1,099.79 334.26 765.53 Richmond 190.00 17.10 — 230.00C&) 437.IO 1,058.94 437.IO 621.84 Atlanta 270.00 24.30 - — 294.30 1,044.80 294.30 750.50 Chicago 4 ,500 .30( f ) 382.04 — - 4,882.34 1,781.66 4 ,882.34 3,100.68(*) St . Louis 195.00 17.55 - - 212.55 1,396.73 212.55 1,184.18 Minneapolis 200.00 18.00 — - 218.00 762.00 218.00 544.00 Kansas City 287.00 25.83 - - 312.83 1,437.58 312.83 1,124.75 Dallas 251.00 22.59 - - 273.59 1,161.06 273.59 887.47 San Francisco 350.00 34.20 - — 414.20 1,846.07 414.20 1,431.87

Federal Reserve Bd. — - 15,603.96 15,603.96 — « •

Total $8,410.76 $733-98 $ - $15,833.96 $24,976.70 $15,711.26 $9,374.74 $9,437.20

Less Reimbursable Charges: 9,267.44 3,100.68(a) 415,711.2& *5,335.58

(&) Main l ine rental , Richmond-Washington (#) Includes sa lar ies of Washington operators (*) Credit (a) Account reimbursable to Chicago l-^

i


X-8004



For immediate r e l e a s e . September 13, 1934.

At a meeting t h i s morning the Federa l Reserve Board heard

s ta tements by Mr. Richard Whitney, P res iden t of the New York Stock

Exchange, and o t h e r s , i n connection wi th t he r e g u l a t i o n to be i s sued

"by the Board, pursuant to the p rov i s ions of t he S e c u r i t i e s Exchange

Act of 1934, wi th regard to the extension and maintenance of c r e d i t

by b roke r s , d e a l e r s , and members of s e c u r i t i e s exchanges. In

a d d i t i o n to Mr. Whitney, the re were p resen t Mr. E. H. H. Simmons, ex-

Pres iden t of the Hew York Stock Exchange; Messrs. Roland L. Redmond,

L. Randolph Mason and Henry Alexander, of counsel f o r the New York

Stock Exchange; Mr. S. Parker G i l b e r t , of J . P. Morgan & Co., Hew

York, Hew York; Mr. Gayer G-. Dominick, of Dominick & Dominick, Hew

York, Hew York; Mr. Henry W. Brower, of Laidlaw & Co., Hew York, Hew

York; and Mr. Warren A. lamson, of Lamson Bros. & Co., Chicago,

I l l i n o i s . Mr. Joseph P. Kennedy, Chairman of the S e c u r i t i e s and Ex-

change Commission, was a l s o p r e s e n t .

The views expressed a t the meeting w i l l be given cons idera -

t i o n by the Board i n connection wi th t he p r e p a r a t i o n of i t s r e g u l a t i o n

which vril l be i s sued i n the very near f u t u r e .




X-8005

September 14, 1934,

SUBJECT} Code Words Covering New Issues of Treasury Notes.

Dear S i r :

In connection with te legraphic t r ansac t ions between

Federal reserve banks covering Government s e c u r i t i e s , the

fol lowing code words have been designated to cover new i ssues

of Treasury Notes;

"NOWKAB" 1 \/Z% Treasury Notes, Ser ies D«-1936, t o be dated September 15, 1934 and t o mature September 15, 1936•

"NOWKiX" 2 l/Z% Treasury Notes, Ser ies D-1938, t o be dated September 15, 1934, and . to mature September 15, 1938.

These code words should be inse r t ed i n the Federal

Reserve Telegraph Code book, on page 172.


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


FEDERAL RESERVE BOARD ISO WASHINGTON


X-8006

September 14, 1934.


Dear S i r :



fol lowing code word has been designated t o cover a new


"NOXNUM" - Treasury B i l l s t o be dated September 19, 1934, and t o mature March 20, 1935.

This word should be inse r t ed i n the Federal Re-


code word "UOXNOW" on page 172*

rery t r u l y yours,

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



FEDERAL RESERVE BOARD 1 2 1 WASHINGTON

X-8007 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 17, 1934#

SUBJECT: Section 32--Suggestions as to Questionnaire to be Answered by Member Banks Operating under Blanket Permit .

Dear S i r :

There are inclosed f o r your information a copy of

the body of a l e t t e r received from the o f f i c e of the Federal

Reserve Agent a t the Federal Reserve Bank of Mew York, a

copy of the form r e f e r r e d to the re in , and a copy of the

Board's l e t t e r t o Mr. Case, r e l a t i n g t o the obtaining of i n -

formation from member banks regarding syndicate operat ions

in which they p a r t i c i p a t e pursuant to the blanket permit r e -

f e r r e d t o in the Board's telegram of June 23, 1934 (Trans

2015).


Chester Morr i l l , Secre tary .

Inc losures•

TO'ALL FEDERAL RESERVE AGENTS EXCEPT HEW YORK. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

A-8007-a

132 Folio-wing our telephone conversat ion, I am enclosing f o r

your cons idera t ion a d r a f t of a p r in ted form which might be used t o f a c i l i t a t e obtaining from member banks information desi red i n con-nect ion with Section 32 of the Banking Act of 1933.

In genera l , the questions appearing on t h i s form fo l l ow those suggested i n the Board's l e t t e r of Ju ly 17* I a l so enclose a copy of the c i r c u l a r l e t t e r which was sent t o a l l member banks i n t h i s d i s t r i c t , i n accordance with the Board's l e t t e r of Ju ly 17. In compliance with t h i s c i r c u l a r l e t t e r , we have a l ready received some twelve or f i f t e e n r epo r t s from member banks. These r epor t s are not uniform i n a l l cases , as t o the information repor ted , manner of r epor t ing and time as of which the r epor t was made. I t would m a t e r i a l l y f a c i l i t a t e our analys is of the information i f t h e incom-ing repor t s were uniform as t o per iod covered, the answers given and the s ize of paper used i n r epo r t i ng . In informal d iscuss ions with several of the important repor t ing banks, the l a t t e r have volunteered t h a t a p r in ted form would l ikewise f a c i l i t a t e them in f u r n i s h i n g the des i red informat ion .

From the discussions r e f e r r e d t o , i t appeared t h a t c e r t a i n of the questions enumerated by the Board might be s l i g h t l y rephrased, to f u r n i s h a somewhat c lea re r p ic tu re of the underlying t r a n s a c t i o n s . The ques t ions , as phrased in the proposed p r in ted form, met with the approval of the banks, who t e l l us t h a t the answers can i n every case be e a s i l y ascer ta ined from t h e i r ex i s t i ng records wi th a minimum of e f f o r t .

You w i l l note t h a t in our proposed quest ion No. 2, we have included the amount of p a r t i c i p a t i o n of each syndicate member. This i s r e a d i l y obtainable from the copy of the syndicate l e t t e r which each p a r t i c i p a n t r e c e i v e s .

In 2b we have provided f o r the name of the syndicate manager, i n the event of any quest ion a r i s i n g upon which we might des i re f u r t h e r information than t h a t contained i n the regular report#

2c would ind ica te r e l a t i o n s h i p as to l i a b i l i t y . P r a c t i c a l -l y a l l syndicates o r ig ina t ing i n the East are so-ca l led undivided syndicate accounts, t h a t i s , each p a r t i c i p a n t i s l i a b l e , not only f o r the sa le of h i s own share of the account, but p ropor t iona te ly the unsold share of other p a r t i c i p a n t s . The more unusual divided account i s one where the p a r t i c i p a n t i s responsible f o r the d i s p o s i -t i o n of h i s p a r t i c i p a t i o n only.


- 2 -123

X-8007-a

In our suggested quest ion 3a, we have used the expression "withdrawn from the account", r a t h e r than the word subscribed# since i t i s the p rac t i ce as regards municipal i ssues not to subscr ibe but to withdraw s e c u r i t i e s from the account only as they are a c t u a l l y so ld . Hence t h i s f i g u r e may be more or l ess than the ac tua l amount of par -t i c i p a t i o n .

3b w i l l i nd ica t e the amount of the i ssue apportioned t o the repor t ing bank, in addi t ion t o what the bank i t s e l f took down from the account.

Question 4, I be l ieve , i s s e l f - exp l ana to ry .

Question 5 should ind ica te the spread between purchase and sa le p r i ce , i nd i ca t i ng the approximate p r o f i t r e s u l t i n g from the t r a n s a c t i o n .

In 5b, provis ion i s made f o r the average p r i ce t o the publ ic , because i t sometimes happens t h a t a proport ion of the i s sue w i l l be sold a t one p r ice and then, in order to move the balance, a p r ice adjustment must be made.

As I say, we have discussed t h i s in formal ly and r a t h e r c a r e f u l l y with severa l banks who think well of i t . I f i t meets with your approval, we should l i k e to adopt i t f o r the balance of the period during which the information w i l l be coming i n t o u s . If you have any quest ions regarding the use of the r e p o r t , or the phraseology of the quest ions , I should be glad t o t r y t o answer them.


COPY X-8007-1) CORRESPONDENT RELATIONSHIPS BETWEEN MEMBER BANKS

AND DEALERS IN SECURITIES

Information to be Submitted to Federal Reserve Bank of New York by Member Banks Operating Under Blanket Permit

(Section 32 of the Banking Act of 1933)

1 . Descr ipt ion of i s sue , including name of the i s s u e r , na ture of the obl iga-t i ons (vdiether bonds, notes , or other ob l iga t ions ) , amount of the i s sue , matur i ty , and r a t e of i n t e r e s t»

2 . a) Names of members of the syndicate or group, including yourselves , which p a r t i c i p a t e d i n the t r ansac t ion , and amount of each member's o r ig -i n a l p a r t i c i p a t i o n

b) Name of syndicate manager

c) Nature of r e l a t i o n s h i p -Divided) . . , . , . ,

Undivided) a s t 0 l i a b x l i t y

3. a) Amount of the i s sue a c t u a l l y -withdrawn from the account by the r e p o r t -ing member bank

b) Amount of the i ssue apportioned to repor t ing member bank on termina-t i o n of the account

c) Amount of the i s sue otherwise acquired by the repor t ing member bank during the term of the account

d) Total of a, b, and c

4 . a ) The amount of the i s sue sold by the repor t ing member bank during the term of the account

b) The amount of the i ssue re ta ined by the repor t ing member bank as i n -vestment

c) The amount of the i s sue held by the repor t ing member bank pending r e s a l e

d) Total of a , b, and c (Should equal 3d)

5. a) Purchase p r ice paid to i s sue r of s e c u r i t i e s by the buying syndicate or group

b) Average o f f e r i n g pr ice t o publ ic

(Please forward above information as of c lose of account, as promptly as possible a f t e r i t s t e rmina t ion)

(Name of Bank) ( O f f i c i a l s igna tu re ) (Date) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

COPY X-8007-c 125

September 17, 1934.

Mr. J . H. Case# Federal Reserve Agent, Federal Reserve Bank of Hew York, Hew York, Hew York.

Dear Mr. Case:

In i t s l e t t e r of Ju ly 17, 1934 (X-7963), the Board de-

scribed the information which should be submitted t o you by each

member bank i n your d i s t r i c t regarding each syndicate operat ion i n

which i t p a r t i c i p a t e s pursuant to the blanket permit r e f e r r e d t o i n

the Board's telegram of June 23, 1934 (Trans 2015). The Board

a lso requested you to obtain such information i n add i t ion t o t h a t

described i n i t s l e t t e r as you may f e e l i s necessary to enable you

to form a conclusion as t o whether or not the permit i n each

p a r t i c u l a r case i s i n the public i n t e r e s t .

Accordingly, the Board's l e t t e r of Ju ly 17, 1934, was not

intended t o prescr ibe r i g i d l y the form of the questions which should

be asked i n connection with such syndicate operat ions , and the Board

w i l l o f f e r no objec t ion t o the use by your bank of a ques t ionnaire

s imi lar i n form to t h a t inclosed in Mr. Douglas1 l e t t e r of August 23,

1934.

In view of the f a c t t h a t the re may be ins tances i n which

you w i l l wish t o obtain information other than t h a t ca l l ed f o r by

the ques t ionnai re , or a t a time other than the c los ing of the p a r t i c u -

l a r account, you may f i n d i t des i r ab le , i n t r ansmi t t i ng any revised,

quest ionnaire t o the member banks i n your d i s t r i c t , t o repea t the


-2~ X-8007$36

substance of the l a s t paragraph of your c i r cu l a r Ho. 1403, dated Ju ly

23, 1934, -which reads :

"In i t s l e t t e r of Ju ly 17, 1934 the Board a l so requested me t o obtain such add i t iona l information from a member bank as I deem advisable, i f in any case I f e e l t h a t the information submitted i s not s u f f i c i e n t t o enable me t o form a conclusion as t o whether or not the permit i n the p a r t i c u l a r case i s i n the publ ic i n t e r e s t . "



Chester Morr i l l , Secre tary .



WASHINGTON


X-8009

September 18, 1934

SUBJECT: Regulation T.

Dear S i r :

In accordance wi th the telegram sent you today, the re

i s a t tached one copy of a c o n f i d e n t i a l rev ised pre l iminary

d r a f t of Regulation T, together wi th a copy of form of agree-

ment to he signed by nonmember banks. Please se t type fo r

p r i n t i n g the r egu la t ion i n accordance with the telegram sent

you yes t e rday .


Chester Mor r i l l , Secre tary .

TO T.B.AGENTS AT ALL F.E.BA1IKS EXCEPT KANSAS CITY, DALLAS AH) SAN FRANCISCO


X-8010 (Superseding X-7631)

FEDERAL RESERVE SYSTEM

The Federa l Reserve System was es tab l i shed pursuant to au tho r i ty

contained i n the Act of December 23, 1913, known as the Federal Reserve Act,

the purposes of which, as s t a t ed i n the promable, a re "To provide ?or the

establishment of Federal reserve banks, to f u r n i s h an e l a s t i c currency, to ,

a f f o r d means of rediscount ing commercial paper , to e s t a b l i s h a more e f f e c -

t i v e supervis ion of banking in the United Sta tes , and f o r other purposes ,"

The system comprises the Federal Reserve Board, which exerc ises supervisory

func t ions , the Federal Advisory Council, nhich a c t s i n an advisory capaci ty

to the Federal Reserve Board, the twelve Federal rese rve banks s i t u a t e d in

d i f f e r e n t s ec t ions of the United S ta t e s , the Federal Open Market Committee,

and the member banks, which include a l l na t iona l banks and such Sta te banks

and t r u s t companies as have v o l u n t a r i l y appl ied to the Federal Reserve Board

f o r membership and have been admitted to the System.

The Federal reserve banks a re located i n Boston, Hew York, P h i l -

adelphia , Cleveland, Richmond, A t l an ta , Chicago, S t . Louis, Minneapolis,

Kansas City, Dal las and San Francisco. There a r e a l so i n opera t ion

twenty-f ive branches and two agencies of the Federal reserve banks, a l l of

which a r e loca ted i n other c i t i e s of the United S t a t e s , except one agency

i n Havana, Cuba.

The c a p i t a l s tock of the Federal reserve banks i s e n t i r e l y owned

by the member banks and may not be t r a n s f e r r e d or hypothecated. Every

na t iona l bank i n exis tence a t the time of the establishment of the Federal

Reserve System was required to subscribe to the c a p i t a l s tock of the

Federal reserve bank of i t s d i s t r i c t i n an amount equal to s i x per cent of

the subscr ib ing bank 's c a p i t a l and surplus . A l i k e amount of Federal r e -


X-8010.

- 2 -

serve bank stock must "be subscribed f o r by every na t iona l bank organized

s ince t h a t time and by every S ta te bank or t r u s t company (except mutual sav-

ings banks) upon becoming a member of the Federal Reserve System; and, when a

member bank increases i t s c a p i t a l or surplus , i t i s required to subscribe f o r

add i t iona l stock i n the same propor t ion . A mutual savings bank which i s ad-

mit ted to membership i n the Federal Reserve System must subscr ibe f o r Federal

reserve bank stock i n an amount equal to s ix - t en ths of one per centum of i t s

t o t a l deposit l i a b i l i t i e s ; and t h e r e a f t e r such subscr ip t ion must be ad jus ted

semi-annually on the same percentage b a s i s . One ha l f of the subscr ip t ion of

each member bank must be f u l l y paid and the remainder i s subject to c a l l by

the Federal Reserve Board; but c a l l f o r payment of the remainder has not been

made.

Af t e r a l l necessary expenses of a Federal r e se rve ban]: have been

paid or provided f o r , i t s stockholding member banks a re e n t i t l e d to receive

an annual dividend of s i x per cent on the pa id - in c a p i t a l s tock, which d i v i -

dend i s cumulative. Af te r these dividend claims have been f u l l y met, the

net earnings a r e paid i n t o the surplus fund of the Federal rese rve bank.

Federal reserve banks, including t h e c a p i t a l s tock and surplus the re in and

the income derived therefrom, a r e exempt from Federa l , S ta te and loca l t ax-

a t i o n , except taxes upon r e a l e s t a t e .

The board of d i r e c t o r s of each Federal rese rve bank i s composed of

nine members, equal ly divided in to three c l a s se s , designated Class A, Class B

and Class C. Di rec to rs of Class A a re r ep re sen ta t i ve of the stockholding mem-

ber banks. D i rec to r s of Class B must be a c t i v e l y engaged i n t h e i r d i s t r i c t i n

commerce, a g r i c u l t u r e or some other i n d u s t r i a l p u r s u i t , and may not be o f f i -

cers , d i r e c t o r s or employees of any bank. Class C d i r e c t o r s may not be o f f i -

cers , d i r e c t o r s , employees, or s tockholders of any bank. The s i x Class A Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

X-8010

_ 3 _ 1 3 0

and B d i r e c t o r s a r e e lec ted by the stockholding member banks, while the

Federal Reserve Board appoints the t h r ee Class 0 d i r e c t o r s . The term of

o f f i c e of each d i r e c t o r i s three yea rs , so arranged tha t t h e term of one d i r -

ector of each c l a s s expires each year .

One of the Class C d i r ec to r s appointed "by the Board i s designated as

chairman of the hoard of d i r e c t o r s of the Federal r e se rve bank and as Federal

reserve agen t , and i n the l a t t e r capaci ty he i s requi red to maintain a loca l

o f f i c e of the Federal Reserve Board on the premises of the Federal reserve bank.

Another Class C d i r e c t o r i s appointed by the Federal Reserve Board as deputy

chairman.

Federal r e se rve banks a re au thor ized , among other t h i n g s , to discount

f o r t he i r member banks no tes , d r a f t s , b i l l s of exchange and bankers ' accept -

ances of shor t m a t u r i t i e s a r i s i n g out of commercial, i n d u s t r i a l and a g r i c u l -

t u r a l t r ansac t i ons , and short term paper secured by ob l iga t ions of the United

S ta t e s ; to make advances to the i r manber banks upon t h e i r promissory notes f o r

periods not exceeding n inety days upon the s ecu r i t y of paper e l i g i b l e f o r d i s -

count or purchase and f o r periods not exceeding f i f t e e n days upon the s ecu r i t y

of obl iga t ions of the United States and ce r t a in other s e c u r i t i e s ; i n c e r t a i n

exceptional circumstances and under c e r t a i n prescr ibed cond i t ions , to make ad-

vances upon other kinds of s ecu r i t y to groups of member banks and, u n t i l March

3 , 1935, to ind iv idua l member banks; under ce r t a in prescr ibed cond i t ions , to

grant c red i t accommodations to f u r n i s h working c a p i t a l f o r e s t ab l i shed indus-

t r i a l or commercial businesses f o r per iods not exceeding f i v e yea r s , e i t he r

through the medium of f inanc ing i n s t i t u t i o n s o r , in except ional circumstances,

d i r e c t l y to such businesses , and to make c o m i t n e n t s wi th r e spec t to the

grant ing of such accommodations; i n unusual and exigent circumstances when

au thor i ty has been granted by a t l e a s t f i v e members of the Federa l Reserve Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

X-8010 - 4 - 131

Board, to discount f o r i nd iv idua l s , par tnersh ips or corpora t ions , under

c e r t a i n prescr ibed condi t ions , notes , d r a f t s and "bills of exchange of the kinds

and m a t u r i t i e s m d e e l i g i b l e f o r discount f o r ember banks; to make advances to

i nd iv idua l s , pa r tne r sh ips or corporat ions upon the i r promissory notes secured

"by d i r e c t ob l iga t ions of the United Sta tes f o r per iods not exceeding n inety

days; to purchase and s e l l i n the open market bankers 1 acceptances and b i l l s

of exchange of the kinds and ma tu r i t i e s e l i g i b l e f o r d iscount , ob l iga t ions of

the United S ta tes and c e r t a i n other s e c u r i t i e s ; to r ece ive and hold on deposi t

the r e se rve balances of nsober banks; to i s sue Federal r e se rve notes and

Federal reserve bank no tes ; to ac t as c l ea r ing houses and as c o l l e c t i n g agents

for t h e i r member banks , and under c e r t a i n condit ions f o r nonmenber banks, i n

the co l l ec t ion of checks and other ins t ruments ; to ac t as depos i t a r i e s and f i s -

cal agents of the United S t a t e s ; and to exorcise other banking func t ions spec i -

f i e d i n tho Federal Reserve Act.

Federal rese rve notes a re a f i r s t and paramount l i e n on a l l the a s -

se t s of the Federal r e se rve banks through which they a r e i ssued and a r e a l so

obl iga t ions of the United S t a t e s . They a r e issued aga ins t the s e c u r i t y of

gold c e r t i f i c a t e s and of commercial and a g r i c u l t u r a l paper discounted or pur-

chased by Federal r e se rve banks, and, u n t i l March 3, 1935, or u n t i l the expi ra-

t ion of such a d d i t i o n a l period not exceeding two years as the Pres ident may

p re sc r ibe , when author ized by the Federal Reserve Board, may a l so be secured

by d i rec t ob l iga t ions of t he United S t a t e s . Every Federal r e se rve bank i s

required to maintain reserves in gold c e r t i f i c a t e s of not l e s s than f o r t y per

cent aga ins t i t s Federal reserve notes i n ac tua l c i r c u l a t i o n and i s a l so r e -

quired to maintain reserves i n gold c e r t i f i c a t e s or lawful money of not l e s s

than t h i r t y - f i v e per cent aga ins t i t s depos i t s .


X-8010. |

- 5 -

Federal r e se rve "bank notes a re the ob l iga t ions of the Federal reserve

"bank procuring them and a re redeemable in lawful money of the United Sta tes on

p resen ta t ion a t the United Sta tes Treasury or a t the bank of i s sue . They a rc

issued against the s e c u r i t y of d i r e c t obl iga t ions of the United S ta t e s i n an

amount equal to the f a c e value of such ob l iga t ions and aga ins t the s ecu r i t y of

notes , d r a f t s , b i l l s of exchange and bankers ' acceptances i n an amount equal

to not more than n ine ty per cent of the estimated value t h e r e o f . Each Federal

reserve bank maintains on deposit i n the Treasury of the United S ta t e s i n law-

f u l money a redemption fund equal to f i v e per cent of i t s l i a b i l i t y on Federal

reserve bank notes i n ac tua l c i r c u l a t i o n , or such other amount as may be r e -

quired by the Treasurer of the United S ta tes with the approval of the Secretary

of the Treasury, and i s requi red to pay a tax of one- four th of one per cent

each half year upon the average amount of i t s Federal rese rve bank notes in

c i r c u l a t i o n . Ho such Federal reserve bank notes may be i ssued a f t e r the P r e s i -

dent s h a l l have declared by proclamation tha t the emergency recognized by him

in M s proclamation of March 6, 1933, has terminated, unless such notes a r e se -

cured by the deposit of bonds of the United Sta tes of c e r t a i n c lasses which a re

e l i g i b l e as s e c u r i t y f o r na t iona l bank no tes .

Broad supervisory powers a re vested in the Federal Reserve Board,

which has i t s o f f i c e s i n Wshington. The law designates the Secretary of

the Treasury and the Comptroller of the Currency as e x - o f f i c i o members, and

provides f o r the appointment of s ix msabers by the Pres ident with the advice

and consent of the Senate. In s e l ec t i ng these s i x members, the Pres ident i s

required to have a due regard to a f a i r r ep resen ta t ion of the f i n a n c i a l , a g r i -

c u l t u r a l , i n d u s t r i a l and commercial i n t e r e s t s , a n d geographical d iv i s ions of

the country. No two appoint ive members may be from the same Federal rese rve Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

X-8010

. 6 - 1 8 3

d i s t r i c t .

Among the more important dut ies of the Federal Reserve Board a re

the review and determination of discount r a t e s charged "by the Federal reserve

banks on t h e i r discounts and advances and supervis ion over the open market

operat ions of the Federal reserve banks. Such open market operat ions a r e

conducted under r egu l a t i ons adopted "by the Federal Reserve Board with a view

to accommodating commerce and "business and with regard to t h e i r "bearing upon

the general c r e d i t s i t u a t i o n of the country. The Federal Open Market Com-

mi t t ee , which makes recommendations wi th regard to open market opera t ions ,

was created "by the law and cons is t s of twelve members, one member being se -

lec ted annually by the board of d i r ec to r s of each Federal r e se rve bank. The

meetings of the Committee a r e held i n Washington a t l e a s t four times each

year upon the c a l l of the Governor of the Federal Reserve Board or a t the

request of any th ree members of the Committee.

In connection with i t s supervis ion of Federal r e se rve banks the

Federal Reserve Board i s a lso authorized to make examinations of such banks;

to requ i re statements and repor t s from such banks; to r equ i r e the e s t a b l i s h -

ment or discontinuance of branches of such banks; to supervise the i s sue and

re t i rement of Federal rese rve notes ; and to exercise spec ia l supervis ion over

a l l r e l a t i o n s h i p s and t ransac t ions of the Federal rese rve banks ^ i t h fo re ign

banks or bankers.

For the purpose of preventing the excessive use of c r e d i t f o r the

purchase or carrying of s e c u r i t i e s , tho Federal Reserve Board i s author ized

to r egu la t e t he amount of c red i t t h a t may be i n i t i a l l y extended and subse-

quently maintained 011 any s ecu r i t y (with ce r t a i n exceptions) r e g i s t e r e d on

a na t iona l s e c u r i t i e s exchange. Cer ta in other powers have been conferred


134 X-8010

- 7 -

upon the Board which a r e l ikewise designed to enable i t to prevent an undue

divers ion of funds i n t o specula t ive operat ions .

The Federal Reserve Board a l so passes on the admission of S t a t e

banks and t r u s t companies to nsaber ship i n the Federal Reserve System and on

the terminat ion of membership of such banks; i t has the power to examine

member banks and a f f i l i a t e s of member banks; i t receives condi t ion r epo r t s

from Sta te member banks and the i r a f f i l i a t e s ; i t l imi t s by regu la t ion the

r a t e of i n t e r e s t which may be paid by member banks on time and savings de-

pos i t s ; i t i s au thor ized , i n i t s d i s c r e t i o n , to i s sue vo t ing permits to hold-

ing company a f f i l i a t e s of member banks e n t i t l i n g them to vote the s tock of

such banks a t e l ec t ions of d i r ec to r s and i n deciding questions a t meetings of

shareholders and to i s sue permits covering ce r t a in r e l a t i o n s between member

banks and organizat ions dealing in s e c u r i t i e s ; i t has the power to remove

o f f i c e r s and d i r e c t o r s of a member bank f o r continued v i o l a t i o n s of law or

unsafe or unsound p rac t i c e s i n conducting the business of such bank; i t may,

in i t s d i s c r e t i o n , suspend member banks from the use of the c r ed i t f a c i l i t i e s

of the Federal Reserve System, f o r making undue use of bank c red i t f o r specu-

l a t i v e purposes or f o r any other purpose incons i s ten t with the maintenance of

sound credi t condi t ions ; i t passes on app l i ca t ions of na t iona l banks f o r

au thor i ty to exercise t r u s t powers or to ac t i n f i d u c i a r y c a p a c i t i e s ; i t may

grant au thor i ty to na t i ona l banks to e s t a b l i s h branches i n f o r e i g n countr ies

or dependencies or i n s u l a r possessions of the United S t a t e s , or to inves t i n

the s tock of banks or corporat ions engaged in i n t e r n a t i o n a l or f o r e i g n bank-

ing; i t supervises the organizat ion and a c t i v i t i e s of corporat ions organized

under Federal law to engage i n i n t e r n a t i o n a l or fo r e ign banking; and i t i s sues


- 8 -

X-8010

135

p e m i t s under the a u t h o r i t y granted by the provis ions of the Clayton Ant i -

t r u s t Act r e l a t i n g to in te r lock ing d i r e c t o r a t e s . Another func t ion of the

Board i s the operat ion of a set t lement fund, "by which "balances due to and

from the var ious Federal reserve "banks a r i s i n g out of t h e i r own t ransac t ions

or t ransac t ions of t he i r manber "banks or of the United Sta tes Government a re

s e t t l e d i n Washington through te legraphic t r a n s f e r of funds without physica l

shipments of currency.

In exerc is ing i t s supervisory func t ions over the Federal rese rve

"banks and member banks, the Federal Reserve Board promulgates r e g u l a t i o n s ,

pursuant to au tho r i t y granted by the Federal Reserve Act, governing c e r t a i n

of the above-mentioned a c t i v i t i e s of Federal reserve banks and member banks.

To meet i t s expenses and to pay the s a l a r i e s of i t s members and i t s employees,

the Board makes semi-annual assessments upon the Federal r e se rve banks i n

proport ion to t h e i r c a p i t a l s tock and surplus . Annual r epo r t s of the opera-

t ions of the Board a re made to the Speaker of the House of Representat ives for

the information of Congress as required by law.

The Federal Advisory Council ac t s in an advisory capaci ty , confer -

r i ng " i t h the Federal Reserve Board on general business condit ions and making

recommendations concerning mat ters within the Board's j u r i s d i c t i o n and the

general a f f a i r s of the Federal Reserve System. The Council i s composed of

twelve members, one from each Federal reserve d i s t r i c t being se l ec t ed annually

by the board of d i r e c t o r s of the Federal reserve bank of the d i s t r i c t . The

Council i s requi red to meet in Washington a t l e a s t four times each year and

of tener i f ca l l ed by the Federal Reserve Board.

September 1, 1934.




X-8011.

September 18, 1934.

Dear S i r :

For your information there i s inclosed a copy of a

l e t t e r rece ived by the Board from the Third Ass i s t an t

Postmaster General, together with a copy of a l e t t e r

addressed to the Director of the Posta l Savings System

by Mr. E. p . Tyner, Ass is tant Cashier of the Federal

Reserve Bank of Kansas City, and of the rep ly made

there to by the Third Ass i s tan t Postmaster General.



Inc losures .

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

(Copy)

Board of Trustees

Pos ta l Savings System

Washington

August 25, 1934

Federal Reserve Board,

Washington, D. C.

Gentlemen;

There i s enclosed a copy of a l e t t e r sent today to the Federal Reserve Bank, Kansas City, Missouri , which brought up the quest ion of i t s accept ing payments f o r the c r e d i t of the Board of Trustees , Pos ta l Savings System, from "banks received a f t e r the exp i ra t ion of the time per iod .

In view of the f a c t tha t i t i s not pos s ib l e f o r such t r a n s f e r s to he received "by Federal Reserve Banks loca ted i n c i t i e s d i s t a n t from the sending "banks, i t would seem appro-p r i a t e fo r the Federal Reserve Bank to accept the depos i t s received a t a l a t e r da te , allowance "being made f o r time i n t r a n s i t .

If the above meets with your approval I w i l l apprec ia te i t i f you w i l l i n s t r u c t "banks accordingly, advis ing t h i s o f f i c e of the ac t ion taken.


(Signed) C. B. Ei lenberger .

Third Ass i s t an t Postmaster General

Enclosure


X-8011-1) (Copy)

FEDERAL RESERVE BAH

of

KANSAS CITY.

August 9, 1934.

Direc tor of Pos ta l Savings System, Washington, D. C.

S i r :

We a re enclosing a Ruling of the Federal Reserve Board wi th r e f e r -ence to the payment of i n t e r e s t on Pos ta l Savings Funds, which was forwarded by us to a l l tanks i n our d i s t r i c t under date of November 27, 1933.

This r u l i n g of the Federal Reserve Board quotes order No. 4420 of the Postmaster General i ssued under date of October 24, 1933, with r e fe rence to the r e tu rn of secured i n t e r e s t bear ing Pos t a l Savings Funds by banks. Acting under t h i s r u l i n g and the r u l i n g of the Federal Reserve Board, s ince November, 1933, i t has not been the po l i cy of t h i s bank to accept f o r deposi tory banks, Pos ta l Savings Funds to be re turned to the Board of Trus tees , Pos t a l Savings System except on the dates ind ica ted i n the schedule contained i n the order of the Postmaster General.

There seems to be some misunderstanding inasmuch as a number of banks have s t a t ed tha t i n i n s t r u c t i o n s received from the Board of Trus tees , Pos ta l Savings System, deposi ts of secured i n t e r e s t bear ing funds a re to be re tu rned by them on the dates ind ica ted i n the schedule, the banks having construed such to mean tha t e n t r i e s may be made on t h e i r books on the date ind ica ted but t ha t the a c t u a l t r a n s f e r of funds need not be completed on tha t da te . Our Counsel has given h i s opin-ion tha t the t r ansac t ion should be completed on tha t date and the funds a c t u a l l y credi ted to the Treasurer of the United S t a t e s .

I t w i l l , t h e r e f o r e , be apprec ia ted , i n view of the d i f f i c u l t i e s men-t ioned above, i f you wi l l advise as to whether i t i s the i n t e n t i o n of the Department i f such t r ansac t ions should be completed on the da te ind ica ted or whether the Federal Reserve Bank may accept de-p o s i t s one or two days a f t e r tha t date and s t i l l handle the matter i n accordance wi th both the ru l i ng of the Postmaster General and the Federal Reserve Board.

EPT*MP enc l .

Yours very t r u l y ,

(Signed) E. P. Tyner,

Ass i s tan t Cashier.


X-8011-

(Copy)

August 25, 1934.

Mr. E. P. Tyner, Ass i s t an t Cashier, Federal Reserve Bank,

Kansas City, Missouri.

My dear S i r :

In rep ly to your l e t t e r of August 9, I have t o advise tha t Pos t a l Savings funds wi th "banks being on time deposi t "basis may only "be re leased a t the expi ra t ion of a time per iod . I t i s r e a l i z e d tha t i n many cases the payments cannot reach the Federal Reserve Bank a t a d i s t an t point on the same date . I t i s , t h e r e f o r e , suggested t h a t any such t r a n s f e r s received "by you from "banks dated as of the expi ra t ion of the time period "be accepted, even though received a t a l a t e r da te , allowance "being made f o r time i n t r a n s i t .

I f t h i s meets with your approval i t w i l l "be apprec ia ted i f you w i l l i n s t r u c t your "branches accordingly.


Third Ass i s tan t Postmaster General.




X-8012.

September 19, 1934.

Dear Sir:

Refer r ing to the Board's telegram, Trans 1873, of September 23,

1933, with regard to the r e c l a s s i f i c a t i o n of member banks fo r e l ec -

t o r a l purposes, the Board w i l l not r equ i re a r e c l a s s i f i c a t i o n a t t h i s

time, but reques ts t ha t you review the present c l a s s i f i c a t i o n so f a r

as your d i s t r i c t i s concerned and advise the Board whether, i n your

opinion, a r e c l a s s i f i c a t i o n of banks f o r e l ec to ra l purposes should be

made e f f e c t i v e next year and, i f so, what changes in the present

c l a s s i f i c a t i o n you would recommend.

In t h i s connection, p lease a lso advise the Board whether you

would favor a r e c l a s s i f i c a t i o n whereby the number of member banks i n

Group 2 w i l l be approximately one- th i rd of the t o t a l number of member

banks i n the d i s t r i c t , wi th the number of member banks i n Group 1 as

near ly as may be i n the same r a t i o to the t o t a l number of a l l member

banks as the combined c a p i t a l and surplus of member banks i n Group 3

bears to the combined c a p i t a l and surplus of a l l member banks.

In submitting your views, p lease f u r n i s h the Board with a s t a t e -

ment grouping the member banks i n your d i s t r i c t according to combined

c a p i t a l and surplus , those having the smallest c a p i t a l and surplus to


X-8012

- 2 -

be shown f i r s t and those having the l a r g e s t c a p i t a l and surplus l a s t ,

together with progress ive cumulations of the f i g u r e s i n the manner

out l ined i n the Board 's l e t t e r X-6159 of October 12, 1928. The cap i -

t a l and surplus of a member bank f o r t h i s purpose should be the same

as tha t used i n determining i t s required holdings of Federal Reserve

bank s tock .



TO ALL CHAIF.MM.



WASHINGTON



September 20, 1934

SUBJECT: Holidays during October, 1934

Dear S i r :

The Federal Reserve Board i s advised t h a t on Wednesday,

October 10, the Havana Agency of the Federal Reserve Bank of

At lan ta w i l l he closed i n observance of the anniversary of the

Revolution of Yara.

On Fr iday , October 12, Columbus Day, there w i l l be ne i the r

t r a n s i t nor Federa l Reserve note c lea r ing , and the books of the

Board's Gold Settlement Fund wi l l be closed. The o f f i c e s of the

Board and the fol lowing Federal reserve banks and branches w i l l

be open f o r business as usua l :

At lan ta Nashvi l le

Char lo t te St . Louis L i t t l e Rock Memphis

Minneapolis De t ro i t

Kansas City Oklahoma City

Please n o t i f y branches.

J . C. Moell,

^ e y y t r u l y yours,

Ass i s t an t Secretary




WASHINGTON

3 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-8015

September 20, 1934

Dear S i r :

There i s inclosed, f o r your information a copy

of a telegram addressed to Mr. Logan, Deputy Governor

and General Counsel of the Federal Reserve Bank of Hew

York under da te of September 10, 1934, with regard to

the question whether a concern, a s u b s t a n t i a l p a r t of

the business of which cons is ts of providing funds f o r

business en t e rp r i s e s through t he underwri t ing, s a l e

and d i s t r i b u t i o n of s e c u r i t i e s , may be considered a

f inanc ing i n s t i t u t i o n within the meaning of s ec t ion

13b of the Federal Reserve Act, as amended.


HQ ^ Chester Mor r i l l ,

Secre tary .

Inc losure .

TO ALL FEDERAL RESERVE AGENTS EXCEPT NEW YORK.


X-8015-a

(Copy)

LOGAN EEW YORK

Your wire September 6 presen t ing question whether Lehman Brothers

investment "bankers i n Hew York may toe considered a f inanc ing i n -

s t i t u t i o n within the meaning of Section 13b of Federal Reserve Act.

I t i s understood tha t a subs t an t i a l p a r t of the business of Lehman

Brothers cons i s t s of providing funds f o r business en t e rp r i s e s through

the underwri t ing, s a l e and d i s t r i b u t i o n of s e c u r i t i e s . I t i s a l so

understood tha t under the t r ansac t ion which i s now proposed Lehman

Brothers w i l l make a loan or advance to an es tab l i shed i n d u s t r i a l or

commercial business to provide i t wi th working c a p i t a l and tha t such

loan or advance w i l l be evidenced by the note of such bus iness . I t

i s Board's view tha t i n circumstances s t a t ed and upon condi t ion tha t

t r ansac t ion w i l l comply i n a l l other respec ts wi th app l i cab le r e q u i r e -

ments of law and regu la t ion Federal Reserve Bank may l awfu l ly discount

or purchase from f i rm of Lehman Brothers such ob l iga t ion of es tab l i shed

i n d u s t r i a l or commercial business pursuant to sec t ion 13b.


MORRILL



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 - 8 0 1 6 t h e f e d e r a l r e s e r v e b o a r d

September 21, 1934.

SUBJECT: Code Word Covering Mew Issue of Treasury B i l l s •

Dear S i r :

In connect ion wi th t e l e g r a p h i c t r a n s a c t i o n s i n

Government s e c u r i t i e s between Federal r e s e r v e banks, t he

fo l lowing code word has been designated t o cover a new


"NOXOAR" - Treasury B i l l s t o be dated September 2G, 1934, and t o mature March 27, 1935.

This word should be i n s e r t e d i n the Federa l Re-


code word "NOXNXJM" on page 172.


J . C. Noel l , A s s i s t a n t Sec re t a ry



WASHINGTON


X-8017

September 24, 1934

Dear S i r :

At ten t ion i s invited, to the f a c t that sec t ion 2(a) of

the Act approved May 18, 1934 (Public No. 235), a copy of which

was sent to you under date of June 9, 1934, provides as fo l lows:

"Whoever, by f o r c e and v io lence , or by p u t t i n g i n f e a r , f e lon ious ly takes , or f e lon ious ly attempts to take , from the person or presence of another any prop-e r ty or money or any other th ing of value belonging t o , or i n the care , custody, cont ro l , management, or pos-sess ion o f , any bank sha l l be f i n e d not more than $5,000 or imprisoned not more than twenty years , or bo th . "

You w i l l note that the word "bank" as used i n the provis ions

above quoted i s def ined i n the Act to include "any member bank of the

Federal Reserve System, and any bank, banking a s soc i a t i on , t r u s t com-

pany, savings bank, or other banking i n s t i t u t i o n organized or opera t -

ing under the laws of the United S t a t e s " . Accordingly, i t would seem

tha t a v i o l a t i o n of these provis ions may be involved i f any proper ty

of the kind described the re in "belonging t o , or i n the ca r e , custody,

con t ro l , management, or possession of" your Federal Reserve Bank or

one of i t s member banks i s taken as the r e s u l t of any ac t i n which

fo rce and v io lence or in t imida t ion has been used; and an attempt to

commit an a c t of t h i s k ind, r ega rd les s of whether any a c t u a l taking

occurred, would a l so seem to be embraced by such p rov i s ions .


! 47 X-8017

- 2 -

I t i s reques ted , t he r e fo r e , t h a t apparent v i o l a t i o n s of

the Act of May 18, 1934 which come to your a t t e n t i o n i n the perform-

ance of your dut ies he made the subjec t of a repor t to tho loca l

United S ta tes D i s t r i c t Attorney and to tho Federal Reserve Board f o r

submission to the Department of J u s t i c e i n accordance with the usua l

procedure. However, as ind ica ted in the Board's l e t t e r of February

8, 1928 (X-5072), i n a case where the only bank connected wi th the

t r ansac t ion i s a na t iona l bank, i t i s not necessary t o make such a

repor t but merely to advise the Chief na t iona l Bank Examiner f o r your

d i s t r i c t of the matter f o r such ac t ion as he considers adv i sab le . If

a p a r t i c u l a r t r a n s a c t i o n , regard less of whether i t a f f e c t s a na t iona l

bank or other banks of the kind described in the s t a t u t e , appears to

be one i n which the Post Off ice a u t h o r i t i e s would be i n t e r e s t e d , i t

i s requested t h a t you br ing the matter to the a t t e n t i o n of those auth-

o r i t i e s and advise the Federal Reserve Board to that e f f e c t .

Very t ru ly yours

L. P. Bethca, Ass i s t an t Secretary .

TO ALL FEDERAL RESERVE AGEHTS.


X-8019

Revised

(Statement proposed to be pr in ted i n -side f r o n t page of Regulation T.)

INQUIRIES REGARDING THESE RBSUIATIONS.

I t i s suggested tha t a l l i nqu i r i e s as to these r egu la t ions

be addressed f i r s t to the S e c u r i t i e s Exchange of which the persons

making the i n q u i r i e s are members or the f a c i l i t i e s of which are

used f o r t h e i r t r a n s a c t i o n s .

In the event the Exchange o f f i c i a l s de s i r e information as

to such ques t ions , they should make inquiry of the Federal Reserve

Agent a t the Federal Reserve Bank of t h e i r d i s t r i c t .

In tu rn the Federal Reserve Agent may make inquiry of

the Board as to any question tha t needs the Board's de terminat ion .

All answers made by the Board to such i n q u i r i e s w i l l be

d i s t r i b u t e d t o a l l Exchanges through the Federal Reserve Agents*


X-8020 , |


WASHINGTON


September 25, 1934

SUBJECTi System Committee on L e g i s l a t i v e Program.

Dear S i r s

At the Federa l Reserve Agents ' Conference held i n May of t h i s

year# t h e r e -was appointed a Committee f o r the Study of L e g i s l a t i v e

Suggest ions, and during the conference of Governors and Federa l r e se rve

agents with t he Federa l Reserve Board i n Washington i n June, 1934, a

Recovery Program Committee was appointed by t he Board f o r the purpose

of making a s tudy of banking laws and of prepar ing a l e g i s l a t i v e program

f o r cons ide ra t ion by the Board. Since then Governor Black as Governor

of t he Federa l Reserve Bank of At l an ta has been added t o the l a t t e r com-

mi t t ee •

In order t o avoid unnecessary d u p l i c a t i o n of a c t i v i t i e s , the

Federal Reserve Board f o I t t h a t t he work of t h e Agents ' Committee should

bo combinod wi th t h a t of t he Recovery Program Committee, and, t h e r e f o r e ,

has added Messrs . L. B. Williams, of Cleveland and J . E. Peyton, of Minne-

a p o l i s , who wore members of tho Federal r e se rve agen t s ' committee, t o

t he membership of tho Recovery Program Committee, which w i l l bo c a l l e d

tho System Committee on L e g i s l a t i v e Program. The other members of tho

committee a re Mr. Thomas, Vice Governor of the Federa l Reserve Board,


Governor Harrison of New York, Chairman of the committee, Governor Young

of Boston, Governor Morris of Phi ladelphia , Governor Fancher of Cleve-

land, Governor Black of At lan ta , and Governor Schal ler of Chicago.

At a meeting of the committee on September 6, 1934, i t was agreed

t h a t Mr* Walter R. Stark, who u n t i l r ecen t ly was Chief of the F inanc ia l

and Economic Research Section of the Treasury Department, should be em-

ployed on a monthly bas i s as t e c h n i c a l a s s i s t a n t t o the committee, with

sa la ry a t the r a t e of $750 per month, with the understanding t h a t the

expense involved would be a l loca ted among the twelve Federal reserve

banks under the same arrangement as w&s used i n connection with the

expense incurred by the System Committee on Reserves# I t i s understood

t h a t Mr. Stark w i l l a l so serve as sec re t a ry of the committee# Under

the proposed arrangement Mr# S t a r k ' s s a l a ry would be paid by the Federal

Reserve Bank of New York and a l loca ted among the Federal reserve banks

on the bas is of t h e c a p i t a l and surplus of the banks. The committee's

ac t ion has been approved by the Federal Reserve Board•

I t w i l l be appreciated i f you w i l l advise the Board i f the a l l o -

ca t ion to your bank i n the manner r e f e r r e d t o of a por t ion of the expense

involved i n connection with the employment of Mr • Stark meets wi th the

approval of your d i rec tors#

Very t r u l y yours.

f & L. P. Bethea,

Ass i s tan t Secre ta ry .

TO THE CHAIRMEN AND GOVERNORS OF ALL F. R. BANKS. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

X-8021

INTERPRETATION OF BANKING ACT OF 1935

(Copies to be sent to a l l Federal reserve banks)

September 25, 1934.

Mr.

Dear Mr. :

Reference i s made to your l e t t e r of September 6, 1934,

inclos ing a copy of a l e t t e r dated August 31, 1934, addressed to

Mr. , Ass is tant Federal Reserve Agent a t the Federal Re-

serve Bank of , in which you ask f o r the opinion of the

Board with regard to the question whether Mr. , who

holds the pos i t ion of Manager of the Branch Off ice a t ,

, of , should be regarded as a "manager" of

t ha t company wi th in the meaning of sec t ion 32 of the Banking Act

of 1933.

Your l e t t e r , and the l e t t e r from point out

tha t Mr. au thor i ty i s l imi ted and tha t the home o f f i c e

p re sc r ibes d e f i n i t e r u l e s which he crust fol low in a l l t r a n s a c t i o n s .

The l e t t e r from ampl i f i e s t h i s s ta tement , and adds

tha t he has no au thor i ty over the charac ter of the business t r a n s -

ac ted . In the circumstances, you suggest t ha t sec t ion 32 i s not

appl icable to Mr. since the word "manager" should be

in t e rp re t ed to include persons who not only carry on some p a r t of

the management of the organizat ion but who are a l s o vested with

a share of the f i n a l con t ro l or a u t h o r i t y in the organiza t ion , or

a s s i s t in formulat ing i t s p o l i c i e s .


. 5 3

- 2 - X-8021

The Board has given ca r e fu l cons idera t ion to the view which

you express in t h i s mat ter bu t , as the word "manager" i s f r equen t ly

used to descr ibe a person in charge of a l oca l branch o f f i c e of an

organizat ion an# in view of the wide use of the term as appl ied to

managers of braSch o f f i c e s of s e c u r i t i e s dea l e r s a t the time when the

Banking Act of 1933 was under considerat ion by Congress, the Board i s

of the opinion tha t the words " o f f i c e r , d i r e c t o r , or manager" in sec-

t ion 32 are properly to be regarded as including a manager of such a

branch o f f i c e . This view i s indicated in the d e f i n i t i o n of the word

"manager" in the Board's Regulation R and has been followed in connec-

t ion with severa l app l i ca t ions under sec t ion 32 which have been acted

upon by the Board,


(Signed) L. P. Bcthea

L. P. Bcthea, Assis tant Secre tary .


X-8023

Statement of Bureau of Engraving and Pr in t ing f o r fu rn i sh ing Federal Reserve Notes Series 1928, August 1 t o 31, 1934.

Total 15 $10 $20 Sheets Amounts

- 100,000 100,000 $8,600.00 90,000 151,000 - 241,000 20,726.00

Phi ladelphia 28,000 - - 28,000 2,408.00 26,000 - - 26,000 2,236.00 26,000 2,000 " __28500£ 2,408.00

170,000 253,000 - 423,000 $36,378.00

423,000 shee ts , @ $86.00 M. $36,378.00


X-8024

In order t h a t persons a f f e c t e d by Regu- ! i

1at ion I of the Federal Reserve Board might have 1

- ?

add i t iona l time a f t e r October 1# 1934, wi th in which .

to f a m i l i a r i z e themselves with t h i s r egu la t ion , the j

Secu r i t i e s and Exchange Commission, a t t h e reques t

of the Federal Reserve Board, has exempted, u n t i l

midnight of October 14, 1934, from the provis ions

of sec t ion 7 and subsect ion (a) of sec t ion 8 of the

| Secu r i t i e s Exchange Act of 1934 a l l s e c u r i t i e s not

| exempted by t he law, whether r eg i s t e r ed or n o t .


2-8025

I n s e r t a t bottom of page 19)

(h) Transactions outside United S t a t e s . - In view of the

provis ions of sec t ion 30(b) of the Secur i t i e s Exchange Act of

1954, nothing i n t h i s regu la t ion s h a l l apply t o any c r ed i t o r

i n so fa r as he t r a n s a c t s a business in s e c u r i t i e s without the

j u r i s d i c t i o n of the United S ta tes , unless he t r a n s a c t s such

business i n contravention of such r u l e s and regu la t ions as the

Secu r i t i e s and Exchange Commission may prescr ibe as necessary

or appropr ia te t o prevent the evasion of the Secur i t i e s Exchange

Act of 1934#


•# ,» *, !'i f hJ ,r , »

X-8026


For r e l ease in morning papers, Friday, September 28, 1934. September 27, 1934.

MARGIN REQUIREMENTS.

The Federal Reserve Board, act ing i n accordance vdth t he requirements

of the Secur i t i e s Exchange Act of 1934, has prescr ibed the margins t o be

required by brokers and dealers from customers borrowing f o r the purpose

of purchasing or carrying s e c u r i t i e s .

The margin requirements which the Board has prescr ibed are those

l a i d down as a standard in the a c t , which gives the Board au tho r i t y t o

impose lower or higher margins i n accordance with preva i l ing condi t ions .

Under the standard adopted a broker or dealer may lend t o a customer on

many s e c u r i t i e s as much as 75 per cent of t h e i r current market value,

while on other s e c u r i t i e s , in p a r t i c u l a r on those t h a t have had a rap id

r i s e in value since July 1, 1933, the percentage t h a t may be l en t i s

smaller , but i n no case l ess than 55 per cen t .

Rules prescr ibed f o r margin requirements c o n s t i t u t e a p a r t of

Regulation T issued by the Federal Reserve Board, which a l so deals with

other mat ters r e l a t i n g to the extension or maintenance of c r e d i t by

brokers, dea le r s and members of s e c u r i t i e s exchanges f o r t he purpose

of purchasing or carrying s e c u r i t i e s . Most of the r u l e s i n t h i s regula-

t i o n are f o r the purpose of preventing the circumvention of the margin

requirements, and no r e s t r i c t i o n s are placed on loans f o r i n d u s t r i a l ,


- 2 - X-8026

a g r i c u l t u r a l , or commercial purposes»

The r e g u l a t i o n becomes e f f e c t i v e October 1, 1934* In o r d e r , how-

e v e r , t h a t persons a f f e c t e d might have a d d i t i o n a l t ime t o f a m i l i a r i z e

themselves w i t h i t s p r o v i s i o n s , t he S e c u r i t i e s and Exchange Commission

a t t h e r e q u e s t of t h e F e d e r a l Reserve Board has made broad use of i t s

power t o exempt s e c u r i t i e s f rom t h e p e r t i n e n t s e c t i o n s of t h e S e c u r i t i e s

Exchange Act# The exemption g ran ted i s f o r t h e pe r iod f rom October 1

t o October 15•

Regu la t i on T does no t p r e s c r i b e a s p e c i f i c margin t h a t must be

main ta ined a f t e r a locm has been g r a n t e d , bu t imposes r e s t r i c t i o n s on

t h e o p e r a t i o n s "which t h e customer may c a r r y on i n h i s accoun t i f h i s

margin f a l l s below t h e s t a n d a r d p r e s c r i b e d f o r i n i t i a l e x t e n s i o n of

c r e d i t .

Under t h e law t h e Board has a u t h o r i t y t o p r e s c r i b e r e g u l a t i o n s ,

i n c l u d i n g margin r e q u i r e m e n t s , a p p l i c a b l e t o loans made by banks f o r t h e

purpose of purchas ing or c a r r y i n g s e c u r i t i e s • This a u t h o r i t y i s a d d i -

t i o n a l t o o the r s t a t u t e s f o r c r e d i t supe rv i s ion# The Board i s s tudy ing

t h e p r e s e n t s t a t u t e i n connec t ion wi th t h e s e o t h e r s t a t u t e s and i n due

time w i l l i s s u e the r e q u i r e d r e g u l a t i o n as t o bank loans made t o pur chase

or c a r r y s e c u r i t i e s .


X-8027

I1TTERPRBTATI0H OP BAMING ACT OF 1933

(Copies to he sent to a l l Federal reserve "banks)

September 21, 1934

AG1JEW SAH FRANCISCO

Eete l Ju ly 25, 1934, request ing Board's opinion upon question

whether holding company a f f i l i a t e of member "bank may lawfu l ly

cumulate i t s shares i n e lec t ions of d i r e c t o r s . Comptroller of

Currency has he re to fo re ruled that holding company a f f i l i a t e

of na t iona l "bank may cumulate i t s shares i n vo t ing f o r d i r e c -

to r s in same manner as individual shareholders a r e permit ted

to cumulate under sec t ion 5144 of Revised S ta tu t e s and Board

concurs i n t ha t opinion. Furthermore, Board i s of opinion

tha t there i s no p roh ib i t ion i n Federal s t a t u t e s aga ins t

holding company a f f i l i a t e of Sta te member "bank cumulating

i t s shares when permit ted "by app l icab le Sta te laws.


MORRILL


FEDERAL RESERVE B O A R D X-8028

WASHINGTON


September 28, 1934.

Dear S i r :

For your information there a re a t tached a copy

of a l e t t e r received "by the Board from the Ass i s t an t

Federal Reserve Agent a t San Francisco, dated September

13, 1934, and a copy of the Board's r e p l y . t h e r e t o , dated

September 27, 1934, concerning the Board's po l i cy wi th

respec t to the issuance of general vot ing permi ts .


L. P . Bethea, Ass i s t an t Secretary .

Inc losures


1 6 1

X-8028-a

FEDERAL RESERVE BAM OF SAH FRAHCISCO

Soptember 13, 1934.

Federal Reserve Board, Washington, D. C.

A t t en t ion : Mr. Leo. E. Paulger , Chief . Division of Examinations.

Dear S i r s :

We are beginning to receive i nqu i r i e s from holding company a f f i l i a t e s as to whether or not permanent vo t ing p e r -mits w i l l be issued be fo re the forthcoming annual s tockholders meetings. May we be advised as to the procedure which w i l l be followed i n t h i s r espec t? Will i t bo the pol icy to i s sue p e r -manent permi t s , or w i l l i t be necessary to again i s sue spec i a l or temporary permits?

t

Yours very t r u l y ,

(Signed) S. G. SARGENT Ass i s t an t Federal Reserve Agent


%.8028-t)

September 27, 1934.

SARGENT - SAN I M C I SCO

Relet September 13. The Board des i res to i s sue general voting; permits

i n a l l cases where current simultaneous examinations of holding com-

pany a f f i l i a t e s and t h e i r subs id ia r i e s a r e ava i l ab l e and i n d i c a t e con-

d i t i o n , management and r e l a t i o n s h i p s to j u s t i f y . As a condi t ion p rece -

dent to the grant ing of general vot ing permits the Board r equ i re s

holding company a f f i l i a t e s and t h e i r subs id ia ry banks i n general to

comply wi th the same condit ions as to the el iminat ion of c r i t i c i z e d

a s s e t s , correct ions i n management p o l i c i e s and r e l a t i o n s h i p s as i f

they were applying f o r and being admitted to membership i n the Federal

Reserve System. I t i s expected that a l l holding company a f f i l i a t e s

which have complied wi th these condit ions w i l l be granted general v o t -

ing permits during t h i s yea r . In a l l other cases cons idera t ion w i l l

be given to the issuance of the necessary l imi ted permits u n t i l neces-

sary cor rec t ions have been made by holding company a f f i l i a t e s and t h e i r

subsidiary banks or the r e l a t i onsh ips have boon terminated. In a l l

cases where i t i s necessary fo r the stock owned by holding company

a f f i l i a t e s to bo voted for s p e c i f i c purposes p r i o r to the issuance of

general pe rmi t s , your o f f i c e should advise the Board of the d e t a i l s

t he reo f , together with your recommendation i n the mat te r .

BETHEA



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 8 0 2 9

September 29, 1934.

t r.2


Dear S i r ;

In connection with te legraphic t r ansac t ions i n




"N0X0DE" - Treasury B i l l s to be dated October 3, 1934, and to mature Apri l 3, 1935,

This word should be inse r t ed in the Federal Re-


code word "U0X0AR" on page 172,


J . C. "Noell, Ass is tan t Secre ta ry .

TO GOVERNORS OF ALL F. R. BAi.liS.



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 a - o u u i

October 2/ 1954 i

Dear S i r :

There a re inclosed f o r your i n f o r m t i o n a copy of a summary

statement of the meeting in Washington on September 27, 1934 of mem-

bers of the Federal Reserve Board with r ep resen ta t ives of the Indus-

t r i a l Advisory Committees of the twelve Federal reserve d i s t r i c t s

and a copy of the minutes of the meeting of the members of the Indus-

t r i a l Advisory Committees held in Washington on the a f te rnoon of

t ha t day. A copy of a l e t t e r being addressed by the Board today to

each of the members of the I n d u s t r i a l Advisory Committees who a t t e n d -

ed the meetings above r e f e r r ed to i s a l so inclosed.

I t w i l l be noted from the summary record of the morning

meeting tha t when the question was ra i sed as to reimbursement of the

members of the I n d u s t r i a l Advisory Committees f o r the time spent in

performing t h e i r d u t i e s , the opinion was expressed by t he represen ta -

t i v e s present t h a t any suggestion in t h i s regard should come from the

Federal reserve banks. I t w i l l a l so be noted t h a t Governor Calkins

suggested t h a t the lav; be amended to a l low reimbursement f o r a c tua l

expenses and, in a d d i t i o n , per diem payments f o r the time spent by

the members of the I n d u s t r i a l Advisory Committees in committee a c t i v -

i t i e s .


2 X-8031

The Federa l Reserve Board w i l l app rec i a t e i t i f you w i l l

study t h i s ma t t e r and submit t o the Board f o r cons ide r a t i on , your

recommendation wi th regard t h e r e t o .


L. P . Bethea, Ass i s t an t S e c r e t a r y .

I n c l o s u r e s .

TO FEDERAL RESERVE AGMTS AND GOVERNORS OF ALL FEDERAL RESERVE BANKS.



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—8030

October 2, 1934.

Dear S i r :

In accordance with the understanding had a t the meeting of members

of the Federa l Reserve Board wi th the r e p r e s e n t a t i v e s of the I n d u s t r i a l Ad-

v i so ry Committees i n Washington on Septeinb*L 27,. 1934, t h e r e i s a t t ached a

copy of a summary statement of t h a t meeting. There i s a l s o a t t a c h e d a copy

of the signed minutes of the meeting of the members of the I n d u s t r i a l Ad-

v i so ry Committees held during the a f te rnoon of September 27, 1934. Four

ex t r a copies of these documents a re a l s o inclosed and i t w i l l be apprec ia ted

i f you w i l l hand these t o the o ther members of your committee.

The Federa l Reserve Board has arranged to send d i r e c t l y t o each mem-

ber of the r e s p e c t i v e I n d u s t r i a l Advisory Committees in the twelve Federal

r e se rve d i s t r i c t s weekly, a summary statement of a p p l i c a t i o n s rece ived and

considered by the I n d u s t r i a l Advisory Committees and the Federa l r e se rve

banks. This i s in conformity wi th the ac t ion taken during the a f t e rnoon

meet ing.

In connect ion wi th the quest ion of the unwi l l ingness of banks to

extend loans which would reduce the l i q u i d i t y of t h e i r a s s e t s or which

might be sub j ec t t o c r i t i c i s m by admin i s t r a t ive a u t h o r i t i e s , cons ide ra t ion

i s being given t o the p r epa ra t i on of a statement which may be s en t t o a l l

banks i a accordance* with the recommendation made by the members wf the

I n d u s t r i a l Advisory Committees t h a t a d e f i n i t e announcement by proper


- 2 -

166 X-8030

o f f i c i a l s on the standing of i n d u s t r i a l loans be made immediately. •

I t i s repor ted on page 6 of the minutes of the meeting of the mem-

bers of the I n d u s t r i a l Advisory Committees t h a t the fol lowing reso lu t ion was

unanimously adopted during the meeting:

"Although in our experience the a t t i t u d e of o f f i c i a l s of Federal reserve banks has a t a l l times been a l i b e r a l one on the cons t ruc t ion and i n t e r p r e t a t i o n of the law and the making of loans , we have been impressed today in our meetings by the very apparent des i re of the Federal Reserve Board in Washing-ton and the Federal reserve banks to handle a l l mat te rs in connection with such loans in such a l i b e r a l manner t h a t the maximum number of proper loans be made, with the l e a s t delay and expense to the borrower.

"We the re fo re pledge ourselves to use our bes t e f f o r t s to bring t h i s about i n our several d i s t r i c t s . "

The Federal Reserve Board apprec ia tes very much the s p i r i t of co-

operation evidenced by the above r e so lu t ion and expresses the hope tha t the

c loser contact which has been created by the meeting in Washington w i l l be

continued.

Very t r u l y yours , ' J ?

/ 1 1 (• • L. P . Bethea,

Ass is tan t Sec re ta ry .

Inc losures .

TO ALL REPRESENTATIVES OF INDUSTRIAL ADVISORY C0i-1 ITTEES V . U O ATTENDED MEET-ING IN WASHINGTON ON SEPTEMBER 27, 1934, AND ALSO TO MR. STUART L. RAI7LINGS, CHAIRMAN.


; 1 G 7 X-8030-a

At the meeting held in Washington on September 27, 1934, a t

10:00 a . m. of members of the Federal Reserve Board and members of i t s

s t a f f with r ep re sen t a t i ve s of the I n d u s t r i a l Advisory Committees of the

twelve Federal reserve d i s t r i c t s , the following ind iv idua l s were p resen t :

Mr. Henry Morgenthau, Secretary of the Treasury and Chairman of the Federal Reserve Board

Mr. George R. James, Member, Federal Reserve Board Mr. M. S.. Szymczak, Member, Federal Reserve Board Mr. J . F. T. O'Connor, Comptroller of the Currency

and ex o f f i c i o member of the Federal Reserve Board

Messrs. Albert M. Creighton, 17m. H. Pouch, J . Ebert Butterworth, J , G. Holtzclaw, John Sanford, Max Epste in , Vto. K. Nor r i s , Sheldon V. Wood and Clarence Ousley, Chairmen of the I n d u s t r i a l Advisory Committees of the F i r s t , Second, Third F i f t h , S ix th , Seventh, Eighth, Minth and Eleventh Federal Reserve D i s t r i c t s , respec t ive ly , .

Messrs. Frank B. Bel l and L. F. Rooney, members of the I n d u s t r i a l Advisory Committees of the Fourth and Tenth Federal Reserve D i s t r i c t s , r e spec t ive ly . .

Mr. L. P. Bethea, Ass is tant Secre tary , Federal Reserve Board

Mr. 5 . R. Carpenter, Ass is tan t Secre tary , Federal Reserve Board

Mr. E. L. Smead, Chief of the Division of Bank Opera-t i o n s , Federal Reserve Board

Mr, L. H. Paulger, . Chief of the Division of Examina-t i o n s , Federal Reserve Board

Mr# George B. Vest , Ass i s tan t Counsel, Federal Reserve Board

Mr. H». Lee Boatwright, a s s i s t a n t Counsel, Federal Reserve Board

Mr. E. M. Stevens, Federal Reserve Agent a t the Federal Reserve Bank of Chicago

Mr. John U. Calkins, Governor of the Federal Reserve Bank of San Francisco

Mr. 2 , G. Hul t , Ass is tant Cashier of the Federal Reserve Bank of Boston

Mr. Jacob Viner, _-_ssi.-itunt to thu Locretary of the Treasury.


—2—

X-8030

Mr. Szymczak s t a t e d t h a t Hr. Thomas, Vice Governor of the Board,

and Mr. Hamlin, the o the r member of the Board who i s i n Washington, were

engaged in ano ther meeting and would be unable to meet wi th the r e p r e -

s e n t a t i v e s of the I n d u s t r i a l Advisory Committees t h i s morning, and t h a t

Mr, Thomas had requested him to take charge of the meet ing.

Mr. Szymczak made a s tatement t he substance of which was as f o l -

lows:

He s t a t e d t h a t the purpose of the meeting was:

F i r s t , f o r the r e p r e s e n t a t i v e s and the Chairmen of the I n d u s t r i a l Advisory Committees to hear from the Board on t he sub jec t of i n d u s t r i a l l oans ,

Second, t o give the r e p r e s e n t a t i v e s and Chairmen of tho I n d u s t r i a l Advisory Committees an oppor tuni ty to express them-se lves f r e e l y upon t h i s s u b j e c t , and

Third , f o r the conference t o make such sugges t ions a s i t saw f i t t o the Federal r e se rve banks and to the Federa l Reserve Board.

He then reviewed the l e g i s l a t i v e h i s t o r y of the I n d u s t r i a l Loan Act and the circumstances under which i t was f i n a l l y passed . He p a r t i c u l a r l y c a l l e d a t t e n t i o n t o the f a c t that i t uas c l e a r l y the i n t e n t i o n of Congress:

F i r s t , t h a t the loans made under t h i s a u t h o r i t y would i n -volve a g r e a t e r amount of r i s i c than i s involved in an ord inary bank l o a n ;

Second, t h a t the loans would be f o r t e r n s longer than the Ordinary b5Lk l o a n , not exceeding f i v e years ; and

Third , t h a t the loans would be made f o r the purpose of f u r n i s h i n g working c a p i t a l r a t h e r than to supply the s h o r t -term c r e d i t needs of the commercial or i n d u s t r i a l borrower.

He f u r t h e r po in ted out t h a t the purpose of the law was:

(a) t o a id s n a i l i n d u s t r y , and (b) t o cont inue , and, i f p o s s i b l e , t o inc rease

employment.

He s t r e s s e d the importance of the I n d u s t r i a l Advisory Com-m i t t e e s by shov.int. t h a t in the o r i g i n a l b i l l p rov i s ion '..as made


X-3030-a

- 3 -

f o r in termedia te c r e d i t "banks, and tha t i n the amended b i l l the sug^-ges t ion of in termedia te c red i t tanks was re ta ined through the pro-v i s ion f o r an I n d u s t r i a l Advisory Committee i n each d i s t r i c t . The law provides f o r the appointment of members of an I n d u s t r i a l Advi-sory Committee "by each reserve tank with the approval and under the r egu la t ions of the Federal Reserve Board. The committees have a d e f i n i t e s t a t u s under the law and represent the publ ic i n t e r e a t i n connection with the operat ion of the law i n the g ran t ing of indus-t r i a l loans . The law i s s p e c i f i c t n i t s requirement. Each member of the committee must "be an ac t ive i n d u s t r i a l i s t . The committee the re fo re i s independent ( to the extent of i t s s t a t u t o r y exis tence) of the Federal rese rve "bank as such, and has a d e f i n i t e a u t h o r i t y and r e s p o n s i b i l i t y which r equ i re tha t the committee consider care-f u l l y each app l i ca t i on and rinke i t s recommendations to the Federal r e se rve bank as to the ac t ion i t thinks the bank should take on the app l i ca t i on . Congress desired to make ce r t a in tha t the -mblic would be represented i n the adminis t ra t ion of t h i s law. The com-mi t tee represen t s the publ ic .

From the very beginning the Federal Reserve Board has taken the a t t i t u d e t h a t the' law should be administered l i b e r a l l y . The regu la t ions adopted by the Federal Reserve Board a r e short and simple, g iv ing every opportunity to the Federal r e se rve banks to operate under the law without d i f f i c u l t y . I t should be remembered tha t i n add i t ion to the $140 ,000,000 which represen ts the present surplus of the Federal reserve banks, the re i s a l so another $139,000,000 i n the Treasury of t he United S ta tes which the Secre-ta ry of the Treasury has agreed, pursuant to the a u t h o r i t y granted Mm under the provis ions ef Section 13b (e) of the Federal Reserve Act> to t r a n s f e r to the Federal rese rve banks i f needed fo r the purpose of making i n d u s t r i a l advances. F i f t y per cent ef the t o t a l amount of i n d u s t r i a l loans made by the Federal r e se rve banks w i l l be advanced from the banks * surp lus , and the other 50 per cent from funds to be fu rn i shed the banks by the Secretary of the Treasury. There i s , t h e r e f o r e , a revolving fund of about $280,000,000 to be used f o r t h i s purpose.

Mi*. Szymczak r e f e r r e d to h i s recent v i s i t to n ine Federal r e -serve d i s t r i c t s , dur ing which he met wi th o f f i c e r s and beards of d i r e c t o r s of the Federal reserve banks, as well as wi th members of the I n d u s t r i a l Advisory Committees and r ep resen ta t ives of the commercial banks. He discussed h i s t r i p qu i te in formal ly and i n some d e t a i l . He s t a t e d tha t while he found tha t a g rea t deal has a l ready been done by t he I n d u s t r i a l Advisory Committees and the Federal r e se rve banks, as well as p r i v a t e f inanc ing i n s t i t u t i o n s , to the end of providing c red i t to indus t ry , a grea t deal remains to be done, p a r t i c u l a r l y on the sub jec t of informing f inanc ing i n s t i t u t i o n s of the provis ions of the law, the r egu la t i ons of the Board and t h e requirements of Federal r e se rve banks, to t h e end of obta in ing t h e i r cooperation under the law.


•: 1 7 0 'Z -8050-a

- 4 -

When the m a t t e r i s c a r e f u l l y expla ined t o f i n a n c i n g i n s t i t u t i o n s they genera l ly become i n t e r e s t e d , not only because of the p o s s i b i l i t y of t h e i r being ab l e t o make a loan on which a cocjmit,ment from t h e i ' edera l r e se rve bank t o red i scoun t the loan can be ob ta ined , thus g iv ing the f i nanc ing i n s t i t u t i o n a d d i t i o n a l earning a s s e t s and l i q u i d i t y , but a l s o because of the g e n e r a l pub l i c i n t e r e s t involved i n t h e s u b j e c t . I t would seem important from the banker*s s t a n d p o i n t , p a r t i c u l a r l y a t t h i s t ime, t h a t he cooperate in the I n d u s t r i a l Loan a c t i v i t y , a t l e a s t t o the e x t e n t of informing himself f u l l y on t h i s s u b j e c t and making every e f f o r t t o meet the purpose of the law c o n s i s t e n t wi th i t s p r o v i s i o n s , so t h a t the r e s u l t of h i s e f f o r t i n t h i s d i r e c t i o n w i l l prove d e f i n i t e l y the t r u e cond i t i ons and tne reasons t h e r e f o r . I t appears , t h e r e f o r e , t h a t s t r e s s should be l a i d on t h e importance of a c t i v e s t e p s being taken by the Federa l r e s e r v e banks and the I n d u s t r i a l Advisory Committees, not only t o inform banks, and o the r f i nanc ing i n s t i t u t i o n s on t h e law and the r e g u l a t i o n s , bu t a l s o on the ourncseo ol the I n d u s t r i a l Loan Act .

I t i s a l s o important t h a t sympathet ic t rea tment be given the a p p l i c a n t s when they come t o the Federa l r e s e r v e bank f o r the p u r -pose of d i scuss ing an i n d u s t r i a l l o a n . Many of the p r o s p e c t i v e b o r -rowers a e e n t i r e l y -macauainted wi th the Federa l r e s e r v e bank, i t s pe r sonne l , or with the I n d u s t r i a l Advisory Coranittee, and i t s member-sh ip , and a r e perhaps small borrowers who have had l i t t l e occas ion p r i o r t o t . i i s time t o v i s i t a Federa l r e s e r v e bauk,' and accord ing ly might be overawed in t h e i r f i r s t v i s i t t o the Federa l r e s e r v e bank or f r i g h t e n e d by t h e s i z e and d e t a i l of t h e form of a p p l i c a t i o n they a r e asked t o f i l l o u t . I t i s doubly impor tan t , t h e r e f o r e , t h a t every e f i o r t be made to have them unders tand t h a t they a re e n t i r e l y wi th in t h e i r r i g h t s i n coming t o t h e bank, and t h a t they a r e welcome aad a r e to be out a t ease ana advised t h a t t h e i r a p p l i c a t i o n , even i f f o r a small amount, w i l l be given c a r e f u l and thorough c o n s i d e r a t i o n . Courtesy and kind t rea tment w i l l prove a most va luab l e inves tmen t .

One of the important advantages of t h i s loan a c t i v i t y i s t h a t i t a f f o r d s t h e Federa l Heserve System an oppor tun i ty t o come i n t o d i r e c t con tac t wi th the p u b l i c i n a vay which enables the System t o l'-iid a sympathet ic hand and t o b r ing about a b e t t e r unders tand ing on the p o r t of t h e gene ra l pub l i c of the f u n c t i o n s of the System, i t s h i s t o r y and i t s performance. This i s an oppor tun i ty t h a t we should a v a i l o u r s e l v e s of a t t h i s t ime with a t r e a t dea l of en thus iasm.

I t t;eej;;5 v h s r e f o r e t h a t the re^ i e o o n t u t i v e s and chairmen of tue JuVaUiitrial Advisory Committees should cons ider t h e fo l lowing p o i n t s :


X-8030-a 1 7 1

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1. How bes t to a id in obtaining the cooperat ion of f inanc ing i n s t i t u t i o n s on loans to indus t ry .

2. How to give the f u l l e s t considera t ion to each app l i ca t ion on d i r ec t loans so t h a t nothing w i l l be overlooked which would make poss ib le the grant ing of a loan i n accordance wi th the provis ions and requirements of the law.

3. The a t t i t u d e to be shown toward an appl icant on a d i r ec t loan to indus t ry , so t h a t i n case of delays he might a t once be i n -formed of the reason f o r such delays , and in case ef a r e f u s a l he might be informed a t once of the reasons f o r the r e f u s a l i n a cour te-ous way, and in case of technica l or l ega l obs t ac l e s , he might be informed of t hese obs tac les and shown tha t the matter i s wholly be -yond the au tho r i t y of the committee or the bank and t h e r e f o r e not i t s r e s p o n s i b i l i t y , and in case of need f o r advice the appl ican t might obtain such advice from the bank.

4 . How bes t to review an a p p l i c a t i o n that has been turned down i n order to make c e r t a i n tha t r e f u s a l was abso lu t e ly necessary and t h a t t he r e have been no new developments s ince the date of the r e f u s a l tha t might change the ac t ion ef the committee or the bank or both.

' While the Federal Reserve Board does not expect the I n d u s t r i a l Advisory Committees or the Federal reserve banks t o . a c t imprudently or i l l o g i c a l l y or to v i o l a t e the provis ions of the I n d u s t r i a l Loan Act, the Board does f e e l s t rong ly t h a t the circumstances under which the ac t was passed r equ i r e a l i b e r a l cons t ruc t ion of the law; t h a t the I n d u s t r i a l Advisory Committees and the Federal r e se rve banks should do everything poss ib le to make reasonably sound loans and be prepared t o prove beyond a question of a doubt why i t was not poss ib le to make c e r t a i n loans appl ied f o r i n accordance wi th the powers and the l im i t a t i ons of the law.

Apparently the Federal r e se rve banks and the I n d u s t r i a l Ad-v i so ry Committees a r e making a very s ince re e f f o r t under t h i s law, and i t would be most unfor tunate i f , be cause of t he emission by the committee or the bank of some d e t a i l small as i t may appear , someone might be given reason to think tha t such an e f f o r t i s not being made.

Mr, Szymczak then read excerpts frcm the law and r e f e r r e d t o a comparative statement of i n d u s t r i a l loans made by the twelve Federal rese rve banks.

At the close of Mr. Szymczak's s ta tement , Mr. Henry Morgenthau,

Secretary of the Treasury and Chairman of the Federal Reserve Board,


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joinod the mee t ing . He s t a t e d t h a t , inasmuch as h i s t ime was l imibed , h<

would a p p r e c i a t e i t ve ry much i f each of the r e p r e s e n t a t i v e s of t h e I n -

d u s t r i a l Advisory Committees would make a s h o r t s ta tement wi th regard to

the i n d u s t r i a l loan a c t i v i t y in h i s d i s t r i c t .

In accordance with the Chairman's reques t s t a t e m s n t s were made

by each of the r e p r e s e n t a t i v e s of the I n d u s t r i a l Advisory Committees

p re sen t and by Governor Calkins r e p r e s e n t i n g the Twelf th Federa l Reserve

D i s t r i c t . The s t a t emen t s i n d i c a t e d g e n e r a l l y t h a t , i n the opinion of

the r e p r e s e n t a t i v e s of the Advisory Committees, the Federa l r e s e r v e

bunks a re l end ing every a s s i s t a n c e to the I n d u s t r i a l Advisory Committees

tii-nt t h e r e i s c lose coopera t ion between the i n d u s t r i a l loan a c t i v i t i e s

of the Federa l r eee rve banks and the l o c a l agenc ies of the Reconst ruc-

t i o n Finance Corpora t ion and t h a t , in most case s, t he Federa l r e s e r v e

banks have adopted a more l i b e r a l a t t i t u d e toward the- g ran t ing of i n -

d u s t r i a l loans than have the I n d u s t r i a l Advisory Committees.

In connection with t h e cues t ion of de lays in f i n a l a c t i o n on

a p p l i c a t i o n s , i t was s t a t e d by some of the r e p r e s e n t a t i v e s t h a t they

a re g i v i n g s p e c i a l a t t e n t i o n t o t h i s ma t t e r and t h a t they f e e l t h a t

t he de lays a rc due t o the necessa ry i n v e s t i g a t i o n and c o n s i d e r a t i o n

which must be given t o the a p p l i c a t i o n s , t o the f a c t t h a t i t i s d i f -

f i c u l t i n many cases to >\et s a t i s f a c t o r y in fo rma t ion , and t h a t in some

i n s t a n c e s the funds a r e t o t r e q u i r e d immediately. The po in t was a l s o

made t h a t c a r e f u l c o n s i d e r a t i o n i s bein& 'siveu t o a l l a p p l i c a t i o n s ,

p a r t i c u l a r l y those of the smal l borrower , f o r the reason t h a t the


X-8030-a

I n d u s t r i a l adv i so ry Committee d id not v/isa t o w e the a u a l l b u s i n e s s

man put out of bus ines s because of h i s i n a b i l i t y t o ge t the necessary

c r e d i t when h i s p o s i t i o n would j u s t i f y the ex tens ion of such c r e d i t .

I t xa.3 i n d i c a t e d by most of the r e p r e s e n t a t i v e s p r e s e n t , however, t h a t

a l a r g e number of the i n q u i r i e s rece ived by the f e d e r a l r e s e r v e banks

were from persons who had no unders tanding of the r equ i r emen t s of the

law and vvho.3e f i n a n c i a l p o s i t i o n was such t h a t they were not e n t i t l e d

t o c r e d i t . I t v.as i n d i c a t e d a l s o t h a t t he I n d u s t r i a l adv i so ry Com-

m i t t e e s in one or two d i s t r i c t s had approved loans on the b a s i s of the

c h a r a c t e r and bus iness record of the a p p l i c a n t w i th noth ing more than

nominal s e c u r i t y f o r the l o a n .

I n connect ion wi th the quest ion which was r a i s e d by some of

the r e p r e s e n t a t i v e s a s bo t h e pos s ib l e c r i t i c i s m by examiners of i n -

d u s t r i a l loans p a r t i c i p a t e d in by banks, i t was poin ted out by the

Comptrol ler of the Currency t h a t he had i n s t r u c t e d examiners t o l i s t

i n d u s t r i a l l o a n s , and p a r t i c i p a t i o n s t h e r e i n , by n a t i o n a l banks under

a s e p a r a t e schedule .

On the ques t ion of bank coopera t ion , i t was s t a t e d t h a t some

of the commercial bank:, were coopera t ing but t h a t o t h e r s were not

i n t e r e s t e d i n the c o n s i d e r a t i o n of i n d u s t r i a l loans , and t h a t i t was

r e a l i s e d t h a t i t i s i m o r t a n t t h a t the a c t i v e coope ra t i on of the banks

be sought .

In response t o an i n q u i r y , soiae of the r e p r e s e n t a t i v e s i n d i -

cated that the I n d u s t r i a l Advisory Committees had taken a much more

l i b e r a l a t t i t u d e than they would have been ab le to t ake nad they been


X-oG30-a ' 1 7 4

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a c t i n 0 us d i scoun t committees of commercial banking i n s t i t u t i o n s .

A l l of the r e p r e s e n t a t i v e s i n d i c a t e d ta&t t h e i r commietees were

t r y i n g to f i n d ways t o make l o a n s and t h a t i n a number of cases a p p l i c a -

t i o n s had been recons ide red and sugges t ions made a s t o s t e p s which

might be t aken i n o rde r t o make i t p o s s i b l e f o r the a p p l i c a t i o n t o be

considered f a v o r a b l y . One r e p r e s e n t a t i v e s t a t e d t h a t his committee i n -

v i t e s an appearance of the a p p l i c a n t in b o r d e r - l i n e cases , but i t was

i n d i c a t e d g e n e r a l l y t h a t the committees do not i n t e rv i ew a p p l i c a n t s a?,

such procedure vvoulc! bu p r o h i b i t i v e from the s t andpo in t of the time

consumed. The opinion was a l s o expressed t h a t the maicin^ of i n d u s t r i a l

loans i s se rv ing a r e a l need and i s a worthwhile u n d e r t a k i n g .

The s ta tement was r:.; de by one r e p r e s e n t a t i v e t h a t h i s impres-

s ion was t h a t the m a j o r i t y of i n d u s t r i a l i s t s g e n e r a l l y a r e no t r e q u e s t -

ing c r e d i t l o r the reason t h a t t.aey do not want t o inc rease t h e i r a c -

t i v i t i e s in the f a c e of the u n c e r t a i n t y which they f e e l as t o the

f u t u r e .

Mr. S n s t e i n read a p r i n t e d pamphlet prepared by aim, o u t l i n i n g

a suggest ion a s t o the procedure f o r making small l o a n s , and the sug-

g e s t i o n was made t h a t i t be d i scussed by the r e p r e s e n t a t i v e s whi le

they a r e in Washington. .

Mr. N o r r i s s a i d , du r ing h i s s t a t emen t , t h a t he f e l t i f h i s

committee had gran ted any of t h e l oans which had been r e f u s e d , i t

would have amounted t o a donat ion which never would have been r e p a i d .

Governor Calkins s t r e s s e d the n e c e s s i t y of e x p l a i n i n g t o the

a p p l i c a n t , where t h e a p p l i c a t i o n i s i n e l i g i b l e under t h e law, the


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reasons which raake i t i n e l i g i b l e .

No mention i s made in t h i s s ta tement of the s t a t i s t i c s given

by the r e p r e s e n t a t i v e s of the I n d u s t r i a l Advisory Conruitteos ar> to the

number of a p p l i c a t i o n s rece ived and considered f o r the reason t h a t

such i n fo rma t ion was a v a i l a b l e in the s ta tement prepared i n the Board ' s

o f f i c e s and d i s t r i b u t e d dur ing the mee t ing .

At t h e conc lus ion of the statements by the r e p r e s e n t a t i v e s of

the I n d u s t r i a l Advisory Committees and the ques t ions asked by members

of the Board in connect ion the rewi th , Mr. Mo.genthau l e f t t he meeting

and s h o r t l y t h e r e a f t e r Mr. Viner l e f t *

Mr. James r e f e r r e d t o the exper ience of the Federa l r e s e r v e

banks under the a u t h o r i t y g ran ted by the t h i r d paragraph of s e c t i o n

13 of the Federa l Reserve Act t o the Federa l r e s e r v e banks t o make

d i r e c t l oans t o i n d i v i d u a l s , p a r t n e r s h i p s or c o r p o r a t i o n s i n unusual

and ex igent c i r cums tances , and t o the f a c t t h a t ve ry few loans were

made under t h a t a u t h o r i t y . He expressed the opinion t h a t the banks

a re in f a c t meeting the l e g i t i m a t e c r e d i t needs of the- coun t ry in so

f a r a s commercial bank c r e d i t i s concerned and he s t a t e d he f e l t

t h a t t h e exper ience of the Federa l r e s e r v e banks wi th i n d u s t r i a l

loans w i l l be somewhat s i m i l a r t o t h e i r exper ience under the earlier

a u t h o r i t y t o make d i r e c t loans f o r the reason t h a t t he number of

e s t a b l i s h e d i n d u s t r i a l and commercial concerns which a re e n t i t l e d

t o C r e d i t , and wiii.cn a re unable t o ob t a in c r e d i t t o meet t h e i r

l e g i t i m a t e needs , are comparat ive ly fevj, and t h a t t h i s would be


X-8030-a X Y O

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demonstrated by the a c t i v i t i e s of the Federa l r e s e r v e "banks i n the

i n d u s t r i a l loan f i e l d .

He a l s o c a l l e d a t t e n t i o n t o the f a c t t h a t the Fede ra l Re-

serve Board lies d e c l i n e d t o d e f i n e d e f i n i t e l y the term "working c a p i -

t a l " a s used in the i n d u s t r i a l loan a c t and the Board ' s r e g u l a t i o n with

regard t o i n d u s t r i a l l o a n s . He s t a t e d t h a t he was c e r t a i n t h e members

of the Board would be very l i b e r a l i n interpreting the term and t l . a t ,

in his op in ion , t h e paranouni, cons ide ra t i on i s whether or not the loan

i s a good one, r . - e . , reasonably s a f e . - He said t h a t he v a s i n t e r e s t e d

p r i m a r i l y i n the number of people who could be put to work by the i n -

dustrial loans made br trio 7ede_-al reserve banks and t h a t he would not

b e inclined t o criticize t h s I n d u s t r i a l Advisory C o m m i t t e e s o r t n e

Federa l r e s e r v e banks f o r a l i b e r a l i n t e r p r e t a t i o n of the requ i rements

of the ' law.

Mr. Szymczak made the f u r t h e r sugges t ion t h a t the I n d u s t r i a l

Advisory Committees g ive c o n s i d e r a t i o n t o whether any changes should

be made in the law with regard to i n d u s t r i a l advances by Federa l r e -

serve banks. In t h i s connection t h e opinion was expressed by some

r e p r e s e n t a t i v e s t h a t the presence of the term :'workin,_> c a p i t a l " in

the lav/ i s a r e a l l i m i t a t i o n on the f i e l d of a p p l i c a n t s who a r e

e l i g i b l e f o r i n d u s t r i a l l o a n s .

Mr. J?u,'.e3 r a i s e d the ques t ion a s t o reimbursement of the

members of the I n d u s t r i a l Advisory Committees f o r the t i u c spent and

the expenses incur red in performing t h e i r d u t i e s , and he s t a t e d t h a t

in h i s op in ion t h i s i s an important ques t ion because of the appa ren t l y


X-8030-a 1 7 ?

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permanent character of the committees. In t h i s connection t he r e p r e -

s e n t a t i v e s ind ica ted t h a t they f e l t any suggestion in regard to reim-

bursement should cone from the Federal reserve banks . Governor Calkins

suggested t h a t the law be amended t o al low reimbursement f o r a c t u a l

expenses and in a d d i t i o n per diem payments f o r the time spe^t by the

members of the I n d u s t r i a l Advisory Committees in committee a c t i v i t i e s .

Fur ther r e f e r e n c e was made t o the poss ib l e c r i t i c i s m by ex-

aminers of i n d u s t r i a l loans and p a r t i c i p a t i o n s by banks and the s t a t e -

ment was made t h a t some bonks h e s i t a t e t o make such loans or p a r t i c i p a t e

t h e r e i n f o r the reason t h a t they do not want t o show indebtedness t o

the Federa l r e se rve bank. Mr. .-xuad oointed out t h a t commitments by

Federal r e se rve banks to red iscount i n d u s t r i a l loans made by com-

merc ia l banks c r e a t e no indebtedness to the r e se rve banks and t h a t i f

a commercial bank p a r t i c i p a t e s in a loan t o the ex ten t of twenty pe r

cent or more and tho Federal r e se rve bank t akes the ba lance , the p a r t i -

c i p a t i o n would be t r e a t e d us a loan by the commercial bank and ca r r i ed

in i t s loans account , and there would be no r e f e r e n c e i n i t s statement

t o the p a r t of the loan taken by the Federal r e se rve bank. Some of

the r e p r e s e n t a t i v e s s t a t e d t h a t they f e l t t he banks d id not under-

stand these po in t s o r the f a c t t ha t the Comptroller of the Currency

has provided a s p e c i a l l i s t i n g f o r i n d u s t r i a l loans by n a t i o n a l banks,

and they expressed tho opinion t h a t i t was important t h a t thu informa-

t i o n bo sent t o the banks . Accordingly, Mr. Szymczak s t a t e d the Board

would iiivo cons ide ra t ion to the p r e p a r a t i o n of a s ta tement with regard

to the p o i n t s r e f e r r e d t o , t o be sen t to member banks .


%-803&_a ^

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Mr. Szymczak expressed the app rec i a t i on of tlie Federa l Re-

serve Board of t he w i l l i n g n e s s of the members of the I n d u s t r i a l Ad-

v i s o r y Committees to give the b e n e f i t of so nruch of t h e i r time and

experience to t h i s work, and thanked the r e p r e s e n t a t i v e s of the

committees f o r t h e i r v i s i t to Washington. He then suggested t h a t

the r e p r e s e n t a t i v e s meet again a t two p . m. t h i s a f t e r n o o n to d i s -

cuss the t o p i c s on a program which had "beon prepared f o r t h e i r con-

s i d e r a t i o n and any o ther phase of t h e i r i n d u s t r i a l loan a c t i v i t i e s ,

and to fo rmula te any recommendations or suggest ions they might

wish to make.


X-6050-b

A meeting of members of the I n d u s t r i a l Advisory Committees

was held i n Washington, D. C., on September 27, 1934, a t 2:00 p . m«

PRESENT $ Mr. Alber t M. Creighton, (Chairman, Boston) D i r e c t o r , Boston Woven Hose and Rubber Co*, Boston, Massachuset t s .

Mr. "ton. H. Pouch, (Chairman, New York) P r e s i d e n t , Concrete S t ee l Company, New York, Few York.

Mr. J . Eber t But terworth , (Chairman, P h i l a d e l p h i a ) V ice -P res iden t , II. W. But terworth and Sons Co., P h i l a d e l p h i a , Pennsylvania .

Mr. Frank B# Be l l , (Member, Cleveland) P r e s i d e n t , Edgewater S t e e l Company, Oakmont, Pennsylvania .

Mr. Jolin Sanford, (Chairman, A t l a n t a ) P r e s i d e n t , Armour F e r t i l i z e r Works, A t l a n t a , Georgia .

Mr. Max Eps te in , (Chairman, Chicago) Chairman, General 'American Tank Car Corpora t ion , Chicago, I l l i n o i s .

Mr• Win. K. N o r r i s , (Chairman, S t . Louis ) P r e s i d e n t , McQuay-lIorris Manufacturing Co., S t . Loui s , Mi s s o u r i .

Mr,. Sheldon V. Wood, (Chairman, Minneapol is) P r e s i d e n t , Minneapolis E l e c t r i c S t e e l Cast ing Co., Minneapolis , Minnesota.

Mr. L. F. Rooney, (Member, Kansas Ci ty ) V ice -P re s iden t , Manhattan Cons t ruc t ion Company, Muskogee, Oklahoma.

Mr. Clarence Ousley, (Chairman, Da l l a s ) P r e s i d e n t , Globe L a b o r a t o r i e s , For t Worth, Texas.

ALSO PRESENT: Mr. Thomas, Vice-Governor, Federa l Reserve Board Mr. Hamlin, Member, Federa l Reserve Board Mr. Szymczak, Member, Federa l Reserve Board Mr. Jno . U. Calkins , Governor, Federa l Reserve

Bank of San Franc i sco , San Franc i sco , C a l i f o r n i a .


X-8030-b - 2 -

The meet ing v/as addressed b r i e f l y by Vice Governor Thomas, Mr

Hamlin and Mr# Szymczak# T h e r e a f t e r t h e meet ing was tu rned over t o

Mr# E p s t e i n as t emporary Chairman and Messrs* Thomas, Hamlin and

Szymczak l e f t the room#

I t was moved and seconded t h a t Mr# Cre ighton be made permanent Chairman of t h e meeting#

Unanimously c a r r i e d .

The d i s c u s s i o n dur ing t h e meeting was based upon t h e f o l l o w i n

o u t l i n e i

"A* P u b l i c i t y methods-( a ) Bankers group meet ings (b) Radio add re s se s ( c ) Newspaper p u b l i c i t y (d) Ques t i onna i r e s ( e ) V i s i t s by bank r e l a t i o n s men of t h e

F e d e r a l r e s e r v e bank ( f ) C i r c u l a r s of i n f o r m a t i o n t o banks ,

bus ine s s concerns , e tc*

B . W h a t m a y b e d o n e b y t h e C h a i r m a n a n d o t h e r members of t h e I n d u s t r i a l Advisory Committees, a p a r t f rom what t h e F e d e r a l r e s e r v e banks have done or should do, t o a c q u a i n t t h e p u b l i c wi th t h e i n d u s t r i a l l o a n f a c i l i t i e s o f f e r e d by t h e F e d e r a l r e s e r v e banks, and t o ge t f u n d s i n t o t he hands of i n d u s t r i a l and commercial concerns f o r working c a p i t a l purposes where such f u n d s cannot be ob ta ined th rough usua l banking channels#

C# To what e x t e n t has t h e i n a b i l i t y of e s t a b l i s h e d b u s i n e s s e s t o o b t a i n loans f rom u s u a l sources f o r working c a p i t a l purposes been due t o : ( a ) Absence of l o c a l banking f a c i l i t i e s

as a r e s u l t of bank c l o s i n g s or o therwise#

(b) Unwil l ingness of banks t o ex tend loans which would reduce t h e l i q u i d i t y of t h e i r a s s e t s or which might be s u b j e c t t o c r i t i c i s m by a d m i n i s t r a t i v e a u t h o r i t i e s #


"D. 7/hat i n genera l i s the a t t i t u d e of a p p l i c a n t s whose a p p l i c a t i o n s are d i sapproved .

Be I s t h e r e any i n d i c a t i o n t h a t t h e r e s e r v e "banks a re too s t r i c t i n pass ing on a p p l i c a t i o n s f o r i n d u s t r i a l advances .

F . An i n d u s t r i a l concern t h a t ob ta ined approva l of a loan f rom t h e R. F . C. r e c e n t l y sought t o ob t a in a d i r e c t loan from a r e s e r v e bank i n a s u b s t a n t i a l l y l a r g e r amount, w i th t h e i n -t e n t i o n of not accept ing the R. F« C. loan i f t h e l a r g e r amount were obta ined f rom the Federa l r e s e r v e bank. Have s i m i l a r i n s t a n c e s been encountered i n your d i s t r i c t ,

G. What volume of i n d u s t r i a l advances can be made according t o the p resen t out look by t h e end of 1934."

A show of hands was c a l l e d f o r t h e purpose of d e t e r -mining t h e opinion of those p r e s e n t ' r e g a r d i n g t h e a d v i s a -b i l i t y of employing r a d i o p u b l i c i t y , w i t h t h e fo l l owing r e s u l t i

The Chairman appointed the fo l lowing committee t o fo rmula te

Discuss ion of Topic B showed t h a t f i v e d i s t r i c t s had f i e l d

examiners r e p r e s e n t i n g t h e Fede ra l r e s e r v e banks, and f i v e d i s t r i c t s

employed e x p e r t s whenever needed.

Favorable Doubtful Against

3 5 3

recommendations r e g a r d i n g p u b l i c i t y :

Mr. Pouch, Chairman Mr. Sanford , Mr. N o r r i s .

Mr. Ousley moved t h a t t h e Chairman appoint a s p e c i a l committee t o fo rmu la t e an express ion of t h e opinion of t h i s meeting on Topic C.

Unanimously c a r r i e d


- 4 - X-8030-b

' 1 The Chairman appointed the fo l lowing committee i n accordance

•with t h e above motion:

Mr. But terwor th , Chairman, Mr. Be l l , Mr • Wood•

At t h i s p o i n t Governor Calkins l e f t t h e mee t ing .

The Chairman appointed the fo l l owing committee to fo rmula te

a s ta tement of the genera l consensus of t h e meeting as t o the a t t i t u d e

of a p p l i c a n t s f o r loans t

.Mr. Rooney, Chairman, Mr. Ousley.

The meeting was asked t o vo te upon t h e q u e s t i o n -whether t h e r e

i s any i n d i c a t i o n t h a t the Federa l r e s e r v e banks a r e t o o s t r i c t i n

pass ing upon a p p l i c a t i o n s f o r i n d u s t r i a l advances, each vote t o r e p r e -

sent t h e member's opinion as t o h i s ovm d i s t r i c t o n l y .

Nine answered t h e ques t i on nega-t i v e l y and one a f f i r m a t i v e l y .

Mr. Eps te in made the fo l lowing motions

" I t i s recommended t h a t a c lea r inghouse arrangement wi th t h e Recons t ruc t ion Finance Corporat ion be made i n any d i s t r i c t where no t now i n f o r c e . "


The meeting then r eces sed f o r f i f t e e n minutes and reconvened

a t 3:45 p . m.

The Committee on P u b l i c i t y submit ted t h e f o l l o w i n g r e s o l u t i o n *

" I t i s recommended, f i r s t , t h a t b a n k e t s ' group meetings be held i n a l l d i s t r i c t s ; secondly, t h a t a t


- 5 - X-8030-b

• i : " t h i s time no e f f o r t be made t o use the r a d i o ; t h i r d , t h a t t r a d e papers , such as t h e c r e d i t a s s o c i -a t i o n magazines, chamber of commerce weekl ies and month l i e s , and o ther t r a d e p u b l i c a t i o n s seem t o be the b e s t veh ic l e f o r p u b l i c i t y i n our work, and t h a t t h e use of t h e s e veh ic l e s be s t r e s s e d . The committee a l s o recommends the use of newspaper space, i f p rope r ly guarded, s t r e s s i n g t h a t loans be made on reasonable and sound b a s i s , as the banks can n o t make unsound loans ; f o u r t h , we do not r e c -ommend q u e s t i o n n a i r e s , but be l i eve t h a t p e r s o n a l con t ac t i s p r e f e r a b l e ; f i f t h , we recommend t h e d i s t r i b u t i o n of c i r c u l a r s publ i shed by t h e Federa l r e s e r v e banks t o banks, bus iness concerns , t r a d e a s s o c i a t i o n s , and chambers of commerce.

"With r e f e r e n c e t o Topic B, t h i s s u b j e c t i s covered by the p u b l i c i t y ma t t e r s r e f e r r e d t o above. This ma t t e r could be j u d i c i o u s l y handled by pe r sona l con t ac t of members of t h e Committee wi th i n d i v i d u a l banks and i n d u s t r y . "

Mr. Eps t e in moved t h a t the above r e s o l u t i o n be adopted as t h e sense of t h e Conference.


The Committee appointed t o d r a f t an opinion on Topic C sub-

mi t t ed t h e fo l l owing s ta tement which was adopted as t h e sense of t h e

Conference:

" ( a ) This has been a very small f a c t o r a l though i t has been given as a reason by a p p l i c a n t s whose c r e d i t s tanding did no t j u s t i f y a l o a n .

" ( b ) Many banks a re r e l u c t a n t t o p a r t i c i p a t e i n long term loans because t hey are u n c e r t a i n of the a t t i t u d e which may be taken by var ious bank examiners . We recommend t h a t a d e f i n i t e announcement by proper o f f i c i a l s on t h e s t and ing of such loans be made immediately t o r e l i e v e t h i s s i t u a t i o n . "

The Committee appointed t o fo rmula te t h e concensus of t h e

meeting as t o the a t t i t u d e of a p p l i c a n t s f o r loans o f f e r e d t h e f o l -

lowing s t a t ement which was unanimously adopted as the sense of t h e

Conference;


- 6 - X-8030-b. ^ L

"The consensus i s t h a t t h e genera l a t t i t u d e of a p p l i c a n t s whose a p p l i c a t i o n s have been disapproved i s about what would be expected from any a p p l i c a n t f o r any bank loan - only two or t h r e e cases of harsh or unreasonable c r i t i c i s m have been r e p o r t e d except i n one d i s t r i c t which r e p o r t s cons ide rab le disappointment and sharp c r i t i c i s m . "

Mr. Pouch moved t h a t a weekly compi la t ion of a p p l i c a t i o n s , ap-

p rova l s , r e j e c t i o n s and commitments be sen t by the Fede ra l Reserve

Board t o each member of each of the I n d u s t r i a l Advisory Committees a t

h is bus iness a d d r e s s .


At t h i s p o i n t , Dr. Jacob Viner , A s s i s t a n t t o t h e S e c r e t a r y of

the Treasury, e n t e r e d t h e room and spoke i n f o r m a l l y t o the meet ing,

fo l lowing which a f u l l d i s c u s s i o n was had on s p e c i a l c r e d i t cases .

Mr* Eps te in addressed the meeting on t h e s u b j e c t of small

loans , fo l lowing which i t was suggested t h a t the p lan which he b r i e f l y

ou t l i ned be submi t ted by him i n w r i t i n g a t an e a r l y da te t o t h e Chair -

men of the I n d u s t r i a l Advisory Committees f o r t h e i r c o n s i d e r a t i o n and

s u g g e s t i o n s .

Mr. Bel l o f f e r e d the fo l lowing r e s o l u t i o n , which was unanimous-

l y c a r r i e d :

"Although i n our exper ience t h e a t t i t u d e of o f f i c i a l s of Federa l r e s e r v e banks has a t a l l t imes been a l i b e r a l one on the c o n s t r u c t i o n and i n t e r p r e t a t i o n of the law and the making of l oans , we have been impressed today i n our meetings by t h e very apparent d e s i r e of the Federa l Reserve Board i n Washington and t h e Federa l r e s e r v e banks t o handle a l l ma t t e r s i n connec-t i o n wi th such loans i n such a l i b e r a l manner t h a t t h e maximum number of proper loans be made, w i th the l e a s t de lay and expense to t h e bor rower .

"We t h e r e f o r e pledge ourse lves t o use our b e s t e f f o r t s t o br ing t h i s about i n our s e v e r a l d i s t r i c t s


- 7 - X-8030-b

Mr. Ousley submitted, the fo l lowing r e s o l u t i o n , which tra.s

unanimously adopted:

"We wish t o record our high a p p r e c i a t i o n of the i n s t r u c -t i v e addresses and d i scuss ions i n i t i a t e d by members of t h e Federal Reserve Board and o f f i c e r s of the Treasury and t o express our thanks f o r the grac ious c o u r t e s i e s extended*"

Thereupon t h e meeting ad journed .

(Signed) A. M« Cre i^h ton . Chairman,


i ! v i l i n g 1 0 • 2 X-8032


S T A T E M E N T F O R T H E P R E S S

F o r r e l e a s e i n t h e e v e n i n g p a p e r s , O c t o b e r 2 , 1 9 3 4 . O c t o b e r 2 , 1 9 3 4

I N T E R P R E T A T I O N O F M a R G I ^ R E Q U I R E M E N T S

" O l d a c c o u n t s "

I n r e s p o n s e t o a n u m b e r o f q u e s t i o n s w h i c h h a v e a r i s e n i n c o n -

n e c t i o n w i t h s e c t i o n 7 ( a ) o f R e g u l a t i o n T , t h e B o a r d h a s i s s u e d t h e

f o l l o w i n g i n t e r p r e t a t i o n s :

1 , T h e a c c o u n t t h a t m a y b e d e s i g n a t e d a s a n o l d a c c o u n t i s t h e

a c c o u n t a s i t s t o o d a t t h e o p e n i n g o f b u s i n e s s o n O c t o b e r 1 , 1 9 3 4 ,

w i t h s u c h c h a n g e s a s c o u l d h a v e b e e n p e r m i t t e d i n s u c h a c c o u n t u n d e r

s e c t i o n 7 ( a ) o f t h e r e g u l a t i o n i f t h e a c c o u n t h a d b e e n d e s i g n a t e d a s

a n o l d a c c o u n t a t t h e b e g i n n i n g o f b u s i n e s s o n O c t o b e r 1 , 1 9 3 4 .

2 . T h e c r e d i t o r m a y d e s i g n a t e s u c h a c c o u n t a s a n o l d a c c o u n t a t

a n y t i m e p r i o r t o N o v e m b e r 1 5 , 1 9 3 4 , a n d m a y p e r m i t t r a n s a c t i o n s i n

t h e a c c o u n t p e n d i n g s u c h d e s i g n a t i o n ; b u t t h e r e m a y n o t b e i n c l u d e d

i n a n y a c c o u n t d e s i g n a t e d a s a n o l d a c c o u n t a n y t r a n s a c t i o n w h i c h

c o u l d n o t h a v e b e e n m a d e i n t h e a c c o u n t i f i t h a d b e e n d e s i g n a t e d a s

a n o l d a c c o u n t a t t h e b e g i n n i n g o f b u s i n e s s o n O c t o b e r 1 , 1 9 3 4 , a n d

a n y t r a n s a c t i o n w h i c h c a n n o t b e s o i n c l u d e d m u s t b e m a d e i n o r t r a n s -

f e r r e d t o a n e w a c c o u n t .

3 * A f t e r a n a c c o u n t h a s b e e n d e s i g n a t e d a s a n o l d a c c o u n t t h e

r e g u l a t i o n p e r m i t s t h e w i t h d r a w a l o f c a s h o r s e c u r i t i e s o n l y i f t h e


- 2 - X-8032

a c c o u n t i s a n u n r e s t r i c t e d a c c o u n t o n O c t o b e r 1 5 a n d i f t h e w i t h d r a w a l

d o e s n o t m a k e t h e a c c o u n t a r e s t r i c t e d a c c o u n t .

4 . I f , b e t w e e n t h e o p e n i n g o f b u s i n e s s o n O c t o b e r 1 , 1 9 3 4 a n d

t h e t i m e o f t h e d e s i g n a t i o n o f s u c h a c c o u n t a s a n o l d a c c o u n t , t h e r e

h a s b e e n a n y - w i t h d r a w a l o f m o n e y o r s e c u r i t i e s f r o m t h e a c c o u n t , s u c h

a c c o u n t c a n n o t b e d e s i g n a t e d a s a n o l d a c c o u n t u n l e s s i t i s a n u n r e -

s t r i c t e d a c c o u n t o n O c t o b e r 1 . 5 o r o n t h e d a t e o f s u c h d e s i g n a t i o n ,

w h i c h e v e r i s t h e l a t e r , o r u n l e s s t h e c a s h a n d / o r s e c u r i t i e s w i t h d r a w n

f r o m t h e a c c o u n t a r e r e p l a c e d b e f o r e t h e a c c o u n t i s d e s i g n a t e d a s a n

o l d a c c o u n t #

5 . I f , b e t w e e n t h e o p e n i n g o f b u s i n e s s o n O c t o b e r 1 , 1 9 3 4 , a n d

t h e t i m e o f t h e d e s i g n a t i o n o f s u c h a c c o u n t a s a n o l d a c c o u n t , t h e r e

h a s b e e n a n y a d d i t i o n a l p u r c h a s e o f s e c u r i t i e s i n t h e a c c o u n t o r a n y

s u b s t i t u t i o n c o n s i s t i n g o f a s a l e a n d r e p l a c e m e n t p u r c h a s e w h i c h r e -

s u l t s i n a n i n c r e a s e i n t h e a d j u s t e d d e b i t b a l a n c e o f t h e a c c o u n t , t h e

s e c u r i t i e s p u r c h a s e d a n d a n y d e b i t f o r t h e c o s t t h e r e o f c a n n o t b e i n -

c l u d e d i n t h e a c c o u n t d e s i g n a t e d a s a n o l d a c c o u n t b u t m a y b e t r a n s f e r r e d

t o a n e w a c c o u n t .

6 . E v e n t h o u g h t r a n s a c t i o n s h a v e b e e n m a d e i n a n a c c o u n t s u b s e -

q u e n t t o S e p t e m b e r 3 0 , 1 9 3 4 , t h e c r e d i t o r m a y f o r c o n v e n i e n c e d e s i g n a t e

t h e a c c o u n t e x a c t l y a s i t e x i s t e d a t t h e b e g i n n i n g o f b u s i n e s s o n

O c t o b e r 1 , 1 9 3 4 , a s a n o l d a c c o u n t a n d m a y t r a n s f e r a l l t r a n s a c t i o n s

m a d e s u b s e q u e n t t o S e p t e m b e r 5 0 , 1 9 3 4 , t o a n e w a c c o u n t , t o w h i c h a l s o

m a y b e t r a n s f e r r e d a n y m o n e y a n d / o r s e c u r i t i e s l a w f u l l y w i t h d r a w n f r o m

t h e o l d a c c o u n t i n a c c o r d a n c e w i t h s e c t i o n 7 ( a ) o f t h e R e g u l a t i o n *


* " 1 8 8 FEDERAL RESERVE BOARD

WASHINGTON


X-8033

October 2, 1934.

Dear S i r :

I t has appeared i n a few i n s t a n c e s from correspondence and

conversa t ions t h a t the Board ' s p o s i t i o n on the m a t t e r of p u b l i c ad -

dresses by r e s p o n s i b l e o f f i c e r s of Federa l r e s e r v e banks has been

misunders tood. The Board has imposed no gene ra l p r o h i b i t i o n upon the

making of speeches or addresses or t a l k s by such o f f i c i a l s . As was

i nd i ca t ed to the Governors a t t h e i r r ecen t meeting i n Washington,

t h e r e have been two or t h r e e cases of members of the s t a f f s of the

Federa l r e s e r v e banks who have indulged in p u b l i c i t y on c o n t r o v e r s i a l

a spec t s of banking which involve the p o s s i b i l i t y of embarrassment to

the system, but such cases have been taken up i n d i v i d u a l l y and d i r e c t -

l y with the Fede ra l r e s e r v e banks concerned and the a c t i o n the reon

has not j u s t i f i e d any misunders tanding of the Board ' s p o s i t i o n on the

genera l s u b j e c t . There i s a t t ached f o r ready r e f e r e n c e a copy of the

Board ' s l e t t e r cf* A p r i l 18, 1932, on the s u b j e c t "Addresses on Banking

and C r e d i t " , from which i t w i l l be noted t h a t , while the Board des i r ed

to be advised c u r r e n t l y wi th regard to addresses on banking and c r e d i t

made by persons connected wi th the Federa l r e se rve system and t h a t i t

be f u r n i s h e d wi th copies of a l l addresses on t h e s e s u b j e c t s d e l i v e r e d


Jfc#- w X - 8 0 3 3

b y o f f i c e r s a n d e m p l o y e e s o f t h e F e d e r a l r e s e r v e b a n k s , i t w a s e x p r e s s -

l y s t a t e d t h a t c o p i e s o f s u c h a d d r e s s e s n e e d n o t b e f u r n i s h e d t o t h e

B o a r d i n a d v a n c e o f t h e i r d e l i v e r y a l t h o u g h t h e y s h o u l d b e s e n t t o

t h e B o a r d p r o m p t l y . T h i s r e q u e s t w a s m a d e s o t h a t t h e B o a r d m i g h t

b e i n f o r m e d o f w h a t i s b e i n g s a i d a n d w r i t t e n a n d a l s o b e i n p o s i t i o n

t o a s s i s t i n c o r r e c t i n g m i s u n d e r s t a n d i n g s t h a t m i g h t r e s u l t i n s e r i o u s

c o n s e q u e n c e s . T h i s i s t h e l a t e s t c i r c u l a r i s s u e d b y t h e B o a r d o n t h i s

s u b j e c t a n d t h e r e f o r e i t s h o u l d b e c l e a r t h a t t h e B o a r d h a s n o t r e -

q u i r e d t h a t a d d r e s s e s b e a p p r o v e d i n a d v a n c e . W h i l e t h e B o a r d d e s i r e s

t o b e i n f o r m e d f u l l y a s t o t h e n a t u r e o f t a l k s o r s p e e c h e s w h i c h r e -

l a t e t o m a t t e r s i n w h i c h 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 n t e r e s t e d , i t

h a s n o t b e e n t h e i n t e n t i o n o f t h e B o a r d t o u n d e r t a k e t o e d i t t h e m a n u -

s c r i p t s i n a d v a n c e a n d t h e B o a r d h a s a d v i s e d o f f i c e r s o f t h e F e d e r a l

r e s e r v e b a n k s t h a t , w h e n t h e n a t u r e o f t h e o c c a s i o n a n d t h e c o n d i t i o n s

u n d e r w h i c h a t a l k i s m a d e a r e s u c h t h a t i t i s n o t p r a c t i c a l t o p r e -

p a r e a m a n u s c r i p t i n a d v a n c e , i t w i l l m e e t t h e B o a r d ' s d e s i r e s i f a

r e s u m e o f t h e r e m a r k s b e s e n t a s p r o m p t l y a s p o s s i b l e .

T h e B o a r d n o t o n l y s e e s n o o b j e c t i o n t o a d d r e s s e s o r t a l k s

b y C h a i r m e n , G o v e r n o r s a n d o t h e r r e s p o n s i b l e o f f i c e r s o f t h e F e d e r a l

r e s e r v e b a n k s w h e n i t i s f e l t b y t h e b a n k s t h a t t h e y w o u l d b e b e n e -

f i c i a l t o t h e F e d e r a l r e s e r v e s y s t e m b u t i s o f o p i n i o n t h a t t h e r e a r e

t i m e s a n d c i r c u m s t a n c e s w h e n i t i s d e s i r a b l e t h a t t h e r e b e a c t i v i t y

o f t h i s c h a r a c t e r , e s p e c i a l l y w h e n t h e s u b j e c t o f d i s c u s s i o n i s i n t h e

n a t u r e o f a n e x p o s i t i o n a n d n o t a c o n t r o v e r s i a l o n e . S u c h a s i t u a t i o n

e x i s t s a t t h i s t i m e w i t h r e s p e c t t o t h e i n d u s t r i a l l o a n a c t i v i t i e s o f

t h e F e d e r a l r e s e r v e b a n k s , i n c o n n e c t i o n w i t h w h i c h i t i s t h e d e s i r e


X-8053

o f t h e B o a r d t h a t e v e r y e f f o r t p o s s i b l e b e m a d e t o c a r r y o u t t h e p u r -

p o s e o f t h e i n d u s t r i a l l o a n a c t , a n d ' d i s c u s s i o n s o f t h i s s u b j e c t

s h o u l d a f f o r d a n o p p o r t u n i t y t o p r o m o t e b e t t e r u n d e r s t a n d i n g o f t h e

f u n c t i o n s a n d s e r v i c e s o f t h e F e d e r a l r e s e r v e s y s t e m a n d t o e n l i s t t h e

c o o p e r a t i o n o f b a n k e r s g e n e r a l l y i n m a t t e r s o f c o m m o n i n t e r e s t .

V e r y t r u l y y o u r s

L. P . B e t h e a A s s i s t a n t S e c r e t a r y .

I n c l o s u r e .

TO THE CHAIRMEN 0? ALL FEDERAL RESERVE BANKS.


X-7135

A p r i l 18, 1932.

SUBJECT: Addresses on Banking and C r e d i t .

Dear S i r :

I n order t h a t the Federa l Reserve Board may be

advised c u r r e n t l y wi th regard to addresses on banking

and c r e d i t made by persons connected wi th the Federa l

Reserve System, i t w i l l be apprec i a t ed i f you w i l l f u r -

n i s h the Board wi th copies of a l l addresses on t h e s e

s u b j e c t s d e l i v e r e d by o f f i c e r s and employees of your

bank.

Copies of such addresses need not be f u r n i s h e d

the Board in advance of t h e i r d e l i v e r y but i t w i l l be

a p p r e c i a t e d i f they a re sen t to the Board promptly .

Very t r u l y yours , i

Ches ter M o r r i l l , , S e c r e t a r y .

TO CHAIRMEN OF ALL F. R. BANKS.



ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD X-8034

October 3 , 1934

Dear S i r :

There i s i n c l o s e d herewi th f o r your i n fo rma t ion a copy

of a l e t t e r r e c e i v e d "by the Federa l Reserve Board from the Secre -

t a r y of t h e Treasury w i th regard to t h e agreement en t e r ed i n t o

"between the Sec re t a ry of t h e Treasury and each Fede ra l r e s e r v e

bank pursuant to t h e p rov i s ions of s e c t i o n 13b of the Federa l Re-

se rve Act and i n c l o s i n g a copy of the S e c r e t a r y ' s r e g u l a t i o n s

i s s u e d pursuant to t h a t s e c t i o n . Your a t t e n t i o n i s i n v i t e d to

the l a s t pa ragraph of t h e inc losed l e t t e r wi th regard to compli-

ance wi th s e c t i o n 3 of the r e g u l a t i o n s of the S e c r e t a r y of the

Treasury on t h i s s u b j e c t .


L. P. Bethea, A s s i s t a n t Sec re t a ry .

I n c l o s u r e .

TO GOVERNORS AH) FEDERAL RESERVE AGENTS AT ALL FEDERAL RESERVE BAHS


copy * . .+•

X-8034-a

T R E A S U R Y D E P A R T ME IT T ' ;|_

WASHINGTON

Dear S i r s :

Receipt i s acknowledged of your l e t t e r dated September

20, 1934, and the enc losures conta ined t h e r e i n .

There i s enclosed a copy of t h e r e g u l a t i o n s i s s u e d under

da te of August 15, 1934, by the Sec re t a ry of the Treasury pursuan t

to Subsect ion (e) of Paragraph 13b of t h e Federa l Reserve Act , as

amended by t h e Act of June 19, 1934. There i s a l s o enclosed a copy

of a l e t t e r of t h i s d a t e to t h e Federa l Reserve Bank of P h i l a d e l p h i a .

I d e n t i c a l l e t t e r s have been sent to t h e twelve Federa l Reserve Banks.

You axe c o r r e c t i n your unders tand ing t h a t l o a n s , d i s c c u n t s

advances, purchases and commitments which may have been made by a Fed-

e r a l r e s e r v e bank p r i o r to the execut ion of the p r e s e n t agreement

would be regarded as s u b j e c t to t h e terms of t h e p r e s e n t agreement.

I t i s unders tood tha t t h e correspondence between you and

the Fede ra l Reserve Bank of Chicago, copies of which correspondence

you forwarded to u s , i s not in tended i n any way to a f f e c t or modify

the agreement en te red i n t o between the Sec re t a ry of t h e Treasury and

the Federa l Reserve Bank of Chicago.

Your a t t e n t i o n i s c a l l e d to Sec t ion 3 of t h e enclosed Regu-

l a t i o n s . Your coopera t ion i n having t h e Federa l r e s e r v e banks and

Federa l r e s e r v e agen ts do t h e th ings p r e s c r i b e d i n s a i d s e c t i o n w i l l

be g r e a t l y a p p r e c i a t e d .

Very t r u l y your s , The Federa l Reserve Board,

Washington, D. C. (Signed) H. Morgenthau, J r . Sec re t a ry of the Treasury .

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

X-8035 Q ,JL 9lJ

T E L E G R A M

FEDERAL RESERVE BOARD

WASHINGTON

September 28, 1934.

CURTISS BOSTON

WILLIAMS CLEVELAND

STEVENS CHICAGO

McCLTJRE KANSAS CITY

CASE Z3W YORK

HOXTON RICHMOND

WOOD ST. LOUIS

WALSH DALLAS

AUSTIN PHILADELPHIA

NEWTON ATLANTA

PEYTON MINNEAPOLIS

SARGENT SAN FRANCISCO

TRAITS. No. 2094

In order to c a r r y out p r o v i s i o n s of s e c t i o n 10 of Board ' s Regula t ion

T> each Federa l Reserve Agent should u n t i l f u r t h e r n o t i c e n o t i f y each

other Fede ra l Reserve Agent and the Federa l Reserve Board, "by t e l e -

graph w i t h conf i rma t ion "by ma i l , the te legrams to be numbered s e r i a l l y

"beginning w i t h number one i n each d i s t r i c t , of t h e name and p r i n c i p a l

p l ace of "business of each nonmember "bank which f i l e s an agreement on

F.R.B. Form T - l or T-2 pursuant to s e c t i o n 8(a) of S e c u r i t i e s Exchange

Act of 1934 and i s g iven a c e r t i f i c a t e on F.R.B. Form T-3. For t h i s

purpose code word "ALIGHTABLE" J.s a s s igned to mean "Agreement on F.R.B.

Form T - l or T-2 has "been f i l e d by and c e r t i f i c a t e on F.R.B. Form T-3

given to (name of "bank) of ( p r i n c i p a l p l a c e of b u s i n e s s ) " . This code

word should be i n s e r t e d on page 8 of Federa l Reserve Telegram Code

Book fo l l owing the code "ALIGHT". Each Federa l Reserve Agent should

p repa re and have a v a i l a b l e f o r d i s t r i b u t i o n upon r e q u e s t a l i s t show-

ing the name and p r i n c i p a l p l ace of bus ine s s of each nonmember bank

which has f i l e d an agreement on F.R.B, Form T - l or T-2 which i s s t i l l


i n e f f e c t . At t h e end of each month each Federa l Reserve Agent should

forward a copy of such l i s t t o the Board. Cons idera t ion w i l l l a t e r

he g iven to the a d v i s a b i l i t y of i s s u i n g a s i ng l e l i s t by the Board

f o r d i s t r i b u t i o n to a l l Federa l Reserve Agents .

(Signed) L. P. 3ETHEA

BETHEA


itulinp; 1-0. 1 X-8036

T E L E G R A M


WASHINGTON

September 29, 1934

CURTISS - Boston CASE - N e w York AUSTIN - P h i l a d e l p h i a

WILLIAMS - Cleveland HOXT ON - Richmond NEWTON - A t l a n t a

STEVENS - Chicago WOOD - S t . Louis PEYTON - Minneapolis

McCLURE - Kansas Ci ty WALSH - Da l l a s SARGENT - San Franc i sco

Trans No. 2095

R e f e r r i n g Regula t ion T the fo l l owing te legram was sen t on Septem-

ber 28 t o

of today to Wyatt STOP. Orders executed Saturday September 29

even though not a c t u a l l y debi ted or c r e d i t e d to accoun t s u n t i l

a f t e r October 1s t may be considered as p a r t of accounts mainta ined

a t t h e opening of bus iness on October 1, 1934, so as to secure

b e n e f i t s of p r o v i s i o n s of s e c t i o n 7(a) of Federa l Reserve Board ' s

Regula t ion T. UNQUOTE.

QUOTE Answering s p e c i f i c ques t ion 4 s wi re

(Signed) L. P. BETBEA

BETHEA


liuling Lio. 5. X-8037

T E L E G R A M

FEDERAL RESERVE BCARD

WASHINGTON

October 2, 1934

AUSTIN - Philadelphia STEVENS - Chicago WILLIAMS - Cleveland WOOD - St . Louis

CURTISS - Boston CASE - New York

HOXTON - Richmond NEWTON - Atlanta

PEYTON - Minneapolis MCCLORE - Kansas City WALSH - Dallas SARGENT - San Francisco

TRAITS. No. 2100 Replying to inquiry as to whether and under what

conditions nonmember bank which has executed agreement on F. R. B.

Form T-l or T-2 under section 8(a) of Securities Exchange Act may

cancel such agreement, Board has taken posit ion that, inasmuch as

statute makes no reference to termination or cancel lat ion except

in case of "bank's fa i lure to comply with provisions of agreement,

there i s doubt as to Board's power to permit voluntary cancel lat ion

by a bank in other cases and that, since question depends upon i n -

terpretation of criminal statute rather than interpretation of

of Board's regulation. Board could not safe ly sanction such can-

ce l la t ion without opinion from Attorney General holding that such

action would be lawful and would re l i eve bank from further com-

pliance with agreement. Since i t i s practice of Attorney General

to decline to express opinions except on basis of s p e c i f i c facts

in actual cases requiring some action by Government, i t i s not

believed to be poss ib le to obtain opinion from Attorney General

on hypothetical question. In order to clear up this question,

Board w i l l consider recommending to Congress at next sess ion


X-80S7

—2—

that statute be amended so as expressly to authorize voluntary

cancellation of such agreement "by a bank which has closed out

a l l loans made under sect ion 8(a) while agreement was in force .

(Signed) L. P. BETHEA.

BETHEA.


199


T E L E G R A M

TZA.SEING-TON

October 2, 1934

CURTISS - Boston CASE - Hew York AUSTIN - Philadelphia WILLIAMS - Cleveland

KOXTON - Richmond PEYTON - Minneapolis NEWTON - Atlanta MCCLURE - Kansas City .STEVENS - Chicago WALSH - Dallas FOOD - St. Louis SARGENT - San Francisco

TRANS. NO. 2102

On account of highly technical nature of questions ar i s ing under

Regulation T, necess i ty of conferences between Counsel's o f f i c e

and technical s t a f f and necessity of obtaining Board approval

before any rulings or interpretations are made, i t i s requested

that a l l such questions be submitted in writing or by telegraph

rather than by telephone. Answers to a l l questions of general

interest w i l l be aont simultaneously to a l l Federal reserve agents

and each Federal reserve agent i s requested to see that copies of

such rulings are furnished promptly to appropriate o f f i c i a l s of

each securi t ies exchange in his d i s t r i c t .

(Signed) L. P. BETHEA

BETHEA


Ruling Ho. 4 . X-8039

T E L E G R A M


WASHINGTON

CURTISS BOSTON

CASE NEW YORK

AUSTIN PHILADELPHIA

WILLIAMS CLEVELAND

HOXTON RICHMOND

NEWTON ATLANTA

STEVENS CHICAGO

WOOD ST. LOUIS

PEYTON MINIxTEAPOLIS

October 2, 1934

McCLURE KANSAS CITY

WALSH DALLAS

SARGENT SAN FRANCISCO

Trans. No. 2103 In response to an inquiry as to a p p l i c a b i l i t y

of sec t ion 4 (e ) of Board's Regulation T in l i g h t of word

"additional" preceding word "margin" in f i r s t sentence, Board

has rep l i ed that the subsection re f er s to a l l margin which mast

be demanded in order to comply with Regulation T.

(Signed) L. P. Bethea

BETHEA




X-8040

October 4, 1934.

Dear Sir:

There are "being forwarded to you today under

separate cover, for the use of your "bank, three copies

of part 18 of the hearings "before the Committee on Bank-

ing and Currency of the United States Senate on stock

exchange pract ices . Copies of part 17 of these hearings

were forwarded to you on August 2, 1934.

TO ALL F. R. AGENTS

(ITo copies to Governors or extra copies to "banks; one copy to "be sent to Mr. Kitzmil ler . )

your^

S. E. Ca/penter, Assistant Secretary,



ADDRESS OFFICIAL C O R R E S P O N D E N C E T O T H E FEDERAL R E S E R V E B O A R D

X-8041

October 4, 1934

SUBJECT: Examinations and reports under Section 21 of the Banking Act of 1933.

Dear Sir:

In the Board's l e t t er of June 26, 1934, X-7936, the Federal

Reserve Agents were advised that i t would not be necessary to submit

to the Board copies of reports of examination made under the provi-

sions of Section 21 of the Banking Act of 1933.

Several questions, however, have since arisen regarding examin-

ations made in accordance with the provisions of Section 21 of the Bank-

ing Act of 1933 and i t w i l l "be helpful to the Board to have copies of

such reports avai lable . I t i s requested, therefore, that copies of a l l

such reports of examination made in the future be forwarded to the Board,

together with your comments on the s i tuat ion and any other pertinent

data in connection therewith, such as copies or "briefs of correspondence

or memoranda re lat ing to conferences with representatives of the i n s t i -

tutions examined. Please forward also copies of reports of examinations

which have already been completed i f such copies are avai lable . If

copies are not avai lable , i t w i l l not be necessary to make an extra


X-8041

- 2 -

copy to be forwarded to the Board. In such cases, however, i t w i l l

be appreciated i f you w i l l forward a brief analysis of each report,

gether with the other information referred to above.

Very truly yours,


TO ALL FEDERAL RESERVE AGENTS


; ^ 0 4

X-8042

T E L E G R A M


WASHINGTON

October 2, 1934.

Curtiss - Boston Case - Hew York Austin - Philadelphia Williams - Cleveland

Hoxton - Richmond Newton - Atlanta Stevens - Chicago Wood - St. Louis

McClure - Kansas City Peyton - Minneapolis Walsh - Dallas Sargent - San Francisco

TRANS. NO. 2099

Re Regulation T• Under sect ion 11 of Regulation T, F.R.B. Forms T-l and T-2

are to he f i l e d in duplicate and Federal Reserve Agents are requested to for-

ward to Board one original counterpart of each form f i l e d . For the period

prior to November 1, 1934 each Federal Reserve Agent i s authorized, notwith-

standing the provisions of Regulation T, in any case which he deems to he of

an emergency nature, to accept an agreement properly executed on F.R.B. Form

T-l or ( in the case of the Federal Reserve Agents at New York or San Francisco)

on F.R.B. Form T-2 even though not f i l e d in duplicate and even though the

resolution authorizing the execution of such agreement and the c e r t i f i c a t e

as to the adoption of such resolution are not in the ident ica l form prescribed

by the Board, provided that in the opinion of counsel for the Federal Reserve

Bank such resolution i s s u f f i c i e n t to authorize the execution of the agree-

ment on Form T-l or T-2 and such c e r t i f i c a t e furnishes s u f f i c i e n t evidence

of the adoption of such resolution. While Board desires prompt advice in

accordance with Trans. No. 2094 of issuance of c e r t i f i c a t e s on Form T-3, i t

i s not necessary to send copies of Form T-3 to Board.


BETHEA


X-8043

T E L E ORAM

FEDERAL EESERVE BOARD

WASHINGTON October 4 , 1934.

CURTISS - BOSTON CASE - NSW YORK AUSTIN - PHILADELPHIA WILLIAMS - CLEVELAND

HOXTON - RICHMOND NEWTON - ATLANTA. STEVENS - CHICAGO WOOD - ST. LOUIS

PEYTON - MINNEAPOLIS MC CLURE - KANSAS CITY WALSH - DALLAS SARGENT - SAN FRANCISCO

TRANS. NO. 2105. In reply to an inquiry as to the e f f ec t under sect ions 4(c)

and 4(e) of Regulation T of a creditor allowing a customer to e f f e c t a trans-

action in an unrestricted account which would make the account a res tr ic ted

account and then f a i l i n g to obtain, within three f u l l business days as speci -

f i e d in sect ion 4(e) of the regulation, the margin required for the transac-

4 t ion, the Board has advised that such fa i lure to obtain margin w i l l not merely

cause the account to become a restr icted account but w i l l constitute a v io la -

t ion of the regulation, unless within said three day period the account i s

otherwise brought into conformity with the regulation or within said three

day period an extension of time i s obtained as provided in the f i r s t proviso

« of section 4 ( e ) . Such an account may be brought into conformity with the

regulation by such increase in the maximum loan value of the secur i t i e s in

the account and/or such decrease in the adjusted debit balance of the account

as would result in the account being an unrestricted account a f t er eliminating

from the computation of the adjusted debit balance any temporary credit given

pursuant to clause 8 of sect ion 3 ( f ) for margin required on the transaction

and demanded but which has not been obtained. The inquiry as submitted pointed

out that in the case of a sa le made on the third business day for the purpose

of bringing the account into conformity with the regulation the proceeds would

not ordinarily be obtained unt i l a f ter the three day l imit bad expired. I t


i i 0 6

X-8043

should be noted, however, that under clause 7 of sect ion 3 ( f ) of the regula-

t ion the adjusted debit balance of the account r e f l e c t s the sa le as soon as

i t i s made even though proceeds of the sa le are not yet credited to the ac-

count .


BETHEA.

— 2 —


• d07 Ruling No* 5. X-C044



For immediate re lease . October 6, 1934.

MARGIN REQUIREMENTS - TRANSACTIONS IN UNRESTRICTED ACCOUNTS.

In reply to an inquiry as to the e f f ec t under sections 4(c) and 4(e) of

Regulation T of a creditor allowing a customer to e f f e c t a transaction in an

unrestricted account which would make the account a res tr ic ted account and

then f a i l i n g to obtain, within three f u l l business days as specif ied in sec -

tion 4(e) of the regulation, the margin required for the transaction, the

Board has advised that such fa i lure to obtain margin w i l l not merely cause

the account to become a restr icted account but wi l l constitute a v io la t ion

of the regulation, unless within said three day period the account i s other-

wise brought into conformity with the regulation or within said three day

period an extension of time i s obtained as provided in the f i r s t proviso of

section 4 ( e ) . Such an account may be brought into conformity with the regu-

lat ion by such increase in the maximum loan value of the secur i t i e s in the

account and/or such decrease in the adjusted debit balance of the account as

would result in the account being an unrestricted account a f t er eliminating

frail the computation of the adjusted debit balance any temporary credit given

pursuant to clause 8 of section 3 ( f ) for margin required on the transaction

and demanded but which has not been obtained. The inquiry as submitted pointed

out that in the case of a sale made on the third business day for the purpose

of bringing the account into conformity with the regulation the proceeds would

not ordinarily be obtained unt i l a f ter the three day l imit had expired. I t

should be noted, however, that under clause 7 of section 3 ( f ) of the regula-

t ion the adjusted debit balance of the account r e f l e c t s the sale as soon as i t

i s made even though proceeds of the sale are not yet credited to the account.


l iulinrr tio • 6 . X-8046

£ . 5 . 5 . 1 . 5 . 1 5 . £ 2 A R D


Far immediate r e l e a s e . October 6» 1934.

MARGIN REQUIREMENTS - NEW PURCmSES IN RESTRICTED ACCOUNTS.

In r e p l y t o an inqu i ry Board has ru led t h a t under s ec t i on 4(d)

of Regulat ion T new purchases may be made i n r e s t r i c t e d accounts i f

a d d i t i o n a l margin i n t h e amount r equ i red by s ec t i on 3 to oover such

new purchases i s demanded on same day and is obtained wi th in time

allowed by sec t i on 4 ( e ) , even though the account i s not made an

u n r e s t r i c t e d account .


FEDERAL RESERVE BOARD •jA

WASHINGTON

ADDRESS OFFICIAL C O R R E S P O N D E N C E T O T H E FEDERAL R E S E R V E B O A R D

X- 8046

October 6, 1934

Dear Sir:

The representatives of the Industrial Advisory Committees, at

their meeting in Washington on September 27, stated they f e l t that

member banks do not understand how industrial loans, made under the

provisions of Section 13(b) of the Federal Reserve Act, are to be

re f lec ted in condition and examination reports, and expressed the

opinion that i t i s important that they be advised in th is regard.

The Board concurs in this opinion and, accordingly, requests that

you send the attached l e t t er to each State bank member in your d i s -

t r i c t and a copy thereof to the State banking department of each

s tate the capital of which i s s i tuated in your d i s t r i c t . The Board

i s sending a copy of the l e t ter to the Chairman of the Industrial

Advisory Committee in each d i s t r i c t for his information.

The Comptroller cf the Currency i s sending a similar l e t t e r

to National banks and copies to National bank examiners.

Very truly yours,


Inclosure

TO ALL FEDERAL RESERVE AG-EFTS Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

210 X— 8041-fi—a

TO THE BAH ADDRESSED:

The Act of Congress approved June 19, 1934, re la t ing to direct

loans for industrial purposes by Federal Reserve banks, published on

pages 430-434 of the July 1934 issue of the Federal Reserve Bul le t in ,

added a new sect ion, 13(b) to the Federal Reserve Act, paragraph (b)

of which authorizes each Federal reserve bank to discount f o r , or

purchase from, any member bank or other financing i n s t i t u t i o n operat-

ing in i t s d i s t r i c t , obligations having maturities not exceeding f i v e

years entered into for the purpose of furnishing working capital to

an established industrial or commercial business; to make loans or

advances direct to any member bank or financing i n s t i t u t i o n on the

security of such obligations; and to make commitments with regard

thereto, including commitments made in advance of the actual under-

taking of such obl igat ions.

The Act also provides that a member bank or other financing in-

s t i t u t i o n , which discounts or s e l l s such an obligation to a Federal

*"9serve bank, shal l obligate i t s e l f to the s a t i s f a c t i o n of the

Federal reserve bank for at least 20 percent of any lo s s which may

be sustained thereon; a lso that, in l i e u of so obl igat ing i t s e l f

to the Federal reserve bank, a member bank cr financing i n s t i t u -

t ion may advance at least 20 percent of a working capital loan to

an.established industrial or commercial business and the Federal

reserve bank the reniainder, provided the to ta l cf such loan i s

considered as one advance and repayment made prorata under such

regulations as the Federal Reserve Board may prescribe.


' 211 X-*8046—si

- 2 -

In view of the apparent misunderstanding on the part of some mem-

ber hanks on th i s subject, the Federal Reserve Board has requested me

to advise you as follows in regard to the manner in which these loans

should he included in condition reports submitted to the Federal re-

serve bank and in examination reports made by examiners for the Federal

reserve banks.

1. If your bank discounts with, or s e l l s to , the Federal

reserve bank any obligation of an industrial or commercial busi-

ness issued for working capital purposes, only that portion of

such obl igation rediscounted with, or sold to , the Reserve

bank on which your bank has obligated i t s e l f to the Federal

reserve bank for any loss sustained thereon i s to be included

among the asse t s and l i a b i l i t i e s of your bank in condition

reports submitted to the Federal reserve bank. The amount of

such obligation on which your bank i s l i ab le for any loss sus-

tained i s to be included in leans cr investments and shown

among l i a b i l i t i e s as "Obligations on industrial advances trans-

ferred to Federal Reserve Bank".

2. I f , instead of discounting a working capital obligation

with, or s e l l i n g i t to , the Federal reserve bank, your bank

advances not l e s s than 20 percent of such obl igation and the

remainder i s advanced by the Federal reserve bank, only the

amount of the advance by your bank should be included i n the

loans or investments in condition reports submitted to the

Federal reserve bank. The amount advanced by the Federal


X™8046-a

- 3 -

reserve ba.ik should not "be included in the balance sheet of

your bank.

3, When your bank makes an industrial advance of the

kind described in the Act of June 19, 1934, and obtains a

commitment from a Federal t-eserve bank in regard thereto,

the to ta l advance should be included in the loans or inves t -

ments of your bank in condition reports submitted to the

Federal reserve bank, but the commitment obtained from the

Federal reserve bank should not be shown in the balance

sheet of your bank.

4 . Examiners for the Federal reserve banks have been

instructed not to include in the loan c l a s s i f i c a t i o n the por-

t ion of a working capital advance which has been transferred

to the Federal reserve bank without obligation on the part

of your bank for any loss thereon or which, in accordance

with a commitment obtained from the Federal reserve bank,

may be so transferred, and not to c l a s s i f y , except with

respect to apparent losses , the remaining portion of such

working capital advance.

Very truly yours,

}




X-8047

October 6, 1934.

Dear Sir:

In accordance with the suggestion made by the representatives

of the Industrial Advisory Committees who met in Washington on

September 27, the Federal Reserve Board has asked each Federal Re-

serve Agent to send the inclosed l e t t e r , outlining the manner in

which industrial loans made under Section 13(b) of the Federal

Reserve Act are to be shown in condition and examination reports,

to each State bank member in his d i s t r i c t and a copy thereof to

the State banking department of each s tate in his d i s t r i c t .

You w i l l note from the inclosed copy of the l e t t e r sent to

the Federal Reserve Agents that the Comptroller of the Currency

i s sending to National banks and national bank examiners a l e t t e r

similar to that which i s being sent to State bank members.

Very truly yours,


Inclosure

TO THE CHAIRMAN OF EACH INDUSTRIAL ADVISORY COMMITTEE Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

• a l l

X- 804:0—3.

TO THE BAM ADDRESSED:

The Act of Congress approved June 19, 1934, re lat ing to direct

loans for industrial purposes "by Federal Reserve "banks, published on

pages 430-434 of the July 1934 issue of the Federal Reserve Bul le t in ,

added a new sect ion, 13(b) to the Federal Reserve Act, paragraph (b)

of Which authorizes each Federal reserve "bank to discount f o r , or

purchase from, any member bank or other financing in s t i tu t ion operat-

ing in i t s d i s t r i c t , obligations having maturities not exceeding f i v e

years entered into for the purpose of furnishing working capital to

an established industrial or commercial business; to make loans or

advances direct to any member bank or financing i n s t i t u t i o n on the

security of such obligations; and to make commitments with regard

thereto, including commitments made in advance of the actual under-

taking of such obl igat ions.

The Act also provides that a member bank or other financing in-

s t i t u t i o n , which discounts or s e l l s such an obligation to a Federal

>9serve bank, shal l obligate i t s e l f to the sa t i s fac t ion of the

Federal .reserve bank for at least 20 percent of any lo s s which may

be sustained thereon; a lso that, in l i e u of so obligating i t s e l f

to the Federal reserve bank, a member bank or financing i n s t i t u -

t ion may advance at least 20 percent of a working capital loan to

an established industrial or commercial business and the Federal

reserve bank the remainder, provided the to ta l of such loan i s

considered as one advance and repayment made prorata under such

regulations as the Federal Reserve Board may prescribe.


X— 804 (>—a

- 2 -

In view of the apparent misunderstanding on the part of some mem-

ber "banks on th i s subject, the Federal Reserve Board has requested me

to advise you as follows in regard to the manner in which these loans

should "be included in condition reports submitted to the Federal re-

serve "bank and in examination reports made "by examiners for the Federal

reserve banks.

1. If your "bank discounts with, or s e l l s to , the Federal

reserve bank any obligation of an industrial or commercial busi-

ness issued for working capital purposes, only that portion of

such obligation rediscounted with, or sold to , the Reserve

bank on which your bank has obligated i t s e l f to the Federal

reserve bank for any loss sustained thereon i s to be included

among the asse t s and l i a b i l i t i e s of your bank in condition

reports submitted to the Federal reserve bank. The amount of

such obligation on which your bank i s l i ab le for any loss sus-

tained i s to be included in loans cr investments and shown

among l i a b i l i t i e s as "Obligations on industrial advances trans-

ferred to Federal Reserve Bank".

2. I f , instead of discounting a working capital obligation

with, or s e l l i n g i t to, the Federal reserve bank, your bank

advances not l e s s than 20 percent of such obl igation and the

remainder i s advanced by the Federal reserve bank, only the

amount of the advance by your bank should be included in the

loans or investments in condition reports submitted to the

Federal reserve bank. The amount advanced by the Federal


X—804 6«*a

—3-

reserve bank should not be included in the balance sheet of

your bank.

3. When your bank makes an industrial advance of the

kind described in the Act of June 19, 1934, and obtains a

commitment from a Federal reserve bank in regard thereto,

the to ta l advance should be included in the loans or inves t -

ments of your bank in condition reports submitted to the

Federal reserve bank, but the commitment obtained from the

Federal reserve bank should not be shown in the balance

sheet of your bank.

4. Examiners for the Federal reserve banks have been

instructed not to include in the loan c l a s s i f i c a t i o n the por-

t ion of a working capital advance which has been transferred

to the Federal reserve bank without obligation on the part

of your bank for any loss thereon or which, in accordance

with a commitment obtained from the Federal reserve bank,

may be so transferred, and not to c l a s s i f y , except with

respect to apparent losses , the remaining portion of such

working capital advance.

Very truly yours,



A D D R E S S OFFICIAL. 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-8048

October 6, 1934

Bear Sir:

At a recent meeting, the System Committee on l e g i s l a t i v e

Program authorized the technical s ta f f to obtain such help as might

be necessary to accomplish i t s purpose expeditiously. I t i s ant ic-

ipated at th is time that the additional services required w i l l be

one or two junior ass i s tants and two stenographers, bringing the

to ta l expenses of the committee, including the salary of Mr. Walter

R. Stark,to an amount not to exceed $2,000 per month.

The action of the committee, which meets with the Board's

approval, was taken with the understanding that the expenses would

be paid by the Federal Reserve Bank of New York and al located among

the twelve Federal reserve banks in the manner referred to in the

Board's l e t t e r of September 25, 1934, X-8020, with regard to the

salary of Mr, Walter R. Stark, secretary of the committee.

I t w i l l be appreciated i f you wi l l submit to your directors

the matter of the a l locat ion to your bank in the manner referred

to of a portion of the additional expense involved, and forward

to the Board advice of their decision. Several of the banks, in

response to the Board's l e t t er of September 25, have already ad-

vised of approval by their directors of the a l locat ion to the


X-8048 2 1 8

- 2 -

banks of a portion of the expense involved in connection with the

employment of Mr. Stark.

Very truly yours,


To the Chairmen of a l l Federal reserve "banks.

r




X-8049

October 6, 1934

SUBJECT: Code Word. Covering Hew Issue of Treasury B i l l s .

Dear Sir;


Government secur i t i e s "between Federal reserve banks, the


issue of Treasury B i l l s :

"NOXOPA" - Treasury B i l l s to be dated October 10, 1934, and to mature April 10, 1935.



code word "SfOXODE" on page 172.

Very truly yours,




X-8050

T E L E G R A M


WASHINGTON

October 5, 1934

CURTISS - BOSTON CASE - NEW YORK AUSTIN - PHILADELPHIA WILLIAMS - CLEVELAND

HOXTON - RICHMOND PEYTON ~ MINNEAPOLIS NEWTON - ATLANTA MCCLURE - KANSAS CITY STEVENS - CHICAGO WALSH - DALLAS WOOD - ST. LOUIS SARGENT - SAN FRANCISCO

TRANS. NO. 2106

In r e sponse t o i n q u i r y f rom a Fede ra l Reserve Agent as t o method of

d i s t r i b u t i n g r u l i n g s under Regu la t i on T, Board sugges t s t h a t t h e y n o t be

s en t d i r e c t t o a l l b rokers and d e a l e r s i n D i s t r i c t by F e d e r a l Reserve

Agents bu t be s e n t only t o exchanges i n D i s t r i c t , i n order t o encourage

b roke r s and d e a l e r s t o submit i n q u i r i e s th rough exchanges i n s t e a d of d i -

r e c t t o F e d e r a l Reserve Agents• There i s no o b j e c t i o n t o sending copies

of such r u l i n g s i n answering s p e c i f i c q u e s t i o n s submi t t ed t o F e d e r a l Re-

serve Agents, b u t i t would seem a d v i s a b l e t h a t each answer t o a q u e s t i o n

submit ted d i r e c t by a broker or d e a l e r be accompanied by a s u g g e s t i o n

t h a t f u t u r e i n q u i r i e s be submi t ted through exchanges . There i s no ob-

j e c t i o n t o e s t a b l i s h m e n t by Fede ra l r e s e r v e a g e n t s , i n t h e i r d i s c r e t i o n ,

of m a i l i n g l i s t s f o r d i s t r i b u t i o n of r u l i n g s under R e g u l a t i o n T, t o a t -

t o r n e y s , a c c o u n t a n t s , f i n a n c i a l i n f o r m a t i o n s e r v i c e o r g a n i z a t i o n s and

o ther persons who would not normal ly be expec ted t o o b t a i n i n f o r m a t i o n

through t h e S e c u r i t i e s Exchanges. I t would be p e r m i s s i b l e t o send t o

persons on such m a i l i n g l i s t s a l l r u l i n g s under R e g u l a t i o n T which a re

communicated t o a l l F e d e r a l r e s e r v e agents i n t e l eg rams b e a r i n g


- 2 - X-8050

"Trans . Numbers" or i n mimeographed l e t t e r s bear ing "X" numbers, un less

otherwise i n d i c a t e d i n such te legrams or l e t t e r s .


BETHEA


*• P.OO t rx J

: Ruling lk>*7«. X-805X




ACCOUNTS TRANSFERRED FROM BAMS HOT TO BE DESIGHA.TED AS "OLD ACCOUNTS".

Board has "been asked whether a loan carried with a "bank

prior to October 1, 1934 may be transferred a f t er that date

to a broker and designated as an "old account" under sect ion

7(a) of Regulation T. Assuming that bank in question i s not

a member of a national securi t ies exchange, Board has advised

in reply that suggested designation may not be made as sect ion

8(e) of Regulation T with respect to "Transfer of Accounts"

refers only to transfers from one "creditor" to another

"creditor" and term "creditor" as defined in sect ion 2(b) of

Regulation T does not include a bank which i s not a member

of a national secur i t i e s exchange.


* 2Q1 f-'-Tjj

i tuling Ho. 8. X-8052



For immediate r e l e a s e . October 9, 1934

DESIGNATION OF "OLD ACCOUNTS".

In answer to inquiries as to the nature of an account which

may he designated as an "old account" pursuant to sect ion 7(a)

of the Board's Regulation T, Board has advised that the account

to he designated as an "old account" sha l l include a l l f i n a n c i a l

re lat ionships ex i s t ing between a creditor and a customer at the

opening of business on October 1, 1934, except that those r e l a -

tionships which may be recorded separately i n other spec ia l

accounts i n conformity with sect ions 3 (b) , 3 ( c ) , 3 (d) , 5(b) ,

and 6 need not be included in such old account. The adjusted

debit balance of such old account and the maximum loan value

of the s e c u r i t i e s therein must be calculated in accordance with

sect ion 3 ( f ) of the regulat ion as i f i t were a combined account,

except that the old account s h a l l not a f f e c t or be a f f ec t ed by

the s tatus of any other spec ia l account or of any new account

establ ished f o r such customer.


Ruling Bo, 9, X**8053


STATIC23-IT FOR THE PRESS

For immediate r e l e a s e . October 9, 1934.

EFFECT OF SECTION 8(a) OF SECURITIES EXCHANGE ACT ON EXISTING LOANS

In response t o quest ion whether sec t ion 8(a) of S e c u r i t i e s Exchange

Act of 1934 and s e c t i o n 10(a) of Regulat ion T r equ i r e b rokers , dea l e r s

and members of n a t i o n a l s e c u r i t i e s exchanges to pay off before October

15, any money borrowed p r i o r to October 1, 1934, from persons o ther

than member banks, nonmember banks which have f i l e d agreements pursuant

t o sec t ion 11 of r e g u l a t i o n , and o ther brokers , dea l e r s and members of

na t iona l s e c u r i t i e s exchanges, Board expressed the view t h a t the r e s t r i c -

t i o n s of s e c t i o n 10(a) of the r e g u l a t i o n and s e c t i o n 8(a) of the Act

apply only to borrowing on r e g i s t e r e d non-exempted s e c u r i t i e s on or

a f t e r October 1, 1934, when t h i s s ec t i on of the Act became e f f e c t i v e ,

and do not r equ i r e t he paying off of money borrowed before tha t da te

or p r o h i b i t the renewal or ex tens ion of a loan obtained before t h a t

da te ; provided t h a t such renewal or extension involves no inc rease in

the amount of the l o a n . In view of f a c t t ha t v i o l a t i o n of s e c t i o n 8(a)

of the Act i s a c r imina l o f f e n s e , however, Board 's opinion upon t h i s

sub jec t would not preclude prosecut ion i f Department of J u s t i c e should

i n t e r p r e t t he lav/ d i f f e r e n t l y ; and, in case of any doubt, member, b roker ,

or dea le r should ob ta in advice of h i s own counsel .


Ruling Ho. 10. X-8054

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


For immediate r e l e a s e October 9, 1934

SCOPE OF AGREEMENT OF NONMEKBER BANKS UNDER SECTION 8(a ) OF SECURITIES EXCHANGE ACT OF 1934#

Several i n q u i r i e s have been rece ived as t o which p rov i s i ons of the

S e c u r i t i e s Exchange Act of 1934, the Federa l Reserve Act, as amended# and

the Banking Act of 1935 are app l icab le t o member banks and r e l a t e t o t he

use of c r e d i t t o f i n a n c e t r a n s a c t i o n s i n s e c u r i t i e s w i th in t h e meaning of

s e c t i o n 8(a) of t h e S e c u r i t i e s Exchange Act of 1934 and of t h e Board 's Forms

T- l and T~2 p r e s c r i b e d pursuant t h e r e t o . Since ques t ion r e q u i r e s i n t e r p r e -

t a t i o n of c r imina l s t a t u t e r a t h e r than i n t e r p r e t a t i o n of Board ' s r e g u l a t i o n ,

express ion of opinion by Board would not a f f o r d p r o t e c t i o n from c r imina l

p rosecu t ion i f the Department of J u s t i c e , upon c o n s i d e r a t i o n of the mat te r

should t a k e p o s i t i o n i n c o n s i s t e n t wi th t h a t t aken by Board and should f e e l

compelled t o p rosecu te f o r v i o l a t i o n of the sec t ion* Accordingly, Board

does no t f e e l t h a t i t would be app ropr i a t e f o r i t t o express an opinion upon

the ques t ion o ther than t o advise nonmember banks contemplat ing the execu-

t i o n of Form T - l or T-2 t o f a m i l i a r i z e themselves w i t h * s t a t u t e s i n ques t ion

and to consider p o s s i b i l i t y t h a t i t may be held t h a t above-mentioned

language of s e c t i o n 8 (a ) r e f e r s t o the fo l lowing p r o v i s i o n s , among o t h e r s :

Sect ion 11 (m) of Federa l Reserve Act as amended by s e c t i o n 7 of Banking Act

of 1933, seventh paragraph of s e c t i o n 19 of Federa l Reserve Act as amended

by s e c t i o n 11 of Banking Act of 1933, f o u r t h paragraph a f t e r paragraph

11 Eighthu of s e c t i o n 4 of Federa l Reserve Act as amended by s e c t i o n 3 of

Banking Act of 1933, and those p rov is ions of S e c u r i t i e s Exchange Act of

1934 which a r e conta ined i n appendix t o Regula t ion T* In r e p l y t o another


" 2 " X-8054

i n q u i r y . Board adv ises t h a t fo rego ing should be brought t o a t t e n t i o n of

nonmember banks contemplat ing execut ion of agreements b u t t h a t c i r c u l a r i z a -

t i o n of such in fo rma t ion t o a l l .nonmembe r banks i s be l i eved t o be unnecessary#


llulins No. 11. x-8055




WITHDRAWALS PRIOR TO DESIGNATION OP OLD ACCOUNTS.

In i n t e r p r e t i n g sec t ion 7(a) of Regulat ion T on October 2, 1934, the

Federa l Reserve Board sa id : " I f , between the opening of bus iness on

October 1, 1934 and the time of the des igna t ion of such account as an

old account , the re has been anf withdrawal of money or s e c u r i t i e s from

the account, such account cannot be designated as an old account un l e s s

i t i s an u n r e s t r i c t e d account on October 15 or on the date of such

des igna t ion , whichever i s the l a t e r , or un l e s s the cash and/or s e c u r i -

t i e s withdrawn from the account a re replaced be fo re the account i s d e s i g -

nated as an old account . " Th i s r u l i n g has given r i s e to two a d d i t i o n a l

i n q u i r i e s . (1) Does i t prevent the withdrawal of any s e c u r i t i e s or only

of s e c u r i t i e s which as of October 15 w i l l have the s t a t u s of r e g i s t e r e d

and/or exempted s e c u r i t i e s ? and (2) What i s meant by the replacement of

cash or s e c u r i t i e s withdrawn from the account? In answer to the f i r s t

ques t ion , the Board has ru led tha t the r e s t r i c t i o n a p p l i e s to the wi th -

drawal of u n r e g i s t e r e d , non-exempted s e c u r i t i e s as w e l l as t o the w i t h -

drawal of r e g i s t e r e d and/or exempted s e c u r i t i e s . In answer to the

second ques t ion , the Board has ru led t h a t , where cash has been withdrawn,

i t must be rep laced by an equivalent amount of cash and, where s e c u r i t i e s

have been withdrawn, they must be replaced by money and/or s e c u r i t i e s

to such an ex ten t t h a t the money p l u s the market value of the s e c u r i t i e s

deposi ted i s not l e s s than the aggregate market value of the s e c u r i t i e s


- 2 - X - 8 0 5 5

which were withdrawn and the money p lus the maximum loan va lue of the

s e c u r i t i e s depos i ted i s not l e s s than the aggregate maximum loan value

of the s e c u r i t i e s which were withdrawn from the account . For the purpose

of determining the amount of cash and/or s e c u r i t i e s needed to r e p l a c e

s e c u r i t i e s withdrawn, the cur ren t market value and maximum loan va lue of

the s e c u r i t i e s withdrawn and of the s e c u r i t i e s r ep laced must be a s c e r t a i n e d

in accordance wi th s ec t i on 3 of Regulat ion T as of the opening of bus iness

on October 15 or the da t e of replacement , whichever i s l a t e r .


X-8056

T E L E G R A M


mSHIHGTOH

October 6, 1934.

CURTISS BOSTON

Re wire from G-etteray October 5th. Under sect ion 11(c)

of Regulation T delivery to Federal Reserve Agent of

duplicate originals of form $-1, properly executed, con-

s t i t u t e s f i l i n g with Federal Reserve Board, even though

c e r t i f i c a t e on Form T-3, evidencing such f i l i n g , has not

been issued. As to cancellation by bank of agreement on

Form T-l which i t has f i l e d , please refer to Trans. Ho.

2100.


BETHEA.


,330 X-8057

October 6, 1934

Mr 4 Freder ic II • Curt i s s , Federal Reserve Agent, Federal Reserve Bank of Boston, Boston, Massachusetts•

Dear Mr. C u r t i s s :

This r e f e r s to your l e t t e r of Ju ly 19, 1934 r e spec t ing

the s t a t u s of mutual savings banks i n view of c e r t a i n p rov i s ions of

s ec t i on 8 of the S e c u r i t i e s Exchange Act of 1934. Sect ion 8 p r o h i b i t s

members of n a t i o n a l s e c u r i t i e s exchanges and c e r t a i n brokers and dea le rs

t o borrow from non-member banks unless such banks have f i l e d with the

Federal Reserve Board an agreement to comply with those provis ions of

the S e c u r i t i e s Exchange Act of 1934, the Federal Reserve Act, as amended,

and the Banking Act of 1933 which are app l i cab le t o member banks and

which r e l a t e t o the use of c r e d i t t o f inance t r a n s a c t i o n s i n s e c u r i t i e s •

As c e r t a i n of these provis ions r e l a t e t o the c a p i t a l and surplus of bank-

ing i n s t i t u t i o n s you i n d i c a t e t h a t the re i s a ques t ion as t o t h e i r ap-

p l i c a b i l i t y t o mutual savings banks which have no c a p i t a l and o r d i n a r i l y

do not have what i s ca l l ed a su rp lus , a l though you s t a t e t h a t they may

have a guaranty fund s imi l a r t o su rp lus .

As suggested i n the concluding sentence of your l e t t e r ,

the Board has borne these f a c t s in mind during the p r epa ra t i on of i t s

r e g u l a t i o n s under t h e S e c u r i t i e s Exchange Act of 1934, but the ques t ion

which you r a i s e i s one which i t i s impossible t o answer e i t h e r i n the

r e g u l a t i o n s or by a l e t t e r a t t h i s t ime. As the answer t o the i n q u i r y


- 2' X-8057

w i l l depend in each case upon the i n t e r p r e t a t i o n of a p rov i s ion of law

in view of the app l icab le f a c t s of a s p e c i f i c case, i t i s suggested

t h a t any i n t e r e s t e d mutual savings bank de l ive r to you f o r submission

to t h e Board a f u l l s tatement of f a c t s and s p e c i f i c r e f e r e n c e to the

provis ions of law with r e spec t t o which the ques t ion i s r a i s e d . The

p r o p r i e t y of t r e a t i n g a guaranty fund as surplus w i th in t he meaning of

the Federal s t a t u t e s w i l l depend in pa r t upon the law of the s t a t e

under which t he mutual savings bank i s incorpora ted and i t would be

h e l p f u l t o the Board i f the p r e s e n t a t i o n of f a c t s could be accompanied

by an opinion of your counsel or of counsel f o r t h e i n q u i r i n g bank,

which would dea l p a r t i c u l a r l y with t h i s aspect of t he ques t i on .



L. P. Bethea, Ass i s t an t Sec re t a ry .


T, n. TO X-8058 Ruling -vo. 12 •



For immediate r e l e a s e October 10, 1934.

MARGIN REQUIREMENTS - FLUCTUATIONS III liLiRKST PRICES.

The Board has been asked whether Regulat ion T r e q u i r e s t h a t add i t i ona l

margin be obtained i f i n a r e s t r i c t e d combined account conta in ing s e c u r i -

t i e s and commodity commitments t h e r e are no new t r a n s a c t i o n s but t he r e are

adverse f l u c t u a t i o n s of t h e commodity market . In r e p l y the Board advised

t h a t Regulat ion T does not r equ i r e the c r e d i t o r t o obta in a d d i t i o n a l mar-

gin i n the circumstances i nd i ca t ed and t h a t under sec t ion 4(b) of Regulat ion

T the c r e d i t o r may permit c r e d i t t o be maintained in such an account r e -

gardless of mere f l u c t u a t i o n s i n the commodity market and r ega rd l e s s of mere

bookkeeping e n t r i e s used t o i nd i ca t e such f l u c t u a t i o n s •


Ruling iio» 13. X-8059




MARGIN REQUIREMENTS - SHORT SALES AND OTHER TRANSACTIONS IN RESTRICTED ACCOUNTS.

In r e p l y t o an inqu i ry , the Board has ru led t h a t under sec t ion 4(d)

of Regulat ion T s h o r t s a l e s may be made i n a r e s t r i c t e d account i f the

margin customari ly r equ i red by t h e c r e d i t o r on such sho r t commitments

i s demanded on t he same day and i s obtained wi th in the time allowed by

sec t ion 4 ( e ) . The same p r i n c i p l e appl ies to the execut ion i n r e s t r i c t e d

accounts of t r a n s a c t i o n s of the kinds r e f e r r e d t o i n c lause 4 of s ec t i on

3 ( f ) .


So. 14. x_8060

I E D E E A 1 E E S | R T I B O A R D


For immediate re l ease . October 10,1934.

WITHDRAWALS OF CASH FROM OLD ACCOUNTS PRIOR TO OCTOBER 15, 1934

In reply to an inquiry, the Board has advised that , in the

case of an account which has been designated as an old ac-

count pursuant to sect ion 7(a) of Regulation T, a withdrawal

of cash which i s made prior to October 15 and which thereby

increases the adjusted debit balance of the account i s

nevertheless permitted i f the account i s not thereby made

a r e s t r i c t e d account and i f , on October 15, the account i s

an unrestr ic ted account.


Ruling No. 15. X-8061



For immediate re l ease . October 10, 1934.

TIME WITHIN WHICH COMBINATION OF TRANS-ACTIONS MUST BE MADE IN OLD ACCOUNTS.

In rep ly to an inquiry, Board has advised that i n order to "be

considered a "combination of transactions" within the meaning

of the second proviso of sec t ion 7(a) of Regulation T, the

transactions const i tut ing such combination must be made on the

same day except that any subst i tut ion of s e c u r i t i e s cons is t ing

of a sa le of s ecur i t i e s in the account and the purchase of

other s e c u r i t i e s may be considered as a s ing le transact ion oc-

curring on the day on which the purchase occurs, i f completed

within a period of two success ive business days, regardless of

whether the s a l e occurs before or a f t e r the purchase.


X-8062




MARGIN REQUIREMENTS - TRANSACTIONS IN CASH ACCOUNTS.

Ruling No. 16 interpreting Regulation T. In response

to an inquiry as to whether in a cash account under sect ion 6

of Regulation T credit may "be extended on unregistered non-

exempt secur i t i e s as an incident to the purchase of such securi -

t i e s , the Board advised that sect ion 6 of Regulation T does not

authorize such extensions of credit and also pointed out that

sect ion 7(c) (2) of the Securit ies Exchange Act of 1934 expressly

prohibits a creditor as defined in section 2(h) of Regulation T

from extending or maintaining credit on such secur i t i e s under

the circumstances indicated.


36-8063



For immediate re lease . October 11, 1934

CONFIRMATION OF DEMAND FOR MARGIN.

RULING NO. 17 INTERPRETING REGULATION T. In response to an

inquiry, the Federal Reserve Board has ruled that, where a

demand for margin has not "been made "by a l e t t e r or telegram

sent to a customer at his l a s t known address hut has been

delivered to the customer in person, the amount so demanded

cannot be included in the computation of the adjusted debit

balance of the customer's account pursuant to the provisions

of clause 8 of section 3 ( f ) of Regulation T, unless such

demand for margin has been confirmed by a l e t t e r or telegram

which the creditor shall have sent to the customer at his

l a s t known address.


3*3

X-3064

F E D 2 R A L R E S E R V E B O A R D

STAISkiSNT FOR THE PRESS

For imredinte r^lewso October 12# 1934.

INCREASES IK ADJUSTED DEBIT BALANCE OF AN OLD CCOUNT

RULING HO. 18 INTERPRETING REGULATION T. In response to an inquiry the

Federal Reserve Board has advised that, i f the adjusted debit balance

of an account which has been designated as an "old account" pursuant to

section 7(a) of Regulation T, i s reduced by reason of a sa le of secur i t i e s

or otherwise, the creditor may not thereafter permit the customer to make

any transaction which would result in an increase i n the adjusted debit

balance except a withdrawal of money made in conformity with the third

proviso of sect ion 7(a) of Regulation T. In th i s connection the Board

cal led attention to the fact that a transaction which would resu l t in an

increase in the adjusted debit balance i f standing alone i s not prohibited

by sec t ion 7(a) i f i t i s part of a "combination of transactions" which

results in no increase in the adjusted debit balance*


X-8065

L E R 1 B : A h B O A R D



MARGIN REQUIREMENTS ™ TIME AL-LOWED FOR OBTAINING MARGIN.

RULING NO. 19 INTERPRETING REGULATION T. The Federal Reserve Board has

been asked whether under s ec t ion 4(e) of Regulat ion T, i n t he case of a

purchase of s e c u r i t i e s on a Monday, the th ree -day per iod allowed f o r ob-

t a i n i n g margin expi res a t midnight Wednesday or a t midnight Thursday, i f

the days s p e c i f i e d and a l l the in te rven ing days are f u l l bus iness days.

In r e p l y the Board advised t h a t the th ree -day per iod s p e c i f i e d means

th ree f u l l business days fol lowing the date of the t r a n s a c t i o n and t h a t ,

i n the case i n d i c a t e d , t he t h r e e - d a y period allowed by s e c t i o n 4 (e ) would

not expire u n t i l midnight on Thursday.


X-8066 T E L E G R A M


WASHINGTON October 11, 1934


HOXTON - RICHMOND NEWTON - ATLANTA STEVENS - CHICAGO WOOD - ST. LOUIS

PEYTON - MINNEAPOLIS McCLURE KANSAS CITY WALSH - D-uLLAS SARGENT - SAN FRAMCIfCO

TRANS. NO. 2118. In order to avoid confusion in referring to previous rulings

interpreting Regulation T, the Board m i l , in the future, give a number to

each ruling interpreting Regulation T which i s of s u f f i c i e n t general interest

to be sent to a l l Federal Reserve .agents and released by Board as a press

statement. Rulings issued a f ter t h i s change of procedure w i l l be numbered in

order beginning with No. 16. Rulings heretofore issued have been numbered as

fol lows: Trans. No. 2095 (Beginning af ter word "STOP" and eliminating f ina l

word "UNQUOTE") - Ruling No. 1 interpreting Regulation Tj Trans. No. 2097 -

Ruling No. 2 interpreting Regulation Tj Trans. No. 2100 - Ruling No. 3 inter-

preting Regulation Tj Trans. No. 2103 - Ruling No. 4 interpreting Regulation

Tj Trans.No. 2105 - Ruling Ho. 5 interpreting Regulation T; Trans. No. 2107

- Ruling No, 6 interpreting Regulation T; Trans. No. 2108 - Ruling No. 7 in-

terpreting Regulation T; Trans. No. 2109 - Ruling No. 8 interpreting Regu-

lat ion T; Trans• No. 2110 - Ruling No. 9 interpreting Regulation Tj Trans.

No. 2111 - Ruling No. 10 interpreting Regulation Tj Trans. No. 2112 - Ruling

No. 11 interpreting Regulation Tj Trans . No. 2114 - Ruling No. 12 interpret-

ing Regulation T; Trans . No. 2115 - Ruling No. 13 interpreting Regulation Tj

Trans. No. 2116 - Ruling No. 14 interpreting Regulation Tj Trans. No. 2117 -

Ruling No. 15 interpreting Regulation T. In giving out copies of any of

these f i f t e e n rulings in the future, i t i s suggested that the appropriate

number be inserted at the beginning of the rul ing.


BETHEA


T E L E G R A M X-8067


WASHINGTON October 12#1934


HOXTON - RICHMOND NEWTON - ATLANTA STEVENS - CHICAGO WOOD - ST. LOUIS

PEYTON - MINNEAPOLIS McCLURE - KANSAS CITY WALSH - DALLaS SaRGENT - SAN FRANCISCO

TRANS NO. 2123.

Refer r ing Regulat ion T. The Secre ta ry of the Treasury has advised the

Federal Reserve Board t h a t he has designated f o r exemption under t he pro-

v i s ions of paragraph 12 of s ec t i on 3(a) of the S e c u r i t i e s Exchange Act of

1934, i nd iv idua l and consol idated Farm Loan bonds i s sued by Federal land

banks and debentures i s sued by Federal in te rmedia te c r e d i t banks under the

a u t h o r i t y of the Federa l Farm Loan Act, approved Ju ly 17, 1916, as amended.

(Signed) L. P. BETHEA

BETHEA


X-8068


STATElvIENT FOR THE PRESS


GUARANTEED ACCOUNTS.

RULING NO. 21 INTERPRETING REGULATION T.

In response t o an i n q u i r y w i th r e s p e c t to guaranteed accounts , t he

Board advises t h a t under s e c t i o n 8(d) of Regula t ion T, a c r e d i t o r may-

regard as an u n r e s t r i c t e d account any account which i s guaranteed i n

w r i t i n g f o r an amount s u f f i c i e n t to make such account an u n r e s t r i c t e d

account by a person who has an account with such c r e d i t o r con ta in ing

a cash c r e d i t ba lance and/or s e c u r i t i e s of s u f f i c i e n t loan value t o

make such guaranteed account an u n r e s t r i c t e d account i n a d d i t i o n t o

providing t h e margin requ i red by Regula t ion T on the g u a r a n t o r ' s

account#


' 2 4 3 . 3h8P69



For immediate r e l e a s e October 12* 1934

CASH TRANSACTIONS

RULING NO. 20 INTERPRETING REGULATION T. In response t o two i n q u i r i e s

with r e s p e c t t o the time when the seven day period allowed under s e c t i o n

6 of Regulat ion T begins to run i n connection with bona f i d e cash t r a n s a c -

t i o n s , the Federal Reserve Board ru led t h a t :

In the case of a bona f i d e cash t r a n s a c t i o n i n which a broker pur-

chases a s e c u r i t y as agent f o r a customer and makes payment t o the s e l l e r

of the s e c u r i t y , the seven day period commences t o run when the broker pays

f o r the s ecu r i t y without having received payment from h i s customer.

. In the case of a bona f i d e cash t r a n s a c t i o n i n which a dea le r a c t -

ing as p r i n c i p a l or as agent f o r t he s e l l e r s e l l s a s e c u r i t y t o a customer,

the seven day per iod commences t o run when t i t l e t o the s e c u r i t y passes to

the customer without t h e customer having paid fo r t h e secur i ty*

In both cases and i n a l l other cases involving cash t r a n s a c t i o n s , the

seven day per iod commences t o run when the r e l a t i o n of debtor and c r e d i t o r

a r i s e s between t h e purchaser and the c r ed i t o r as a r e s u l t of the cash

t r a n s a c t i o n .

In t h i s connection, the Board explained t h a t t he sole purpose of

sec t ion 6 i s t o a l low the extension of c r e d i t f o r l imi t ed per iods of time

i n connection with bona f i d e cash t r a n s a c t i o n s and t h a t t h i s s e c t i o n does

not place any r e s t r i c t i o n s upon a bona f i d e cash t r a n s a c t i o n which does

not r e s u l t i n any debtor and c r e d i t o r r e l a t i o n s h i p between t h e customer

and the broker or d e a l e r .




X-8070 .

October 13 , 1934,


Dear S i r :

In connec t ion wi th t e l e g r a p h i c t r a n s a c t i o n s i n

Government s e c u r i t i e s between Federa l r e s e r v e banks, the

fo l lowing code word has been des igna ted to cover a new


"NOXOEE" - Treasury B i l l s t o be da t ed October 17, 1954, and to mature A p r i l 17, 1935,



code word "NOXOEA" on page 172,.


A s s i s t a n t S e c r e t a r y ,



X-8071


STATEMENT SDR THE PRESS

For immediate r e l e a s e . ,October 13, 1934

MARGIN REQUIREMENTS - JOINT ACCOUNTS BETWEEN MEMBERS OF NA.1TOMAL SECURITIES EXCHANGES.

RULIM3- NO. 22 INTERPRETING REGULATION T.

The Federa l Reserve Board has been asked to ru le on

the ques t ion whether t h e r e i s an extens ion of c r e d i t by a

c r e d i t o r to a customer w i th in the meaning of the Board 's

Regulat ion T in t he case presented by the fo l lowing f a c t s ;

A f i rm having membership in a na t iona l s e c u r i t i e s exchange

and an ind iv idua l member of the exchange form a j o i n t a c -

count f o r t r a n s a c t i o n s in s e c u r i t i e s . The ind iv idua l p ro -

vides no c a p i t a l but f u r n i s h e s to the j o i n t account s e r v i c e s

in purchasing and s e l l i n g the s e c u r i t i e s . The f i r m pays f o r

the s e c u r i t i e s bought, f u r n i s h e s the s e c u r i t i e s sold and

" c l e a r s the account" . In these circumstances, t h e Board

has ru l ed t h a t such r e l a t i o n s h i p does not c o n s t i t u t e a

c red i to r -cus tomer r e l a t i o n s h i p , within the meaning of

Regulat ion T, between the f i r m and the j o i n t account o r the

f i rm and the i n d i v i d u a l , and t h a t , t h e r e f o r e , such t r a n s -

ac t ions a r e not sub jec t t o the provis ions of the r egu l a t i on

governing extens ions of c r e d i t to a customer.


X-8072



For immediate r e l e a s e October 13, 1934,

CALCULATION OF NET DEBIT BALANCE IN ARBITRAGE ACCOUNTS

RULING NO. 23 INTERPRETING REGULATION T. In response t o an i n q u i r y the

Federa l Reserve Board has r u l e d t h a t , i n c a l c u l a t i n g t h e n e t d e b i t balance

of an a r b i t r a g e account w i t h i n t h e meaning of Sec t ion 3(d) of Regula t ion

T, both the long commitments and t h e sho r t commitments i n s e c u r i t i e s

should be t aken i n t o c o n s i d e r a t i o n .


2 4 7

X - 8 0 7 3 .




TRANSACTIONS WITHIN THE UNITED STATES FOR CUSTOMERS OF FOREIGN BRANCHES.

RULING NO. 24 INTERPRETING REGULATION T. In response to i n q u i r i e s as

t o "whether p a r t i c u l a r t r a n s a c t i o n s come vdth in the p rov is ions of Regu-

l a t i o n T and the S e c u r i t i e s Exchange Act of 1934 i n view of Sect ion 8(h)

of t h e Regulat ion and Sect ion 30(b) of t he Act, the Federal Reserve

Board has expressed the fol lowing opinions:

Mien a c r e d i t o r with a f o r e i g n branch o f f i c e which i s car ry ing

s e c u r i t i e s i n a f o r e i g n country f o r a f o r e i g n customer executes wi th in

the United S ta tes an order f o r the purchase of a r e g i s t e r e d s e c u r i t y

f o r such f o r e i g n customer, such t r a n s a c t i o n i s s u b j e c t to p rovis ions of

Regulat ion T and i s not excepted theref rom by Sect ion 8(h) t h e r e o f •

A c r e d i t o r borrowing i n the United S ta tes on any r e g i s t e r e d s e c u r i t y

i n t h e ord inary course of business as a broker or dea ler must comply with

the provis ions of Regulat ion T and of the Act wi th r e s p e c t to such bor -

rowing, r ega rd l e s s of whether or not the s e c u r i t y i s held fo r the

account of a f o r e i g n customer*


Xr&074



For immediate r e l e a s e October 13, 1934

MARKET VALUE AMD LOAN VALUE OF SECURI-TIES INVOLVED IN SUBSTITUTIONS.

RULING NO. 25 INTERPRETING REGULATION T. The Federa l Reserve Board has

been asked t o ru l e upon t he fo l lowing ques t ion : 11A customer "with a r e -

s t r i c t e d account de s i r e s t o s u b s t i t u t e s e c u r i t i e s • The s u b s t i t u t e d

s e c u r i t i e s must have a cu r ren t market value equal t o t h a t of t he s e c u r i -

t i e s withdrawn; otherwise, t h e r e would be a ne t withdrawal, under Regula-

t i o n 4 (d) • The ques t ion i s whether the s u b s t i t u t e d s e c u r i t i e s must a l so

have a loan value equal t o t h a t of the s e c u r i t i e s withdrawn#" The Board

r e p l i e d t h a t , under sec t ion 4(d) of Regulat ion T, n e i t h e r the cur ren t

market value nor the maximum loan value of the s e c u r i t i e s s u b s t i t u t e d i n

a r e s t r i c t e d account should be l e s s than the cu r ren t market value or the

maximum loan value , r e s p e c t i v e l y , of the s e c u r i t i e s withdrawn, unless any

d i f f e r e n c e between such values i s made up by a depos i t of cash or unless

the account i s made an u n r e s t r i c t e d account .



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-8075

October 15, 193^•

SUBJECT: Expense, Main Lines, Leased Wire System, September, 1934.

Dear Sir:

Inclosed herewith you w i l l f ind two mimeo-graphed statements, X-8075-a and X-8075-b, covering in de ta i l operations of the main l i n e s , Leased Wire System, during the month of September, 193^«

Please credit the amount nayable by your bank for your share of the expense of the Leased Wire System, to the Federal Reserve Bank of Richmond in your dai ly statement of credi ts through the Gold Set -tlement Fund for the account of the Federal Reserve Board, and advise the Federal Reserve Bank of Richmond by wire the amount and purpose of the credi t .

Very truly yours,

Fiscal Agent.

Inclosures .



REPORT SHOWING- CLASSIFICATION AH) NUMBER OF WORDS TRANSMITTED OVER MAIN LIEES. OF THE FEDERAL RESERVE LEASED TIRE SYSTEM FOR THE MONTH OF SEPTEMBER,

X-S075-a

From

Business reported by "banks

Words sent by Few York charge-able to other F. R. Banks ( l )

yet Federal reserve bank business

Per cent of t o t a l bank business (*)

Boston Hew York Philadelphia Cleveland Richmond Atlanta Chicago St . Louis Minneapolis Kansas City Dallas San Francisco

Total,

29,329 l 4 l , l 6 8

26,462 46,802 44,4o6 44,972 79,508 59,701 31,919 61,244 51,391 SI,903

698,805

1,599

1,550 1,497 1,667 1,462 1,372 1,773 1,518 1,568 2,184 3)081

19,771

30,928 l 4 l , l 6 8 28,012 48,299 46,073 46,434 81,380 61,474 33,^37 62,812 53,575 84,984

718,576

4.30 19.65

3.90 6.72 6 . 4 l 6 .46

11.33 8-55 4.65 8 .74 7.46

11.83 100.00

F. R. Board business 377,575 1,096,151

Reimbursable business Incoming & Outgoing 759,239

Total words transmitted over main l i n e s . 1,855,390

(*) These percentages used in calculat ing the pro rata share of leased wire expense as shown on the accompanying statement (X-8075-b)

( I ) Number of words sent by New York to other F. R. Banks for their sole benef i t charged to banks indicated in accordance ? i t h act ion taken at Governors' Conference November 2-4 , 1925•

CJi


X-S075-T3

REPORT OF EXPENSE MAIN LINES FEDERAL RESERVE LEASED WIRE SYSTEM, September, 1934.

Ret ire- Oper- Pro rata Payable to ment ators1 share of Federal

Operators' Contribu- over- Wire Total tota l Reserve Fame of Bank Salar ies t ions time rental expenses expenses Credits Board

Boston $260.00 $ 23.40 $ 2.00 $ - $285.40 $636.01 $285.40 4350.61 New York 1,345-SO 121.12 19.00 1,485.92 2,906.40 1,485.92 1,420.48 Philadelphia 225.00 20.25 - - 245.25 576.84 245.25 331.59 Cleveland 306.66 27.60 334.26 993.94 334.26 659.68 Richmond 221.00 17.10 — 230.00(&) 468.10 948.09 468.10 479.99 Atlanta 270.00 24.30 — — 294.30 955.49 294.30 661.19 Chicago 4 ,211 .40 ( f ) 371.70 - - 4,583.10 1,675.80 4 ,583.10 2 ,907.30(*) St . Louis 195.00 17.55 .75 - 213.30 1,264.62 213.30 1,051.32 Minneapolis 200.00 18.00 - - 218.00 687.77 218.00 469.77 Kansas City 287.00 25.83 - - 312.83 1,292.72 312.83 979.89 Dallas 251.00 22.59 .60 — 274.19 1,103.40 274.19 829.2} San Francisco 380.00 34.20 — - 4i4 .20 1,749.76 4 l4 .20 1 ,335.56 i!ederal Reserve Bd. — — 15,906.72 15,906.72 - — . -

Total $8,152.86 $723-64 $22.35 $16,136.72 $25,035.57 $14,790.84 $9,125.85 $8,569.29

Less Reimbursable Charges: 10,244.73 2 ,907.30(a) $14,790.8% *5 Mi.99

(&) Main l i n e renta l , Richmond-Washington (#) Includes sa lar i e s of Washington operators (*) Credit (a) Amount reimbursable to Chicago IvJ

CJl j&dk


a

X-6076

Statement of Bureau of Engraving and P r i n t i n g f o r f u r n i s h i n g Federal Reserve Notes Ser ies 1928, September 4 t o 29, 1934.

Tota l | 5 #10 Sheets Amount

- 52,000 52,000 $4,472.00 - 72,000 72,000 6,192.00

14,000 - 14,000 1,204.00 46,000 90,000 136,000 11,696.00 26,000 - 26,000 2,236.00

Minneapolis $ • • • - 49,000 49,000 4 ,214.00

86,000 263,000 349,000 #30,014.00

349,000 shee t s , @ $86.00 M, . . . . . $30,014.00


FEDERAL RESERVE BOARD 3 5 3

WASHINGTON


X-8077

October 16, 1934.

SUBJECT: Weekly Member Bank Condition Statement.

Dear Sir:

Beginning with the statement to be issued on Monday, October

22, which w i l l show figures as of Wednesday, October 17, the Board1 s

weekly member bank condition statement w i l l be revised to incorporate

some of the additional data member banks have been reporting since

September 5* The revised form of statement w i l l contain the following

items:

Loans and investments - t o ta l

Loans on securi t ies - to ta l To brokers and dealers:

In New York Outside New York

To others

Acceptances and commercial paper Loans on real estate Other loans

U, S. Government direct obligations Obligations f u l l y guaranteed by U. S. Gov1t• Other securi t ies

Reserve with F# R. banks Cash in vault

Net demand deposits Time deposits Government deposits


-2 - X-8077

Due from banks Due to "banks

Borrowings from F« R. banlcs

The statement showing the principal assets and l i a b i l i t i e s

of reporting member banks in New York City and Chicago as of October

17 w i l l be issued in the present form on Thursday, October 18, but

on the following Monday the statement for New York City and Chicago

wi l l be incorporated, in the revised form, in the complete weekly

member bank statement. Beginning October 25 the Thursday statement

w i l l be in the revised form. The text accompanying the statement to

be issued on Monday, October 22, w i l l contain the following paragraph:

"The statement has been revised to show separately, and by

Federal Reserve d i s t r i c t s , loans to brokers and dealers in New

York and outside Hew York, loans on securi t ies to others, accep-

tances and commercial paper, loans on real es tate , and obligations

f u l l y guaranteed both as to principal and interest by the United

States Government. In view of the new c l a s s i f i c a t i o n of loans

the memorandum items heretofore appearing at the bottom of the

statement of condition of reporting member banks in New York City,

relat ing to loans on securit ies to brokers and dealers, has been

eliminated from that statement. The statement published l a s t

Thursday, which i s reissued herewith in revised form, showed the

to ta l amount of brokers' loans made by New York City banks for

their own account as $603,000,000, of which (as shown in the re-

vised statement) $555,000,000 represented loans to brokers and


- 3- X-8077

dealers in New York City and §48,000,000 to brokers and dealers

outside of New York City. Of the $136,000,000 loans to "brokers

and dealers made by weekly reporting member banks i n New York

City f o r the account of out-of-town banks (as shown in the s t a t e -

ment issued l a s t Thursday), $131,000,000 was made for the account

of weekly reporting member banks outside New York City. The

f igures as published in th i s statement do not include loans to

brokers and dealers by New York banks for account of non-reporting

banks and for account of others• Figures for such loans, which

at the present time amount to about $6,000,000, w i l l be published

monthly in the Federal Reserve Bul let in ."

The f igures quoted in the above paragraph are as of September

26• Figures for October 17 w i l l be substituted, of course, when the

revised form of statement i s f i r s t i s sued.

Very t ru ly yours,

L. P. Bethea, Assistant Secretary*



X-8078

October 17, 1934

Dear Sirs

Thcro in attached, .Vvr your information, a

copy of a l e t t er addressed to the Federal Reserve Agent

at the Federal Reserve Bank of Cleveland under date of

October 15, 1934, with regard to the question whether

capital notes and debentures sold to the Reconstruction

Finance Corporation by State member banks may be con-

sidered as capital or capital stock for the purpose of

determining l imitations under certain sections of the

Federal Re nerve Act and the Agricultural Credits Act

of 1925.

Very tru ly yours

• i-. Boihea, ;r firii Secretary

Ir- closure

TO ALL F. R. AGENTS EXCEPT CLEVELAND


257

X-8078*a

C O P Y October 15, 1934.

Mr. L. B. Williams, Federal Reserve Agent, Federal Reserve Bank of Cleveland, C level raid, Ohio*

Dear Mr. Williams;

This referc to iir* Anderson's telogran dated July 21,

1934, which reads as f e l lows: 4"

"Has the Board ruled Mother capital debentures sold to ft F C or otherwise may be considered capital for the purpose of establishing loan l imits ."

Although the above telegram is not s p e c i f i c , i t i s

assumed that LSr. Anderson desires a ruling upon the question whether

capital notes and debentures sold t o the Reconstruction Finance Corpor-

ation by State member banks may be considered as capital or capital

stock for the purpose of determining l imitat ions under the following

sections of the Federal Reserve Act: sect ion 9, -which provides a

l imitation upon purchasing, s e l l i n g , underwriting, and holding, by

member banks# of investment secur i t i e s ; sections 9 end 15, which pro-

vide l imitat ions npoti the ratount of paper of any one borrower which a

Federal reserve brail: may rediscount for a member Lank; sect ion 13,

which provides a l imitat ion upen the amount of drafts or b i l l s of

any one borrower which t\ member btti s: may accept, upon the to ta l amount

of b i l l s which r. member bank may ^cdept, and upon the amount of drafts

or b i l l s which rany bo accepted by >t member bunk for the purpose of

providing dollar exchange; section 11(a)* iihAoh provides a l imitat ion


- 2 -

" 258 X-8073-a

upon the amount which a member bank way lorn upon the secur i ty of stock

or bond c o l l a t e r a l j s ec t ion 12B(c), which provides for the amount of

stcck of the Federal Deposit Insurance Corporation for which a member

bank organized a f t e r June 1 0 , may apply during the f i r s t twelve

months af ter i t s organization; s . c t i o n 19, which provides a l imi ta t ion

upon the sum which a member bank sha l l keep on deposit with a nonmember

State bank} sec t ion 25A, a i c , provides a l imi tat ion upon the amount

which a member tarac nav invest i n or loan upon stocks , bone s , debentures,

or other such o i l i g a t i o n s -u an a f f i l i a t e ; and sect ion 24A, which pro-

vi "•••s a lj.n5.tatior u,)on the nmour.t which a member bank may invest in

bank promises or the stock, bonds, debentures, or other such obl iga-

t ions of a corporation holding the bank's premises, and upon the amount

which a member bank may loan upon the stock of such a corporation* A

similar question ar i ses under sect ion 210 of the Agricultural Credits

Act of 1923, which provides a l imitat ion upon the amount of stock of

National Agricultural Credit Corporations in which a member bank may

i n v e s t .

In view of the ruling of the Board contained in i t s

telegram to a l l Federal Reserve Agents, dated November 8, 1935, (Trans.

1905), end in view of the la ter amendment to sect ion 9 of the Federal

Reserve Act, contained in the Act of June 16, 1934, which provides that ,

for the purposes of membership of any State bank, the terms cap i ta l

and capital stock shal l inulu'lo the rev.oi.;at of outstanding capital

notes and debentures ler;rlly issued by the applyiv.- bank and purchased


- 3 - X—8078-a

by the Reconstruction Finance Corporation, the Federal Reserve Board i s

of the opinion that capital notes and debentures l e g a l l y issued by

State member banks and purchased by the Reconstruction Finance Corpor-

ation should be considered as capital or capital stock in determining

l imitations unuor the above mentioned sect ions ,

Er.jevor* since the above mentioned amendment to sec-

t ion 9 of th-s i eoeral Reserve Act does not rofer to capital notes and

debentures sold to others than the Reconstruction Finance Corporation#

any notes or debentures not sold to the Reconstruction Finance Corpora-

t ion may not be included in determining the l imitations above referred

t o . Likewise, since the above mentioned amendment to sect ion 9 refers

only to capital ndtes and debentures issued by State member banks, the

above opinion i s applicable only t o State banks. In t h i s connection,

however, i t i s understood that i t i s not the practice of national

banks to issue capital notes or debentures.

You w i l l understand, of course, that the Board's advic

in this matter i s not intended to refer to l imitations f i xed by State

s tatutes , as the construction of such statutes i s within the jur isdic -

t ion of the appropriate State supervisory authorit ies rather than the

jur isdict ion of the Board.

Very truly yours,




X-8079



For immediate release October 17, 1934*

TRANSFER OF TRANSACTIONS FROM CASH ACCOUNTS.

Ruling No. 26 interpreting Regulation T. The Federal Reserve

Board has been asked for a ruling on the following f a c t s : A customer

requests a broker to purchase for the customer's account certain reg is -

tered securi t ies to be paid for by the customer in cash. The customer

has a bona f ide intention to pay in cash; but, when del ivery day ar-

r ives , he f inds that he has not s u f f i c i e n t cash to pay for the securi-

t i e s in f u l l and desires to pay f i f t y percent and have the broker

carry the secur i t i es in his margin account unt i l the customer i s

ready to make payment in f u l l . The question i s presented whether the

broker may transfer such transaction from the customer's cash account

to his margin account. In reply the Board advised that the transfer

of such a transaction from a cash account to a margin account i s

expressly permitted in exceptional cases by section 6 of Regulation T,

i f authorization i s obtained from the business conduct committee or

other suitable committee of the appropriate national secur i t i es exchange*




X-8080

October 17, 1934

Dear S i r :

In response to a l e t t e r received from a Federal r e -

serve agent advis ing the Board i n regard t o arrangements which

he has made f o r a r a t h e r extens ive speaking tour throughout

h i s d i s t r i c t f o r the purpose of d i scuss ing i n d u s t r i a l loans-

and inqu i r ing whether r epo r t s are des i red by the Board i n each

ins tance wi th r e spec t t o the substance of h i s t a l k s , the Board

advised t h a t , s ince i t appeared t h a t h i s remarks a t each of the

meetings shown on h i s schedule w i l l be on the same s u b j e c t and

presumably along s u b s t a n t i a l l y the same l i n e s , i t f e e l s t h a t a

r4sum4 o u t l i n i n g the substance of one of such t a l k s would com-

ply with the s p i r i t of the Board's l e t t e r of October 2, 1934

(X-8033), on t h i s s u b j e c t .


L. P. Bethea, Ass i s t an t Secretary*

TO ALL GOVERNORS AMD F. Re AGENTS# Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

X-8081

£ £ £ £ £ . A h £ £ £ E R V E 2 ° 6 ^ 2


For immediate re lease . October 17, 1934

EXTENSIONS OF CREDIT ON UNREGISTERED NON-EXEMPTED SECURITIES.


Board has received inquiries as to whether a member of a national se-

cur i t ies exchange may extend:credit on unregistered, non-exempted

securi t ies in clearing for another broker or dealer transactions

involving the purchase of such securi t ies for cash by such other

broker or dealer. The inquiries submitted indicate that in perform-

ing the function of clearing the transactions the clearing member

furnishes the cash which i s paid for the securi t ies and thereby ex-

tends credit unt i l he receives reimbursement either from the broker

or dealer or from some subsequent purchaser. In reply the Board

has called attent ion to the fac t that section 7(c) of the Securit ies

Exchange Act of 1934 forbids any member of a national secur i t i e s

exchange or any broker or dealer who transacts a business in securi-

t i e s through the medium of any such member to extend credit to any

customer on unregistered, non-exempted securi t ies for the purpose

of purchasing or carrying s ecur i t i e s . While the Act authorizes the

Board to prescribe rules permitting the extension of credit on un-

registered, non-exempted securi t ies in certain circumstances, i t

denies the Board the right to grant such permission in cases where


• 263 _g_ X-8081

the extension of credit i s for the purpose of purchasing or carrying

s e c u r i t i e s . As the questions giving r i se to th is ruling indicate

that the extensions of credit in the cases presented are for the pur*

pose of purchasing or carrying secur i t i e s , and that the credit i s

extended to "eustomers" as that term i s used in sect ion 7(c) of the

Securit ies Exchange Act of 1934 and in Regulation I , the Board has

advised that such extensions of credit are prohibited by law and

that no authority i s given to the Board to permit them to be made,




X-8082

October 17, 1934,

SUBJECT: Interpretation of Standard Condition of Membership Numbered 8 Regarding Investment in Bank Premises.

Dear Sir:

Standard condition of membership numbered 8 which has been pre-

scribed for some time reads as follows:

"Such bank shall not permit any investment in a bank building or in a s i t e for a bank building to assume such proportions as, in the judgment of the Federal Reserve Board, would endanger the bank's solvency or l iqu id i ty or would otherwise be unduly large or improper, and before any investment i s made in a bank build-ing or a s i t e for a bank building the bank shall refer the mat-ter to the Federal Reserve Board for consideration."

Recently the question has been raised as to whether i t i s desired

that a l l requests of banks subject to such condition for permission to

make alterat ions and renovations in banking quarters, regardless of the

proposed expenditures, be submitted to the Board or whether the Board

would prefer t o authorize the Federal reserve agents to approve such ex-

penditures within certain l imi t s .

The purpose of the condition i s to prevent excessive investments

in bank premises and the condition was meant to apply primarily to pur-

chases of land or buildings, the construction of new buildings, and

major a l terat ions . In order to expedite the handling of requests cover-

ing alterations and improvements, the Board authorizes the Federal


365

- 2 - X-8082

reserve agents, without referring the matter to the Board, to grant

permission to banks which are subject to condition numbered 8 referred

to above to make alterations and improvements to their banking quarters

when the cost of such alterations and improvements i s not in excess of

10 per cent of the bank* s capital stock and wi l l not increase the

bank's investment in bank premises to an amount in excess of 100 per

cent of the bank's capital stock. Federal reserve agents are requested,

however, to forward to the Board advice of a l l permissions granted in

accordance with th i s l e t t e r . In case a Federal reserve agent i s in

doubt as to whether the expenditure involved in the proposed al tera-

tions or improvements would be in contravention of the s p i r i t of the

condition of membership, the request should be referred to the Board

in the regular manner with his recommendation#

include minor alterations which are charged to expense and not capital -

ized.

I t was not contemplated that the terms of the condition would

Very truly yours,

L. P. Bethea Assistant Secretary.



FEDERAL RESERVE BOARD WASHINGTON 2 6 6


X-8083

October 19, 1934#

SUBJECT: Holidays dur ing November, 1934*

Dear S i r ;

The Federa l Reserve Board i s advised t h a t on Thursday, Novem-

ber 1, t he New Orleans Branch of the Federa l Reserve Bank of At l an ta

w i l l be closed i n observance of Al l S a i n t s ' Day. P lease inc lude

t r a n s i t c l e a r i n g c r e d i t s of November 1 f o r t he New Orleans Branch i n

your c l e a r i n g of November 2 .

On Tuesday, November 6, General E l e c t i o n Day, t h e r e w i l l be

n e i t h e r t r a n s i t nor Federa l r e se rve note c l e a r i n g and t h e books of

the Board 's Gold Set t lement Fund w i l l be c l o s e d . The o f f i c e s of the

Federa l Reserve Board and the fo l lowing Federa l r e se rve banks and

branches w i l l be open f o r bus iness on t h a t day:

Boston L i t t l e Rock L o u i s v i l l e

Cleveland (Unt i l 1:00 P. h* C inc inna t i (Eas te rn Standard Time Omaha

At l an t a S a l t Lake Ci ty New Orleans Birmingham J a c k s o n v i l l e

On Monday, November 12, i n observance of Armist ice Day, which

f a l l s on Sunday, and on Thursday, November 29, t h e r e w i l l be n e i t h e r

t r a n s i t nor Federa l r e se rve note c l ea r i ng and the books of t he Board 's


- 2 - X-8083

Gold Set t lement Fund m i l be c losed . The o f f i c e s of the Board and

of the Oklahoma City Branch of the Federa l Reserve Bank of Kansas

Ci ty w i l l be open f o r business on Monday, November 12•

Please n o t i f y branches#


' V • / C&2£jZ——y

C • Koell , jr Ass i s t an t Secretary# /

TO GOVERNORS OF ALL F. R. BAEKS.


268

x - 8 0 8 4

f e d e r a l r e s e r v e b o a r d

s t a t e m e n t f o r t h e p r e s s

For immediate release October 19* 1934.

s a l e s amd r e p u r c h a s e s OF s e c u r i t i e s i n o l d a c c o u n t s .


Board has been asked whether a creditor, as defined in sect ion 2(b) of

Regulation 1', may permit a cus-tomer t o s e l l a registered security from

a designated old account and on the same day to purchase in i t s place

in the old account an unregistered, non-exempted security, i f the ad-

justed debit balance of the old account i s not increased. In reply the

Board called attention to the prohibition contained in sect ion 7 (c ) (2 )

of the Securit ies Exchange Act of 1934 on the extension of credit on un-

registered, non-exempted securi t ies for the purpose of purchasing or

carrying secur i t i e s , and to the fac t that the provisions of sect ion 4

of Regulation T are made applicable to old accounts by the f i r s t pro-

viso of sect ion 7(a) of the Regulation. Accordingly, the Board ad-

vised that in the circumstances indicated, the extension of credit

for the purchase of the unregistered* non-exempted security i s not

permitted unless at the time of such purchase the maximum loan value

of the secur i t i es in the account exceeds the adjusted debit balance of

the account by an amount equal to or greater than the purchase price

of the unregistered, non-exempted securi ty .


X-8085



For immediate r e l e a s e . October 19, 1934#

MANNER OF I3EPINC- SPECIAL CASH ACCOUNTS

Ruling No. 29 i n t e r p r e t i n g Regulation T. In r ep ly to an i n -

quiry the Federal Reserve Board has advised t h a t under s ec t i on 6

of Regulat ion T a s p e c i a l cash account may be kept s e p a r a t e l y f o r

each customer, and t h a t the r e g u l a t i o n does not r e q u i r e a s ing le

sepa ra t e account covering a l l cash t r a n s a c t i o n s f o r a l l customers.




X-8086

October 19, 1934#

SUBJECT: Examinations under Sect ion 21 of the Banking Act of 1933#

Dear S i r :

In connection wi th examinations of p r i v a t e banks and bankers,

made by the Federa l r ese rve banks under the p rov is ions of s ec t i on

21 (a ) (2 ) of the Banking Act of 1933, quest ions have been r a i s e d as

t o the r e s p o n s i b i l i t y of the Federal r e se rve banks and as t o the

ac t ion , i f any, which should be taken by them regard ing ;

1# P ro t ec t i on of depos i tors when the r e p o r t of examination d i s c lo se s an inso lven t condition#

2# Correct ion of other u n s a t i s f a c t o r y condit ions#

3# Reporting apparent v i o l a t i o n s of the cr iminal p rov i s ions of S ta te laws #

Under the p rov is ions of sa id sec t ion 21(a ) (2 ) a Federa l r e -

serve bank has no a u t h o r i t y t o r equ i r e the c o r r e c t i o n of u n s a t i s -

f a c t o r y condi t ions in p r i v a t e banks submit t ing t o examination and i s

under no s t a t u t o r y duty to take any ac t ion f o r t he p r o t e c t i o n of de-

p o s i t o r s , t o co r r ec t u n s a t i s f a c t o r y cond i t ions , or t o r e p o r t t o the

S ta te a u t h o r i t i e s apparent v i o l a t i o n s of t he c r imina l p rov i s ions of

S ta te laws# The Board f e e l s , however, t h a t each Federa l r e se rve

bank should exe r t i t s b e s t e f f o r t s t o induce p r i v a t e banks t o co r r ec t


> 2 7 1 ^

2 - X—8086

any u n s a t i s f a c t o r y condi t ions d isc losed by the examinations made by

the Federal r ese rve bank and otherwise t o p r o t e c t depos i to r s aga in s t

unsound and unlawful banking p r a c t i c e s . The Board, t h e r e f o r e , expects

each Federa l r e se rve bank t o adopt a cons t ruc t ive a t t i t u d e i n t h i s

r e spec t and to endeavor to ob ta in such co r r ec t i ve ac t i on i n t h e case

of p r i v a t e banks as may appear necessary or d e s i r a b l e i n the circum-

stances s The Board a l so be l i eves t h a t i t i s proper f o r a Federa l r e -

serve bank t o r e p o r t apparent v i o l a t i o n s of c r iminal p rov i s ions of

S ta te laws t o the appropr ia te S ta te a u t h o r i t i e s .


L. P. Bethea, Ass i s t an t Sec re t a ry .




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-8087

October 20, 1934.

SUBJECT? Code Word Covering New Issue of Treasury B i l l s ;

Dear S i r :


Government s e c u r i t i e s between Federal r e s e r v e banks, t he

fo l lowing code word has been des ignated t o cover a new


!tN0X0TY!t - Treasury B i l l s t o be dated October 24, 1934, and t o mature Apr i l 24, 1935.

This word should be i n s e r t e d . i n t he Fede ra l Re-


code word "NOXORE" on page 172.

J-. C. No e l l ,


A s s i s t a n t S e c r e t a r y .




October 20, 1934.

Dear S i r :

The Board 's l e t t e r of October 6, 1934, X-8046, r e f e r r e d

t o t he i n s t r u c t i o n s t o esgaminers regard ing the c l a s s i f i c a t i o n of

i n d u s t r i a l loans made under t he p rov i s ions of s e c t i o n 13(b) of

the Federa l Reserve Act#

f e r r e d i n whole or i n p a r t t o a Federa l r e s e r v e bank, or i n con-

n e c t i o n with which a Federa l r e se rve bank has extended a commitment

I t i s reques ted t h a t i n each r e p o r t of examinat ion made by your ex-

aminers a l l such loans be l i s t e d i n a sepa ra te schedule immediately

fo l lowing supplemental pages 6, t oge the r wi th a summary of the p e r -

t i n e n t c r e d i t da ta regard ing each loan . In accordance wi th p r e v i -

ous i n s t r u c t i o n s , however, the only c l a s s i f i c a t i o n of such loans

should be as t o apparent losses#

The i n s t r u c t i o n s r e f e r r e d t o l oans which have been t r a n s -


L. P# Bethea A s s i s t a n t Secretary#


X-8089

F E D E R A L K E S E R V E B 0 A R D


For immediate r e l e a s e . ' October 22, 1934,

DIVIDENDS OR INTEREST ON SECURITIES CARRIED IN RESTRICTED NEW ACCOUNTS

Ruling No. 30 i n t e r p r e t i n g Regula t ion T• The Fede ra l Re-

serve Board has been aslced' whether under Regula t ion T, a broker

may permit a customer t o withdraw cash dividends or i n t e r e s t

r ece ived by the broker on s e c u r i t i e s c a r r i e d f o r the customer

i n a r e s t r i c t e d new account . In r e p l y t h e Board advises t h a t

f o r t h e purposes of Regulat ion T such withdrawal of i n t e r e s t or

d iv idends i s t o be considered as no t d i f f e r e n t from any o ther

withdrawal of cash and t h e r e f o r e may not be pe rmi t t ed i n such

account except i n compliance wi th the p rov i s ions of s e c t i o n

4(d) of the Regu la t ion .


X-8090 * '

T E L E G R A M


WASHINGTON

October 17, 1934.

CURTISS Boston

Regarding Gettemy' s telegram October 13 with respect to whether, in

case referred to in telegram, there i s an "extension of credit" with-

in meaning of Board's RULING NO. 16 INTERPRETING REGULATION T. Board

advises that existence of "extension of credit" in any case w i l l de-

pend upon facts of that particular case and applicable provisions of

State law. For th i s reason Board i s unable to answer question in

general form submitted but c a l l s attention to RULING NUMBER 20 IN-

TERPRETING REGULATION T which deals with cash transactions but which

indicates factors which Board considers important in determining when

extension of credit occurs. Furthermore, as question in telegram re-

fers to unl isted securi t ies i t should be borne in mind that sect ion

7 (c ) (2 ) of Securities Exchange Act makes i t unlawful for a creditor as

defined in sect ion 2(b) of Regulation T to extend credit to or for a

customer without co l la tera l or on co l la tera l other than exempted and/or

registered secur i t ies except in accordance with rules which Federal

Reserve Board may prescribe and that Board i s not empowered to pre-

scribe rules authorizing such extensions of credit in cases where ex-

tension of credit i s for purpose of purchasing or carrying securit ies*


BETHEA


X-8091

T E L E G R A M


WASHINGTON

October 16, 1934.

CURTISS BOSTON

Referring Gettemy's l e t t er of October 10, Board considers

execution of agreement on F.R.B. Form T-l or T-2 to have

been made in accordance with prescribed form of resolut ion

of authorization i f agreement i s signed by one of the two

o f f i c e r s named in resolution and attested by the other.


BETHEA


X-8092


STATEMENT FOR THE' PRESS


INDIVIDUAL1S PARTICIPATION IN A JOINT ACCOUNT NOT TO BE COMBINED WITH HIS INDIVIDUAL ACCOUNT.

Ruling No, 31. interpreting Regulation T. The Federal Reserve

Board has been asked -whether a certain individual's proportionate share

of the excess loan value in a joint account carried for such individual

and certain other persons jo in t ly may be combined with the individual's

personal account carried simultaneously with the same broker in order

that such personal account may be considered as an unrestricted rather

than a res tr ic ted account under Regulation T. In reply the Board

points out that the individual in question i s a "customer" within the

meaning of the def in i t ion in sect ion 2(m) of the regulation and that

the parties to the jo int account as a group constitute a separate and

d i s t inc t "customer" within the meaning, of such de f in i t i on and according-

ly advised that the individual's personal account may not be considered

an unrestricted account because of the presence of excess loan value

in the jo int account unless the parties to the jo int account acting

jo in t ly have, in writing, guaranteed the individual's personal account

for an amount s u f f i c i e n t to make i t an unrestricted account.


1 1%,

X-8094

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


For immediate r e l e a s e • October 23, 1934*

DEimiD FOR DMRGIN INCLUDED IN CONFIRMATION OF TRANSACTION.

Ruling No. 32 i n t e r p r e t i n g Regulat ion T. The Federa l Reserve

Board has been asked whether, i f a conf i rmat ion of a t r a n s a c t i o n has

been sent by mail t o a customer a t h i s l a s t known address , a demand

f o r margin which appeared not on a separa te piece of paper but on

the conf i rmat ion i t s e l f may be considered as having been made i n

the manner s p e c i f i e d i n c lause 8 of s ec t i on 3 ( f ) of Regulat ion T

so t h a t the amount of margin demanded may be deducted i n computing

the ad jus t ed deb i t balance of the customer1s account . In r e p l y the

Board advises t h a t such a demand may be considered as a demand made

in a " l e t t e r " wi th in the meaning of c lause 8 and t h a t accord ingly

the ques t ion should be answered i n the a f f i r m a t i v e •



FEDERAL RESERVE BOARD x gQg5

WASHINGTON

October 25, 1934

Dear Sir:

For your information, there i s attached a copy of

a telegram sent by the Board to Deputy Governor Rounds, of

the Federal Reserve Bank of Hew York, with regard to the

discount or purchase "by Federal reserve "banks of obliga-

tions evidencing industrial loans in which two or more

commercial "banks participate.

Very truly yours,

~%>RjiiA2Sh/

Chester Morrill, Secretary.

Inclosure.

To the Federal reserve agents at a l l Federal reserve "banks.


280

Copy X-8095-a

T E L E G R A M


WASHINGTON October 22, 1934

ROUNDS - NEW YORK

Retel October 18. Board understands appl icat ions have been presented

wherein two or more commercial banks desire to part i c ipate in provid-

ing working capital for industr ia l or commercial business , each bank

to obl igate i t s e l f to s a t i s f a c t i o n of Federal reserve bank for i t s

pro rata part of a t l e a s t 20 per centum of any l o s s which may be sus-

tained by such Federa l r e se rve bark upon obl igations of industr ia l or

commercial business acquired from such commercial banks. For example,

in case of equal part ic ipat ion by banks A and B, i t i s understood that

industr ia l or commercial business w i l l make s i n g l e appl icat ion but

w i l l execute two separate notes, each equal in amount to one-half of

t o t a l extension of credit and payable to banks A and B, respec t ive ly ,

and that Federal reserve bank w i l l discount or purchase one of such

notes from bank A and other from bank B, each commercial bank o b l i -

gating i t s e l f for a t l eas t 20 per centum of los s which may be sus-

tained by Federal reserve bank upon obl igat ion acquired from such

commercial bank. In such circumstances Board agrees with views of

your counsel that Federal reserve bank may lawful ly discount or pur-

chase obl igat ions i f other requirements of law are s a t i s f i e d .


MORRILL.


X-8096 T E L E G R A M


WASHINGTON

October 23, 1934

STEVENS

CHICAGO

Referring to your l e t t e r of October 17 and question submitted

by the Chicago Stock Exchange in l e t t e r to you dated October 16.

Ruling No. 11 interpreting Regulation T does not enlarge meaning

of term "net withdrawal" as defined in Regulation T so as to make

i t necessary in ascertaining existence of "net withdrawal" to in-

clude market value of unregistered non-exempted secur i t i e s with-

drawn from a res tr ic ted new account. Ruling No. 11 dealt with

old accounts and in particular with third proviso of sect ion

7(a) of regulation which s p e c i f i e s conditions under which credi-

tor may permit customer to withdraw money and/or secur i t i e s and

does not mention or involve "net withdrawal" as defined in the

regulation.

(Signed) Chester Morrill MORRILL


282



October 26, 1934.

SUBJECT: Section 32 - Investment Trusts Dealing in Own Securi t ies .

Dear Sir:

The Board's l e t t e r of March 12, 1934 (X-7820) requested you, in

any case in which a ruling was required as to the appl icabi l i ty of sec-

t ion 32 to a so-cal led investment trust of the management type, to furnish

the Board with certain information regarding the nature of the operations

of the organization, but that l e t t er did not request information as to the

extent and nature of the a c t i v i t i e s of the organization in connection with

the sa le , distr ibut ion, repurchase or redemption of i t s own stock, bonds,

or other secur i t i e s . However, in considering applications and requests for

rulings involving the appl icabi l i ty of sect ion 32 to such investment trusts ,

i t has come to the attent ion of the Board that in some cases the nature and

extent of their a c t i v i t i e s in connection with dealings in their own securi-

t i e s has been such as to became a factor in determining the appl icabi l i ty

of sect ion 32 to them.

Therefore, i t w i l l be appreciated i f , in connection with future

cases requiring a ruling of the Board as to the appl icabi l i ty of sect ion 32

to such investment trus t s , you w i l l obtain and furnish the Board with


X-8097

— 2 *•

information as to the following, in addition to the information requested

in the Board's l e t t er of March 12, 1934 (X-7820):

1. The manner in which the stock, "bonds or other securi-

t i e s of the organization were originally sold and distributed to the

public.

2. The manner in which such secur i t ies are at present being

sold or distributed, i f they are now being sold or distr ibuted.

3. For each of the past three years, the number and par

value of the (a) shares, (b) bonds, and (c) other secur i t i e s of the

organization which have been sold or issued.

4. For each of the past three years, the number and par value

of the (a) shares, (b) bonds, and (c) other secur i t ies of the organization

which have been repurchased or redeemed by the organization.

5. In the event that any such secur i t i es have been thus

repurchased or redeemed, a description of the terms, conditions and manner

of such repurchase or redemption.

In addition to such information, the Board w i l l be glad to have

any further information or comments which you f e e l should be furnished.

Very truly yours,

-tfa&AZVv YDcnsuJJL


TO ALL F. E. AGENTS. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


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 y r f l q f t t h e f e d e r a l r e s e r v e b o a r d a - o u s o

October 27, 1934.


Dear Sir:


Government secur i t ies "between Federal reserve "banks, the



"EOXOVER" - Treasury B i l l s to "be dated October 31, 1934, and to mature May 1, 1935.

This word should "be inserted in the Federal Re-

serve Telegraph Code took, following the supplemental code

word "UOXOTY" on page 172.

Very truly yours

S. R. Carpenter, Assistant Secretary.

TO GOVERNORS OF AIL F. R. BANKS.


2

3-9099


STATEMENT TOR THE PRESS


WITHDRAWALS OF CASH OR SECURITIES FROM OLD ACCOUNTS ON AMD AFTER NOVEMBER 15, 1934.

Ruling Ho. 33 interpreting Regulation T. In reply to certain

inquiries as to whether cash or securi t ies may "be withdrawn from

designated old accounts on and af ter November 15, 1934, the Federal

Reserve Board points out that the third proviso of sect ion 7(a) of

Regulation T i s by i t s terms applicable only to withdrawals made prior

to that date. Accordingly the Board rules that: (1) On and af ter

November 15, 1934, secur i t ies may be withdrawn from a designated old

account to any extent not forbidden by sect ion 4 of the regulation;

and (2) On and af ter November 15, 1934, cash may not be withdrawn

from a designated old account, whether restr ic ted or unrestricted, i f

such withdrawal resul t s in an increase in the adjusted debit balance

of the account in v io la t ion of the second proviso of sect ion 7(a) of

the regulation or i s forbidden by sect ion 4 of the regulation.


21 186 FEDERAL RESERVE BOARD

X-9000 WASHINGTON


October 29, 1934

SUBJECT: Issuance of Federal Reserve notes at Branches of Federal Reserve "banks.

Dear Sir:

Replies have "been received from the Federal reserve agents

to the Board's l e t t e r of August 25 (X-7992) on the above subject and,

a f ter careful consideration of such r e p l i e s , the Board i s of the

opinion that no Federal reserve notes should be issued, except upon

spec i f i c authority, i n each case, of the Federal reserve agent or

an ass istant Federal reserve agent at the Head Off ice .

I t w i l l be appreciated, therefore, i f instructions to th i s

e f f ec t are issued to a l l persons designated to act for you in the

issuance of Federal reserve notes at the Head Office and at each

branch of the Federal reserve bank.

Very truly yours,


TO ALL F. R. AGENTS EXCEPT BOSTON AND PHILADELPHIA


FEDERAL RESERVE BOARD " 387

WASHINGTON


X-9003

October 30, 1934,

Dear S i r :

R e f e r r i n g t o t h e Board 's l e t t e r X-7817 of March 9, 1934, in fo rmal

advice has been r ece ived from the Treasury Department t o t h e e f f e c t t h a t

i t has p r i n t e d and now has on hand gold c e r t i f i c a t e s i n t he fo l lowing

amounts and denominations:

Denomination Amount

$100 $12,000,000 1,000 84,000,000

10,000 360,000,000

The Department a l so advises t h a t w i th in t he next two months i t

expects t o have p r i n t e d and on hand a s u b s t a n t i a l s tock of gold c e r t i f i -

ca te s of t he $100,000 denomination and t h a t i t w i l l then be prepared t o

i s s u e a l i m i t e d amount of gold c e r t i f i c a t e s t o the Federa l r e s e r v e banks

upon r e q u e s t . While no f i n a l d e c i s i o n has been reached, i t i s understood

t h a t t he Department expects to c a l l i n the old s t y l e gold c e r t i f i c a t e s a t

the t ime t h e 1934 s e r i e s are i s sued to t he Federa l r e s e r v e banks•

I t w i l l be apprec ia t ed i f you w i l l advise the Board as t o the

amount, i f any, of each denomination of the new gold c e r t i f i c a t e s your

bank would l i k e t o have shipped t o i t by the Treasury .




FEDERAL RESERVE BOARD 3 8 8

WASHINGTON


October 31, 1934,

Dear Sirs

On June 8, 1934, following the approval by the United States

and Cuba of a treaty abrogating the so-cal led Piatt amendment, the

board of directors of the Federal Reserve Bank of Atlanta adopted a

resolution directing the o f f i c er s of the bank to apply t o the Federal

Reserve Board for permission t o discontinue the agency operated by

the bank at Havana, Cuba. A copy of the resolution referred to i s

attached.

The Federal Reserve Board was advised of the action taken

by the board of directors of the Atlanta bank, and af ter giving con-

sideration to the matter, decided to arrange for a meeting in Wash-

ington of representatives of the American and Canadian banks operat-

ing o f f i c e s in Cuba for the purpose of discussing -with them the

question of the discontinuance of the Havana Agency.

Such a meeting was held in Washington on July 13, 1934, at

which representatives of the National City Bank of New York, the

Chase National Bank of New York, the First National Bank of Boston,

the Royal Bank of Canada, the Canadian Bank of Commerce and the

Bank of Nova Scotia were present, and the resolution adopted by the


- 2 - X-9004

board of d i r e c t o r s of t h e At lanta bank and the fo l lowing te legram r e -

ceived under da te of Ju ly 12, 1934, from Acting Governor Johns of t h e

Federa l Reserve Bank of A t l a n t a , were brought t o t h e i r a t t e n t i o n :

"The fo l lowing cable has been rece ived from Manager of our Havana Agency:

"* Late y e s t e r d a y t h e Cuban Sec re t a ry of Treasury c a l l e d me t o h i s o f f i c e and advised t h a t he had i n fo rma t ion t h a t a conference between Federa l Reserve Board and r e p r e s e n t a t i v e s of f o r e i g n banks ope ra t ing in Cuba would be held Ju ly 13th t o d i scuss the Cuba s i t u a t i o n . He s t a t e s t h a t both he and the P r e s i d e n t f e a r e d t h a t t h i s conference might r e s u l t i n the withdrawal of t he Havana Agency and due t o t h e valuable s e r v i c e rendered cons idered t h e withdrawal of i t would prove very d e t r i -mental to Cuban i n t e r e s t s and would l i k e t o see any such d e c i s i o n avoided i f p o s s i b l e . S e c r e t a r y of Trea-sury reques ted t h a t 1 advise you t h a t on J u l y 13th he w i l l recommend t o cab ine t r e p e a l of a l l l e g i s l a t i o n r e l a t i v e t o withdrawal of money from Cuba enacted s ince May 22nd and t h a t i n a l l p r o b a b i l i t y immediate adop t -ing i n t h i s connect ion w i l l be t a k e n . S e c r e t a r y of Treasury and the P re s iden t r eques t t h a t t h i s in fo rma-t i o n be t r a n s m i t t e d t o you wi th t h e r e q u e s t t h a t you t r a n s m i t same t o Federal Reserve Board.111

Governor Black advised the r e p r e s e n t a t i v e s of the banks t h a t

the f u n c t i o n s of t h e Havana Agency s ince i t s e s t ab l i shment had con-

s i s t e d l a r g e l y of t h e f u r n i s h i n g of new currency t o banks i n Cuba,

the exchanging of f i t currency f o r m u t i l a t e d , d i r t y and u n f i t n o t e s ,

and t h e handl ing of cable t r a n s f e r s between the United S t a t e s and

Cuba. He sa id t h a t t h e agency had been opera ted a t a l o s s and t h a t

such opera t ing l o s s e s had always been accepted and had not a f f e c t e d

the cont inuance of t h e agency by the Federa l Reserve Bank of A t l a n t a ,

but t h a t t h e d i r e c t o r s of t h e At lan ta bank had been concerned about

cond i t ions i n Cuba and f e l t t h a t the f u l l r e s p o n s i b i l i t y of t h e agency


3- X-9004

should not be upon the Atlanta bank and that th i s was e spec ia l ly true

because the agency served the commercial and exchange needs of a l l

parts of the United States and was in r e a l i t y operating for system

purposesj that for a considerable period the Havana Agency kept on

hand approximately $>25,000,000 in currency and in emergencies a great

deal more; that the amount had been reduced to between §10,000,000 and

vl2,000,000 after conferring with banks in Cuba; and that the reduced

amount had been found to be a s u f f i c i e n t supply to keep on hand at the

agency except in cases of emergency, ( in th i s connection i t may be

noted that under date of September 17, 1934, the Board was advised by

the Atlanta bank that i t s directors had authorized the reduction of

the amount of currency at the agency to $5,000,000). He stated also

that the Havana Agency was established for the purpose of carrying on

the operations of a money depot in Cuba at a time when transportation

f a c i l i t i e s were slow and unsatisfactory as compared with those of

today; that the Federal Reserve Bank of Atlanta has a branch in Jack-

sonvi l le , Florida, where i t keeps on hand both issued and unissued

currency which can be transported by airplane from Jacksonville to

Havana in a few hours; that currency also can be sent by r a i l to Key

7/est, Florida, and from there could be transferred by plane to Havana

in a few hours; and that in the circumstances i t would seem that the

transportation problem as between th i s country and Cuba has been

solved. He added that he was of the opinion that the directors of the

Federal Reserve Bank of Atlanta were not concerned greatly over the

p o s s i b i l i t y of actual loss of funds inasmuch as i t was f e l t that the


: 2 9 i - 4 - X-9004

revolutions in Cuba were merely p o l i t i c a l uprisings, but he f e l t that

the primary considerations prompting the action of the directors of the

Atlanta bank in adopting a resolution to discontinue the Havana Agency

were ( l ) the fac t that the transportation problem has now been solved,

(2) that the directors desire to eliminate the risk of the p o l i t i c a l un-

rest in the island, and (3) the rscent abrogation of the so-ca l led Piatt

Amendment•

All of the bank representatives present at the meeting expressed

the opinion that the agency should be continued and they were requested

to address l e t t er s to the Board set t ing forth their reasons for the ir

opinion. Copies of the l e t t er s received by the Federal Reserve Board in

response to th i s request are attached for your confidential information.

At a meeting of the board of directors of the Federal Reserve

Bank of Atlanta held in Atlanta on August 10, 1934, at which Governor

Black was in attendance, he reviewed the consideration given by the Fed-

eral Reserve Board to the resolution adopted by the Atlanta bank re la-

t ive to the discontinuance of the Havana Agency and stated that he had

considered the p o s s i b i l i t y of the agency continuing as a system agency

which would be operated by the Federal Reserve Bank of Atlanta for the

twelve Federal reserve banks. At that meeting the directors of the bank

voted that the Federal Reserve Board be advised that the Atlanta bank

would cooperate in a system operation of the agency and that , in the ir

opinion, such an arrangement would be a proper solution of the problem.

As you know, Governor Black resumed his duties as Governor of

the Federal Reserve Bank of Atlanta on August 16, 1934, and under date


-5- X-9004

of September 27, 1934, he addressed another l e t t e r t o the Board with

regard to the operation of the agency on a system basis , and a copy of

that l e t t e r i s also attached.

quire a reserve bank to operate a foreign agency but the Board f e e l s

that to require system action would be undesirable and at the present

time unnecessary since the Board endorses the suggestion of the Atlanta

bank that the agency be operated by that bank for the account of the

twelve reserve banks, and has under consideration the necessary deta i l s

for that purpose. Accordingly, i t w i l l be appreciated i f you w i l l pre-

sent the matter to the board of directors of your bank at i t s next

meeting and advise the Board as soon as possible as to the att i tude

of your bank towards participation with the other Federal reserve

banks on a system basis in the operation of the agency by the Atlanta

bank. Upon acceptance of such participation by a l l banks, the de ta i l s

of the arrangement w i l l be determined promptly and submitted to your

directors for approval*

Under the law the Federal Reserve Board has the power to re-

Very truly yours


TO THE CHAIRMEN OF ALL FEDERAL RESERVE BANKS. (No copy to Governor, or extra copies to banks)


copy " 2 9 3

Federal Reserve Bank of At lan ta X-9004-a

"YffiEREAS, t h i s bank has maintained f o r a number of yea r s , •with the consent of the Federal Reserve Board, an agency i n t h e City of Havana, Cuba, through which agency the banks i n Cuba have been supplied wi th currency of t h e United S t a t e s ; and

1/VIIEREAS, the p r i n c i p a l reason f o r t he es tab l i shment of sa id agency was t h a t t he Federal Reserve System might ac t i n accord wi th the s p i r i t of t h e s o - c a l l e d ' P i a t t Amendment', and t o the end t h a t a s u f f i c i e n t supply of usable currency might be maintained i n Cuba; and

YffiEREASj by t r e a t y between the United S t a t e s and the Republic of Cuba, the sa id P i a t t Amendment has been abrogated and i t s p rov i s ions are no longer of f o r c e ; and

WHEREAS, the d i r e c t o r s of t h i s bank f e e l t h a t t h e sa id agency should now be d iscont inued,

THEREFORE, BE IT RESOLVED That the proper o f f i c e r s of t h i s bank be and they hereby are d i r ec t ed t o apply t o t h e Federa l Reserve Board f o r permission t o d i scon t inue t he sa id Havana Agency.

BE IT FURTHER RESOLVED That in address ing the Federa l Re-serve Board the o f f i c e r s of t h i s bank make i t p l a i n t h a t the Board of Di rec to r s de s i r e s t o work no unnecessary inconvenience t o the banks i n Cuba, and t h a t while i t i s the des i r e of t he d i r e c t o r s t o c lose sa id agency as soon as pos s ib l e , they wish i t s d iscont inuance t o be e f f e c t e d i n such wise as not unduly t o a f f e c t t he banking and bus iness i n t e r e s t s of Cuba•

BE IT ALSO RES0D7ED That the good o f f i c e s of the Federal Reserve Board be invoked t o the end t h a t t he i n t e r e s t s of t h i s bank may not be i n j u r i o u s l y a f f e c t e d by reason of l e g i s l a t i o n , o f f i c i a l decrees , or other enactments or developments consequent upon or fo l lowing the withdrawal of the sa id former t r e a t y o b l i g a t i o n s s e t out i n the sa id P i a t t Amendment•"

I , L« Me Clark, Secre tary of t he Board of D i rec to r s of the Federal Reserve Bank of At lan ta , do hereby c e r t i f y t h a t t h e foregoing i s a t r u e and c o r r e c t copy of a r e s o l u t i o n adopted by t he Board of D i r ec to r s of the Federal Reserve Bank of At lan ta a t a meeting held on the e igh th day of June, 19 34•

(Signed) L. M. Clark S E C R E T A R Y


2 9 4

COPY X-9004-b

THE NATIONAL CITY BANK

of New York

New York August 8, 1934.

Honorable E. R. Black, Governor Federal Reserve Board Washington, D i s t r i c t of Columbia


I beg to apologize for my delay in complying with your request that , as one of the banks represented at the hearing held by the Federal Reserve Board in Washington on July 13, 1934, we send you a brief wri t ten statement in support of the verbal arguments made at that hearing in favor of the continued maintenance of the Habana Agency of the Federal Reserve Bank of Atlanta. This delay was due to our desire f i r s t t o obtain the views of our representatives located i n Habana on t h i s very important question.

The Federal Reserve Agency in Habana was o r i g i n a l l y e s -tabl ished, I be l i eve , for two reasons:

(a) Because of the re spons ib i l i t y which i t was f e l t had been as-sumed by the Government of the United States to maintain i n Cuba an adequate supply of American currency when the American author i t i e s , charged with the se t t ing up of a new order of government and fol lowing the f ree ing of Cuba from Spanish rule , establ ished American currency as the chief circulating-medium and as legal-tender i n payment of a l l debts; and

(b) Because of the very important service which such Agency could and would perform for American business and banking i n t e r e s t s in Cuba.

These reasons s t i l l e x i s t and with prac t i ca l ly the same force as at the time of the establishment of that Agency. American currency i s s t i l l legal - tender and the chief circulating-medium i n Cuba. I t s place has not in any way been taken by the recent i s sues of additional Cuban s i l v e r coins or other legal-tender currency. The Agency i s s t i l l performing a most important service for American business in ter -e s t s located in Cuba, for American exporters of raw materials , food-s t u f f s and manufactured goods, and for American banks doing business in Cuba, e i ther d i rec t ly , through branches located there, or through correspondents.


X-9004-^ty*^

Sheet ifo. 2 Governor E. R. Black - Washington, D. C. August 8, 1934

I t i s a wel l Icnovm f a c t t h a t the b e n e f i t s confe r red upon American bus ines s j t o say nothing of Cuban bus iness , by t h e e s t a b l i s h -ment of the Agency, have been very mater ia l# The genera l l e v e l of i n -t e r e s t r a t e s i n Cuba has dropped very m a t e r i a l l y from what i t was be-f o r e the establislament of t h a t Agency. I t i s probably f a i r t o s t a t e t h a t , from a peak of twelve per c e n t . , with an average of approximately t en per c e n t . , the i n t e r e s t l e v e l f o r sound sho r t - t e rm advances of a commercial na ture has dropped t o around s ix per c e n t . This i s l a r g e l y due t o t h e presence i n Cuba of the money-stock provided by t h e Agency and t o the ease and r a p i d i t y with which t r a n s f e r s have been e f f e c t e d by t h a t Agency. Before the Agency was e s t a b l i s h e d , r e se rves of from f i f t y per cen t , t o t h i r t y per c e n t , of depos i t s were g e n e r a l . To-day t en t o f i f t e e n per c en t , i s considered adequate . The e f f e c t of the unlocking of these r e se rves upon the l e v e l of i n t e r e s t r a t e s was most pronounced. I be l i eve t h a t I express the general conv ic t ion of banks doing business i n Cuba when I say t h a t a m a t e r i a l i nc rease i n i n t e r e s t r a t e s would fo l low immediately upon the withdrawal of the Agency.

During t he per iod of t roub le through which Cuba has passed and i s pass ing , the presence i n Habana of t he Reserve Bank Agency has been a very important f a c t o r i n mainta in ing what confidence has remained i n the s t a b i l i t y of t he f i n a n c i a l s i t u a t i o n t h e r e . The withdrawal of t h a t Agency a t t h i s time would, in my opinion, have a very unfo r tuna te e f f e c t upon the confidence wi th which both American and Cuban bus iness i n t e r e s t s would regard the f i n a n c i a l s i t u a t i o n i n t h a t i s l a n d .

From t h e s tandpoin t of American bus iness , t he maintenance of American currency as l e g a l - t e n d e r i n Cuba i s of v i t a l importance. This i s e s p e c i a l l y t r u e of t h e American expor ter of American goods, such as American-grown r i c e , American-made automobiles, American f l o u r , l a r d , o i l , e t c . These expor te rs can now draw f o r t h e i r s a l e s i n American d o l l a r s wi thout worry or r i s k of exchange compl ica t ions . The cos t of f i n a n c i n g such exports i s p r a c t i c a l l y the same as f i nanc ing shipments from one p a r t of the United Sta tes t o ano ther , p r i n c i p a l l y because of the f a c t t h a t t h e currency i s the same. The presence of the Agency i n Habana, wi th an adequate supply of currency, i s almost a v i t a l f a c t o r i n t h e continuance of the l e g a l - t e n d e r cha rac t e r of American currency i n Cuba; whereas, i t i s gene ra l l y agreed t h a t the withdrawal of t h e Agency would provide a p ress ing argument f o r t he c r e a t i o n of a bank of i s sue by the Cuban Government, the f o r c i n g i n t o c i r c u l a t i o n of t h e i r own (and probably a dangerous and unsound) cur -rency, and t h e probable withdrawal of the l e g a l t ender power of American currency t h e r e .

As a r e s u l t of the i n t r o d u c t i o n by the American a u t h o r i -t i e s of American currency as the chief c i rculat ing-medium of l e g a l -tender value i n Cuba, a vas t business s t r u c t u r e and economic system has been b u i l t up t h e r e with American currency as i t s b a s e . Many


296 X-9004-b

Sheet ITo. 3 Governor E. R. Black - Washington, D. C. August 8, 1934

mil l ions of dollars of obligations are owing in Cuba to -American ex-porters, business-men and banks, the co l lect ion of which would be made i n f i n i t e l y more d i f f i c u l t with the creation of a Cuban bank of issue with i t s own currency and the disappearance of American currency as tho chief circulating-medium of the i s land. The trend i s in that d i -rection to-day, and both Cuban and American business i s already fear fu l that i t may come. The exchange problem i s one of the major obstacles impeding the sa les of American goods and products to the other countries of the world at present and i f Cuba were to aboli'sh the legal-tender value of American currency in Cuba, and by the advent of a cheaper currency of i t s own cause the disappearance of American currency from circulation, there would be created just one more obstacle to the sales of American goods abroad, and t h i s to a country which has for over th ir ty years been one of our principal customers.

The withdrawal of the Agency would be part icularly un-fortunate at this time when a new commercial treaty with Cuba i s about to be signed by our government providing for added reciprocity , as i t would unquestionably make more d i f f i c u l t the payment for our goods sold to Cuba. I t would, thus, have a tendency to destroy some of the bene-f i t s which i t i s hoped wi l l fo l low the signing of the new treaty . We fear such withdrawal w i l l have the e f f e c t of destroying that confidence in the s t a b i l i t y of the Cuban currency system which has already been badly weakened by the p o l i t i c a l and social disturbances through which the Cuban Republic has passed.

Maintaining a money base at Miami w i l l not, in our opin-ion, answer the needs of the s i tuat ion . That base would be outside and not inside of Cuba, and the psychological e f f e c t of that fac t w i l l be very important as bank depositors w i l l continually f e e l that there i s an inadequate supply of money in the country, as banks w i l l not f e e l the same sa fe ty in the matter of low reserves and consequent low interes t and transfer costs that they now f e e l , and the argument in favor of , and the temptation for , creating a Cuban bank of issue w i l l continue to ex i s t and to grow stronger. Emergency transfers of money from Miami to Habana would be very much more cos t ly than they are now under the simple procedure in e f f e c t under which currency can be ob-tained at any moment during the business day from the Agency at a very reasonable cos t .

I t i s also important, in estimating the future, to take into consideration the probability of an important increase in the f inancia l turnover in Cuba which should fol low the development incident to the establ ishing of new trade relat ions favorable to Cuba through the medium of the new treaty, and i t certainly seems f a i r to estimate that the operating prof i t s of the Reserve Agency in Habana w i l l r e f l e c t materially t h i s larger f inanc ia l turnover.


X-9004-b 2 9 7

Sheet Ho• 4 . Governor E. R. Black, Washington, D. C# August 8, 1934

Fundainentally, we be l i eve t h a t , because of her c lose and economic r e l a t i o n s h i p t o the United S t a t e s , i t i s t o the g r e a t advan-tage of Cuba h e r s e l f t o have American currency as her p r i n c i p a l c i r c u l a t i n g medium, and t h a t advantage i s as g r e a t t o American bus iness i n Cuba and to American expor t e r s of goods to Cuba as i t i s t o the Cubans themselves• Cuba i s a country which has , s ince her independence, been almost e n t i r e l y dependent upon American c a p i t a l f o r f i n a n c i n g her a g r i c u l t u r a l and bus iness tu rnover and i t seems l o g i c a l t o suppose t h a t , f o r a cons ide rab le t ime t o come, she w i l l cont inue t o remain so* That n a t u r a l demand f o r the use of American funds i n Cuba can b e s t be met wi th the cu r renc ies of the two c o u n t r i e s being t h e same and the presence i n Cuba of an agency of our Federa l Reserve System i s one of t he s t r o n g e s t f a c t o r s t h e r e can be making f o r a cont inuance of t h a t s i t u a t i o n . Under i t , American banks i n Cuba can opera te w i th the g r e a t e s t e f f i c i e n c y and a t t h e lowest c o s t . The o p e r a t i o n of these banks i n Cuba i s of g r e a t b e n e f i t t o American c i t i z e n s doing bus iness wi th Cuba and the f i n a n c i n g of what w i l l probably aga in exceed two hundred m i l l i o n d o l l a r s of annual imports and expor t s between Cuba and t h e United S t a t e s w i l l be m a t e r i a l l y helped by t h e cont inued main-tenance of t h e Habana Agency of t h e Federa l Reserve Bank of ^ i t l a n t a .

Thanking you f o r t h e oppor tun i ty a f f o r d e d t h i s i n s t i t u -t i o n t o l ay b e f o r e you i t s views upon t h i s problem, p l ea se b e l i e v e me

Very s i n c e r e l y yours

(Signed) H. E. Henneman

Vice P r e s i d e n t


C O P Y %9004-e 2 9 8

TEE CHA.SE HA.TI01TAL BAH

Of The City of Hew York

NEW YOEK

Shepard Morgan Vice President July 20, 1934.

The Honorable Eugene E. Black, Governor, Federal Reserve Board,

Washington, D. C.

My dear Governor Black:

I take pleasure in complying with your suggestion, made at the meeting in Washington las t Friday, that I put in writing our opinion on the question of whether the Federal Reserve Bank of Atlanta should c lose i t s "branch in Havana.

I would l ike to say at the outset that the Atlanta Bank has provided through th i s "branch an important service to member banks and to American commerce with Cuba. The Chase National Bank, as you know, has one o f f i c e in Havana; otherwise i t has no branches in Cuba. For that reason we are perhaps not subject, in the same degree as banks hav-ing a large number of branches, to the consequences of sudden and unfore-seeable demands for currency. Yet even in our own experience i t has been sometimes a matter of pract ical importance to have a ready source from which to obtain currency, and at a l l times the ease of obtaining i t at a moment's notice from the branch of the Atlanta bank has made our admin-i s trat ion simpler and more economical.

This has undoubtedly resulted in easier credit terms to both Cuban and American customers having f i r s t or second-hand re lat ions with our Havana branch. I cannot quote figures from our own records because the Chase national Bank has operated i t s o f f i c e in Havana only s ince the Federal Reserve Bank of Atlanta established i t s branch there. But i t i s clear that should the branch be withdrawn tre should have to hold larger reserves of currency and would have to raise our credit terms accordingly.

Similarly, the withdrawal of the Reserve Bank's transfer f a c i l i -t i e s would mean heavier charges for exchange transactions between New York and Havana. Our records indicate strong seasonal movements of funds in and out of Cuba, and these periodic movements do not coincide. Even assuming that American currency should remain legal tender a f t er the with-drawal of the branch, i t follows that the exis t ing premium or discount on exchange operations would be materially larger and would suf fer considerable


" 2<. X-9004-c rw*'

The Chase National Bank Of The City of 17ew York TO The Honorable Eugene R. Black Sheet Ho 3

f luctuations from one season to another. Thus American commerce with Cuba would be subjected to costs which the present arrangement largely obviates.

But I think American currency would not remain legal tender for long. During the last few months there has developed in Cuba an aggres-sive movement favoring the establishment of a central bank. You w i l l re-c a l l that during our conference the other day frequent references were made to the monetary decrees, which, according to the observations of the banking representatives present, threatened the s t a b i l i t y of the Cuban currency and interfered seriously with exchange operations. The f i r s t , among other things, provided that the Cuban s i lver peso should have the character of un-limited legal tender. The author of that decree, Juan Andres Ll i teras , frankly stated in the Havana newspaper Pais under date of May 37th that one of the purposes he bad in mind in drawing up the decree was the ultimate establishment of a central bank of i ssue .

The decree re lat ing to exchange transactions has now been ab-rogated and i t i s hoped that similar action wi l l soon be taken with respect to the currency decree. I f th is hope i s real ized much damage w i l l be undone. But i f i t should develop that the Reserve Bank of Atlanta withdraws i t s branch, i t seems probable that both measures w i l l assume their former e f -fectiveness , and that the agi tat ion for a central bank would be pressed to a conclusion.

Cuba now and probably for some time to come w i l l have resources inadequate for a central bank. It would be d i f f i c u l t and probably impossible under exis t ing conditions for such a bank to keep i t s c irculat ion within the bounds set by i t s l imited reserves. The consequences of i n f l a t i o n need not be touched upon except for th i s , that a deterioration of the Cuban cur-rency would go far to n u l l i f y the benef i ts which Americans and Cubans a l ike hope to obtain from the trade treaty now under negotiation.

I t has been suggested that a money base in Miami would serve the practical purposes of the Atlanta Bank branch in Havana. I venture the opinion that such a base would not meet the real requirements of the case. I t would not re l i eve the banks from increasing reserves nor obviate wide exchange f luctuat ions . Nor would i t prevent the act ive prosecution of the plan for a Cuban central bank of i ssue . On the other hand, i f we retain Cuba within the f i e l d of our own currency, we avoid with respect to at least one country one of the major factors of world-wide trade disturbance.

I much appreciate the opportunity the Board gave me to appear before i t l a s t week.

With kind regards,

Yours very truly,

(Signed) Shepard Morgan

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

C O P Y X-9004-d

THE FIRST B.TIOH6.L BkW. OF BOSTON

BOSTOIJ, MASSACHUSETTS

1784 * 1934

July Twenty-four 1 9 3 4

Hon. E. E. Black, Governor Federal Reserve Board Washington, D. C.


Just as we l e f t the meeting in Washington I

think one of your Board members suggested that we might send i n

a memorandum and I am enclosing our thoughts regarding the Atlanta

Agency of the Federal Reserve Bank.

For your conf ident ia l use , I am enclosing a

copy of a memorandum of the Board of Directors of the American

Chamber of Commerce of Cuba which was taken up at a spec ia l meet-

ing that they had on June 13th and forwarded by the President of

the Chamber of Commerce to the State Department in Washington.

Yours very truly ,

(Signed) Charles E. Spencer, Jr .

Charles E. Spencer, Jr . Vice President

Enclosures


C O P Y X-9004-d 3 0 1

Liomorandum for Governor Blaclc, Federal Reserve Board, Washington, D. C.

Our 'bank would favor the continuance of the Atlanta Agency of the

Federal Reserve Bank for the following reasons:

It allows us to carry a smaller cash reserve than would be necessary

i f we were dependent upon replenishing our reserves from outside the

Island. With the higher cash reserves carried, this would contract the

loaning a b i l i t y of the bank operating on the Island and, as long as the

Cuban government carries United States currency as legal tender, we f e e l

there i s a real need for the Federal Reserve Bank Agency in Cuba. Should

they start a Bank of Emission, at that time we f ee l that the continuance

of the agency would not be cal led for; that the discontinuance of the

agency would have a strong bearing on fostering or bringing to a head a

central bank for Cuba, our best estimate being that i t would be a barrier

which American business would have to cope with should Cuba have i t s own

currency.

The re t i r ing of the agency at this time would have a very disquiet-

ing e f f ec t upon the depositors and would undoubtedly a f f ec t the economic

improvement of the Island for some time to come.

"Je trust that the Board's decision w i l l be to continue the f a c i l i t i e s

that exist at present.

(Signed) Charles E. Spencer, Jr .

Charles E. Spencer, Jr . Vice President

July 24, 1934.


X-9004-a "Z COPY

Memorandum of the Board of Directors of the

American Chamber of Commerce of Cuba June 13, 1934.

I

Revival of Cuba's p o l i t i c a l and economic l i f e , and of

America's trade with Cuba, i s President Roosevelt's announced purpose.

Secretaries Hull and Wallace have eloquently stressed th i s double objec-

t ive , in urging those bold and constructive l e g i s l a t i v e measures which now

make i t attainable. A l l Americans whose l i v e s , interests or sympathies

are with Cuba, desire i t s f u l l e s t real izat ion.

The Sugar Act and the abol i t ion of the Piatt Amendment are

already r e a l i t i e s . How comes the third and most v i t a l step, - a new and

more l iberal Reciprocity Treaty. Unless talc en, and taken promptly and

soundly, the program i s unfinished, and i n e f f e c t i v e .

The Treaty should contain appropriate mutual safeguards

against the frustrat ion of i t s aims. Otherwise the expected mutual trade

benef i ts T i l l not come. While of great interest to both countries, such

safeguards are v i t a l to Cuba - as her l i f e depends upon prosperous trade

with America.

II

I t i s axiomatic that t a r i f f s and trade treat ies can be

neutralized by f i s c a l po l icy . Legislation a f fec t ing currency, foreign ex-

change, taxes, e tc . can either increase or diminish the benef i t s of lowered

duties and concessions. Unwise l e g i s l a t i o n might even annul them. For

example, as Secretary of Commerce Roper, and h i s Assistant Secretary John

Dickinson, recently stated during the Reciprocal Tariff B i l l hearings, one

C O P Y


x-9oo4-a 803

— s —

ef fect of the devaluation of the American dollar was to heighten the already

high American t a r i f f wal l . This devaluation made i t more cost ly for Ameri-

cans to buy goods from foreign countries, and made i t l e ss prof i table for

foreign countries to send their goods to America for sa le i n competition

with American goods. Applying that principal to Cuban-American trade, i t

i s easy to pcrccivo how the benef i ts which American exporters might expect

to receive through the concession by Cuba, of an additional preferent ia l to

the United States , might bo rendered to a large extent i l lusory by Cuban fiscal

policy result ing i n depreciated Cuban currency. If such depreciation

happened to be greater as compared with the dol lar, than as compared with

the pound, the mark or the franc, the result would be a .."preferential"

which did not "prefer".

The essence of reciprocity i s mutuality. Mutuality in

international trade between Cuba and the United States should be complete,

not part ia l . And i t should be a mutuality of l iber ty . In matters of trade,

prohibitions and res tr ic t ions may completely destroy mutuality and laclc of

confidence may v i t i a t e i t to the point of making i t unattainable. Subject

to any necessary quota restr ic t ions required to protect vested interest on

either s ide, there should be no restr ic t ions other than those covered by

the tar i f f i t s e l f . Realization of the President's objective of a revival

in interchange of goods between the two countries, w i l l not occur i f Cuban

merchants and Cuban fac tor ies , whoever may own then, are penalized and re-

s tr ic ted by export taxes, exchange embargoes, depreciated currency, exprop-

r ia t ions , e tc . Such measures strangle trade, destroy confidence and i f

adopted in either country would grievously dev i ta l i ze and eventually ruin,


804 X-9004—d

- 3 -

the mutual benef i t s which are the objective of the Treaty.

I l l

The new Treaty, l ike the new Sugar Act, i s experimental.

It i s of paramount importance that the experiment he successful , and that

safeguards he provided to prevent i t s fa i lure from the outset .

As such safeguards> to protect the new commerce which these

measures are designed to promote, the following points are suggested as

essent ia l ly important matters for inclusion in the Treaty:

1. xTeither country should impose any export tax, embargo

or similar res tr ic t ions (in addition to those exis t ing January 1, 1934)

upon exportation to the other country of money, or credit (whether in the

form of currency, exchange or credits) for the purpose of payments.

A- On or with respect to loans, investments or secur i t i es .

B- For services .

C- For the purchase or use of property, r e a l , personal or otherwise.

D- In cases in which such payments are made by persons or

e n t i t i e s , c i t i zens or residents of the one country to persons or e n t i t i e s ,

c i t i zens or residents of the other country.

3 - Uor upon the exportation of money or credit to the other

country for the personal requirements of c i t i zens or residents of either

country.

2. Provisions for payment of money in the national currency

of either country contained in contracts made prior to or during the l i f e of

the Treaty by c i t i zens of either country shal l not be invalidated or suspended


X-9004-d ; 305

- 4 -

by l eg i s l a t i on of cither country during or subsequent to the adoption of the

Treaty.

3. Neither country should impose any export tax, direct ly

or i--tdii eculy' , ( in addition to any such tax exist ing January 1, 1934) uoon

the products of i t s s o i l or industry exported, or produced or processed for

export, to the other country.

4 . Citizens or ent i t i e s of either country res iding or

carrying on business in the other country should enjoy the same rights and

pr iv i l eges , and "be ent i t led to the same status and treatment, as c i t i zens

of such other country, v/ith respect to engaging in commerce, industry,

agriculture, professional or other lavrful occupations, and to holding and

using property; and there should he no discrimination direct ly or indirect ly ,

".7ith regard to taxation, or protection of property and person, "by either

country against c i t i zens of the other country, or against e n t i t i e s o:zned or

controlled "b; c i t i zens of the one country, "7lien resident or doing "business in

the other country.

Ho c i t izens or enti ty of either country shal l "be subject to

confiscation of property, nor shall he or i t bo deprived of property except

by competent authority and for just cause of public u t i l i t y and a f ter proper

indemnity.

ITote: If under the terms of the Reciprocal Tariff B i l l in i t s

f i n a l form the inclusion of such matters as pos i t ive covenants of the Treaty

should be deemed to be beyond the pouor conferred by Congress upon the Pres i -

dent, i t might bo possible to safeguard the Treaty in this respect by s p e c i f i c -

a l l y recognizing, as grounds for denunciation of the Treaty, acts in v io la t ion

of the provisions above outlined.

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

C O P Y X-9004*e °

AGE1TCY OF

THE ROYAL BAM OF CAMDA.

Incorporated 1869

68 William Street

Frederick T. walker) John A . Beat son ( Agents HEW YOEK, Edward C. Holahan )

July-Eighteenth 1 9 3 4

Honorable Eugene E. Black, Governor, Federal Reserve Board, ULSHOTPCGSr, D. C.


At the meeting to which you cal led the representatives of the "banks

doing business in Cuba, for the purpose of hearing their views as to the

continuance or discontinuance of the Havana Agency of the Federal Reserve

Bank of Atlanta, i t was the unanimous opinion of those attending that the

Agency of the Atlanta Federal Reserve Bank should "be maintained and reasons

were given therefor. After th is discussion i t was suggested that, for the

purpose of record, each of the Inst i tut ions represented should write a

l e t t e r to the Board in support of the opinions expressed at the meeting.

In compliance with this request, I "beg to say on "behalf of th i s Ins t i tut ion

that I think there are two principal reasons why the Agency should "be con-

tinued, certainly for the present time at l e a s t , and these are:

F i r s t , - That the present i s a c r i t i c a l stage for the Mendieta Govern-

ment and such a step would be "bound to have a "bad e f f ec t on public confidence

just when conditions seem to be improving and the Government has taken the

necessary steps to undo the i l l considered f inancial decrees of the l a s t two

months,


" 307 X-9004-e

- 2 —

Second, - As the Board i s aware, there has "been considerable agi tat ion

in Cuba for the formation of a Cuban central bank with powers of emission

and while i t i s d i f f i c u l t to see how such a project could be carried out on

any sound l ines in view of the fact that the Cuban Government i s not at the

present time in a pos i t ion to provide a metal l ic base for a national currency,

at the same time i t i s quite conceivable that the withdrawal of the Agency

would be seized upon by the advocates of a National Cuban currency as a

pretext for pushing such a plan, with the poss ib le result that some unsound

currency plan would be adopted.

I need not s tress to your Honorable Board the detrimental e f f e c t that

such a plan i f carried out would have on business between the United States

and Cuba. Owing to the very low price of sugar obtaining for the l a s t couple

of years, reciprocal trade between Cuba and the United States has fa l l en in

terms of Dollars to very low f igures , but under the improved conditions

made possible by the Jones-Costigan Act and the betterment of World sugar

s t a t i s t i c s , there i s every reason to believe that Cuba with a greatly en-

hanced return from her sugar crop w i l l be in a pos i t ion to largely increase

her imports from the United States provided no currency or exchange barrier

i s set up.

Another point which should be mentioned i s that while i t i s true, as

stated by the Atlanta Bank, that the f a c i l i t i e s fcr the shipment of currency

from Jacksonville and Miami have been enormously improved, i t i s , nevertheless,

a fact that the withdrawal of the Atlanta Agency i n Havana would necess i tate

the carrying of larger reserves by the commercial banks in Cuba, adding to

the already great expense of doing business there and having a tendency to


: 308 X-50G4-1

— 3 *•

bring "back the very high rates for money which prevailed a few years ago.

I think v/e may sun up our argument "by saying that the c los ing of the

Agency of the Federal Reserve Bank of Atlanta would he a serious "blow to

American investors and business men in Cuba just at this time when they were

beginning to have hope and need a l l possible help in creating stable conditions

in Cuba.

In conclusion, I wish to express the appreciation of this Inst i tut ion

in being given the opportunity of s tat ing i t s views and thank the Board for

the courtesy and consideration with which we were received.

ITith assurances of our highest respect, we remain,

Yours very truly,

THE ROYAL BAH OF C&8H&,

(Signed) F. T. Walker

A g e n t


309 C O P Y 3N9004-#

THE CAMADIAH BAHK OF COMMERCE Hew Y ork Agency

Exchange Place and Hanover Street HEW YORK

July 19, 1934

COiOIDEifTlAL

The Honourable Eugene H. Black, Governor, Federal Reserve Board, Washington, B.C.


In accordance with your request, we have pleasure in confirming our verbal advices to you of Friday, the 13th instant , regarding the advisabi l i ty or not of discontinuing the Havana Agency of the Federal Reserve Bank of Atlanta.

The foreign trade of Cuba with Canada i s neg l ig ib le with the result that the Cuban branches of Canadian banks handle the same class of business as do the Cuban branches of American banks, consequently a large portion of this business i s dependent upon and of assistance to the interchange of trade between Cuba and the United States. We are in f u l l accord with the arguments set forth in de ta i l by the repre-sentatives of the interested American banks and emphasize the fol low!ng:-

The presence of the Havana Agency of the Federal Reserve Bank of Atlanta has a strong s tab i l i z ing e f f e c t on the f inancial trend of thought of the population of Cuba generally, and particularly in p o l i t i c a l c i r c l e s . That the Cuban Government rea l izes this would appear to be evidenced by the fact that upon learning there was a p o s s i b i l i t y of the closing of the Havana Agency of the Federal Reserve Bank of Atlanta the Cuban Administration in order to show i t s good f a i t h and restore f inancial confidence rescinded the Decree prohibiting the exportation of capital from Cuba. To close the Havana Agency of the Federal Reserve Bank of Atlanta at the present time would not only n u l l i f y a l l th is but would encourage - indeed i t might force - Cuba to resort to some form of currency of i t s own with a l l the attendant hardships upon business in and with Cuba, The withdrawal of the Havana Agency of the Federal Reserve Bank of Atlanta would necess i tate a l l Canadian and American banks with branches in


X- 9004—f

The Honourable Eugene B. Blaclc - 2 July 19, 1934

Cuba carrying much larger cash reserves there, rzith a con-sequent increase in the cost of credit , which increased cost would have to be "borne not only by Cubans but also by Americans doing business i n and with Cuba.

We take this opportunity of expressing to you our appreciation of the services rendered us in the past by the Havana Agency of the Federal Reserve Bank of Atlanta, and also to thank you for your courtesy in asking us to appear before your Board.

Yours f a i t h f u l l y ,

(Signed) C. J. Stephenson

Agent


C O P Y . X-9004—g

AGEiJCY OF

THE BAM OF NOVA SCOTIA

49 HaLL STREET

P. IT. Murphy,Agents HEW YOKE July 20th 1934, F. W. Murray,(

The Honorable E.R. Black, Governor, Federal Reserve Board, Washington, B.C.


Having reference to the recent conference at your o f f i c e when Hew York representatives of Banks, American and Canadian, which have "branches in Cuba, were invited by your board to give consideration to the continuance or discontinuance of the Havana Agency of the Federal Reserve Bank of Atlanta, - At your request I am glad to submit herewith our views in the matter.

It i s undoubtedly advantageous to American business men in Cuba and to American exporters to that Country to have the Federal Reserve Agency in Havana. Were i t withdrawn the banks would have to carry larger cash reserves in their own vaults , and consequently Americans in Cuba, as well as others, would be required to pay higher interes t rates on loans from the banks.

The psychological influence of the Agency i n Havana on business a f f a i r s , particularly while the general s i tuat ion, p o l i t i c a l l y and economically, i s un-s e t t l e d , i s undeniably favorable to the interes ts of Americans in Cuba and to American exporters to Cuba.

The proposed trade treaty between Cuba and the United States now under consideration, and, i t i s thought, soon to become operative, should be very helpful to reciprocal business and we think that a continuance of your Agency in Havana would assuredly serve in furthering the benef i t s under the treaty to American trade, inasmuch as i t would exert a powerful influence in s tab i l i z ing the currency and a s s i s t materially in f a c i l i t a t i n g the move-ment of money into and out of Cuba.

% think that while i t i s true, because of a ir mail f a c i l i t i e s , currency can now be shipped quickly to Havana from Atlanta or Jacksonvil le , nevertheless some (contd)


; 3 1 2 X - 9 0 0 4 - g

— 2r~

The Honorable E.R. Black, Governor, Federal Reserve Board, Washington, B.C. July 20th 1934.

of the American and Canadian "banks have tranches in the inter ior of the i s land and i n case of emergency i t would he greatly to their advantage to have an immediate source of supply of currency such as i s now afforded "by your Agency in Havana.

We are in agreement with the views of the representatives of the American "banlcs which were expressed "by them at the meeting. We appreciate the "benefits that we, as a Canadian i n s t i t u t i o n , derive from the Havana Agency of the Federal Reserve Bank, and we f e e l that i t s withdrawal would "be hurtful to the in teres t s of a l l "banks', as wel l as to those of commercial corporations and indiv id-uals doing "business in or with Cuba.

I would l i k e to express to you and to your "board my sincere thanks for your inv i ta t ion to attend the confer-ence and for your courtesy there.

Yours f a i t h f u l l y ,

(Signed) P. W. Murphy

Agent.

PW/AS


ZJ>

X-9004-h COPY

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

OF A T L A N T A

Office of September 27, 1934 Governor

< ? 1 3

Mr. J . J . Thomas, "Vice Governor, Federal Reserve Board, Washington, D. C.

Dear Governor Thomas:

At the June meeting of our directors a resolu-tion was passed directing the o f f i c e r s of t h i s bank to apply-to the Federal Reserve Board for permission to discontinue the Havana Agency of th is bank. The resolution directed the o f f i c e r s , in transmitting t l i is action to the Federal Reserve Board, to in-form. the Board that th i s bank desired to work no unnecessary in-convenience to the banks in Cuba and that they desired i t s d i s -continuance ef fected in such a way as not u n d u l y to a f f e c t the banking and business in teres t s of Cuba.

This resolution was transmitted to the Board and in considering i t the Board invited representatives from the dif ferent banks in Cuba to a hearing in Washington. At that hearing these banks protested the discontinuance of the agency and afterwards transmitted opinions from business in teres t s , a l l adverse to the discontinuance of the agency.

The Board has taken no action on the June resolu-t ion of our directors .

At the August, 1934, meeting of the directors of th is bank a second resolution was passed in which the Federal Reserve Bank of Atlanta stated that i t would cooperate with the other twelve banks in the System operation of th i s agency and in which resolution it suggested to the Board that the establishment of such System agency would be a proper solut ion of t h i s question. This August resolution of our Board has been duly transmitted to your Board.

Last week when I was in Washington I discussed with the members of the Board the question of the establishment of t h i s Havana agency as a System agency. This would r e a l l y mean that the Atlanta bank would continue to operate the agency for the account of the System. This procedure would be very much in l ine with the practice of the New York Bank in operating foreign accounts as a System matter.


%9004rh

Mr. J . J . Thomas, Vice Governor - 2 .

For your information I tm attaching a statement of the di f ferent functions of th i s agency. You are, of course, famil iar with the fac t that th i s agency i s largely a currency depot for the purpose of handling cable transfers of money in and out of Cuba for the account of banks in Cuba, and especia l ly those banks in Cuba which are branches of American banks. I t i s true a lso that the Havana agency has been of benef i t to the Cuban Government in the matter of currency exchanges.

I t should be borne in mind that the Havana agency has no credit functions— that i s , i t lends no money in Cuba or elsewhere. I t s operation, in my opinion, has been of great ad-vantage to the banks in Cuba and to the Government of Cuba. I t s operation has resulted in the furnishing of clean and adequate currency t o Cuba, which country has no currency of i t s own. I t has prevented the necess i ty of the banks in Cuba carrying large currency reserves in the ir own vau l t s . I t has furnished a measure of s t a b i l i t y to banking and currency operations in Cuba.

You wi l l r eca l l that Assistant Secretary of State Sumner Welles conferred with me on the discontinuance of t h i s agency and expressed his strong opinion that at t h i s time, when Cuba was struggling to get on i t s f e e t both p o l i t i c a l l y and f i -nancial ly , i t would be a direct blow to such e f f o r t s to have the agency discontinued. You w i l l a lso r e c a l l that the Cuban Govern-ment has taken act ion against the discontinuance of the agency.

I personally am in accord with the views of Mr. Welles and with the views of the banks operating in Cuba and with the views of the Cuban Government in th is matter. However, the Federal Reserve Bank of Atlanta has operated th i s agency through a number of years and in i t s operation has served the whole coun-try and other sect ions of the country more espec ia l ly than this section, and my opinion that the agency should be continued would not be complete without expressing my fee l ing that i t should be continued as a System agency.

This conclusion i s reached, f i r s t , because of the fact that the whole country i s being served; second, that the currency carried in Cuba has been equal to the combined capital and surplus of t h i s bank and in that respect i s too large an operation for t h i s bank in a foreign country. The agency has been operated at some l o s s , but t h i s l o s s has not been a .moving factor in the decision of our directors , and the l o s s can be largely over-come by changing the rate for handling currency operations in Cuba.


3C-,9004-h

Mr. J . J . Thomas, Vice Governor - 3.

Under the law the Board has the r ight to require a reserve bank t o e s tab l i sh and consequently to maintain an agency in a fore ign country. This puts rather a large responsi-b i l i t y upon the Board with respect to any one reserve bank and I would not even suggest now that the Board require t h i s agency to be accepted by the System as a System agency. I rather f e e l that i f the Board would conclude that t h i s agency should be operated as a System agency and would request the cooperation of the twelve reserve banks in the respons ib i l i ty attached to t h i s agency, such proper so lut ion would be accepted by the twelve banks and the agency could be operated by the Atlanta ban!: f o r the account of the twelve banks, and a l l questions as to the continuance or d i s -continuance of the agency would be solved.

, At the present time we are reducing our currency holdings in Cuba to $5,000,000. I think th i s amount would be adequate because currency can be transported from our Jackson-v i l l e branch, or indeed from a money depot which we might estab- ' l'ish in Miami, in a very few hours. A supply of ')5,000,000 in currency w i l l solve a l l the day t o day needs of the agency and in event larger sums are required they can be speedi ly transported to Cuba.

I am of opinion t h a t the At lan ta bank should be t h e opera t ing bank f o r t h i s agency because of i t s nearness t o Cuba and because the agency i s a l ready wel l e s t a b l i s h e d by the At l an ta bank in Cuba.

I w i l l great ly appreciate i t i f the Board w i l l con-sider t h i s matter and w i l l determine that t h i s agency should be a System agency and ask the cooperation of the twelve banks to t h i s end. If the Board takes t h i s act ion and the twelve banks acquiesce in i t , the d e t a i l s of such arrangement can e a s i l y be worked out.

Thanking you and the Board for immediate considera-t i o n of t h i s matter, I am, with my warm regards,

Sincere ly yours ,

(Signed) E. R. Black

Governor. B-C


Federal Reserve Bank of Atlanta

* 316 X-9004-h

miOEAKDUIvl FOR GOVERNOR BLACK:

FUNCTIONS OF THE HAVANA i&ENCY

The Federal Reserve Bank of Atlanta i s authorized to exercise the following powers in Havana, Cuba, through i t s Agency;

1 . To buy, s e l l and c o l l e c t , prime bankers' ac-ceptances and prime b i l l s of exchange which are payable in dollars arising out of actual import or export transactions; bear the signatures of two or more responsible parties; bear a sat i s factory bank endorsement; have not more than 90 days to run, exclusive of days of grace, and are secured at the time of purchase by shipping documents evidencing the actual importation or exportation and the actual sale of goods, and conveying or securing t i t l e to such goods;

2 . To buy from or s e l l to the Republic of Cuba, or any banking ins t i tu t ion doing business in Havana, cable transfers to or from any banking ins t i tu t ion located in any c i ty in the United States in which there i s located a Federal Reserve Bank or Branch, charging a commission of $1 per $1000, provided that no such trans-f e r shall by i t s terms be for credit to the account of any third party;

3 . To pay out Federal Reserve notes or other currency of the United States in such denominations as may be demanded in payment of cable transfers to Havana, or in payment of cable trans-f e r s , bankers' acceptances or b i l l s or exchange purchased in Havana, the kinds of currency to be paid out to be discretionary with the Agency;

4 . To accept any and a l l kinds and denominations of United States currency, including Federal Reserve notes , in payment for cable transfers , bankers' acceptances, or b i l l s of exchange sold by i t in Havana;

5 . To make direct exchanges in l ike denominations and amounts of new or f i t currency for mutilated or unf i t currency, tendered by the Treasurer of the Republic of Cuba, or any banking ins t i tu t ion doing business in Havana, charging for such exchanges a commission at tho rate of $1 per $1000;

The Agency maintains a stock of $1 b i l l s for con-venience of tho Havana banks and they are authorized to exchange these b i l l s for any other denominations of United States currency, a charge of $1 per §1000 being made for such exchange*


X-9004 - 2 —

FOKCTIOI-E OF THE HAVANA AGENCY - Cont'd.

7. The Havana Agency i s also authorized to make direct exchanges of new and f i t currency for American s i l ver or gold coin tendered by the Treasurer of the Republic of Cuba or any banking ins t i tut ion doing business in Havana, charging for such exchanges a commission of §1 per ()1000. This has been discontinued in view of the high cost of transportation of American s i l ver coin t o the United States and such exchanges as have been made during the l a s t two years have been made with the understanding that the entire cost of transportation would be borne by the Treasurer of the Republic of Cuba, plus our exchange commission of £>1 per AlOOO. We have not been tendered American s i l v e r coin by any of the Havana banks.

8 . The Havana Agency performs other f i s c a l transactions for the Treasurer of the Republic of Cuba, such as receiving Cuban gold coin under a repurchase agreement, del ivering United States currency f o r such Cuban gold coin; the Cuban gold coin to be re-deemed by payment of United States currency at the expiration of the repurchase agreement.

Recently the Second Export-Import Bank desired to ship t o Cuba 10,000,000 Cuban pesos, and in order that delivery might be made in Havana, our Agency was requested to act as a representa t ive of the Second Export-Import Bank and the Treasurer of the Republic of Cuba in making t h i s del ivery. A commission rate of $1 per $1000 for the currency received in payment of these pesos was charged, the to ta l prof i t to the Agency being approximately $3,800.

From time to time the Agency w i l l l ike ly be ca l led upon to perform other f i s c a l agency transactions which they w i l l l i k e l y agree to do, upon proper approval, when such transactions can be consummated with due sa fe ty .


X-9005

T E L E G R A M


WASHINGTON

October 27, 1934

WILLIAMS CLEVELAND

Referring your l e t t e r of October 19, 1934, which i n -

quires as to correctness of your conclusion that Joint

Stock Land Bank Bonds are not "exempted securi t ies" within

meaning of Securit ies Exchange Act of 1934 and Board's

Regulation T thereunder. Board knows of no reason for

d i f fer ing with your conclusion on question, and suggests

that persons inquiring whether securi t ies have been

designated for exemption by the Secretary of the Treasury

or the Securit ies and Exchange Commission be referred to

those author i t ies , unless you have def in i te information

regarding the security in question.


MORRILL


319 FEDERAL RESERVE BOARD

WASHINGTON


November 1, 1934.

Dear Sir:

Daring the meeting of Chairmen and other representatives of

the Industrial Advisory Committees in Washington on September 27,

1934, there was a discussion of the status of the committees and

their relat ions with the Federal reserve "banks under the industrial

credit ac t . A "brief digest of this discussion i s contained in the

summary statement which was sent to you with the Board's l e t t e r ,

X-8031, of October 2, 1934.

As you know, Congress, in establishing the Industrial Advisory

Committees, provided that each member should "be ac t ive ly engaged in

some industrial pursuit within the Federal reserve d i s t r i c t in which

the committee i s established; that each application should "be sub-

mitted to such committee; and, a f ter examination by i t of the business

with respect to which the application i s made, that the applicat ion

should be transmitted to the bank with the recommendation of the com-

mittee .

As the enactment of th is new l eg i s l a t i on was based upon the

be l i e f that there were many established business enterprises whose needs

for working capital had not been met by banking i n s t i t u t i o n s , i t was


320 X-9006

— 2 —

evidently the expectation of the Congress that establishment in each

d i s t r i c t of a body composed of careful ly selected i n d u s t r i a l i s t s would

bring to bear in the f i r s t instance upon the problem submitted in each

application the kind of independent judgment that would be most approp-

r iate for the determination of the question whether the loan desired

could be made on a sound and reasonable basis notwithstanding the risks

and uncertainties that might have deterred banks from making such loans.

It i s important, therefore, in order to carry out the obvious

intent of the Congress that the Industrial Advisory Committee shal l be

free to use such means and methods as they may deem necessary in order

to enable them not only to make the examinations required by the law but

to exercise their independent judgment in making their recommendations

to the Federal reserve banks.

The question has arisen, however, whether the o f f i c er s of the

banks, in a sp ir i t of cooperation and a desire quickly to reach harmonious

conclusions, may have overlooked the purpose of Congress as to the prece-

dent and independent pos i t ion of the committees and have attempted to in -

fluence the members of the committees to adopt views which the o f f i c e r s ,

in the l ight of their own banking experience, f e l t should apply to the

f ina l disposi t ion of the applications. However sound such views might

be and however commendable the desire to a s s i s t , the Board f e e l s that i t

should point out the advisabi l i ty on the part of the o f f i c e r s of the

banks of refraining from any form of action with respect to the proceed-

ings of the committees which might seem to j u s t i f y cr i t ic isms in the


X-9D06

- 3

future that the recommendations of the Industrial Advisory Committees

v/ere reached otherwise than through the exercise of their independent

judgment. This expression of the Board's f e e l i n g i n t h i s matter of

course should not be interpreted as r e s t r i c t i n g i n any degree the

freedom of the committee to c a l l for any ass i s tance that i t may need

and i t i s expected that the invest igators who prepare data for submis-

sion to the committees w i l l include in their reports a l l pertinent data

that they have been able to gather regarding the condition, management,

e t c . , of the appl icant , both of a favorable and unfavorable nature, in

order that the committees may be i n possess ion of a l l the f a c t s which

the invest igators have been able to ascerta in .

Very truly yours,

Chester Morr i l l , Secretary.

TO GOVERNORS AND AGENTS OF ALL F. R. BANKS.




November 2, 1934.

X-9007


Dear Sir:


Government secur i t i es between Federal reserve "banks, the



"NOXOWL" - Treasury B i l l s to be dated November 7, 1934, and to mature May 8, 1935.



word "NOXOVER" on page 172.

% truly yours,



X-9008

E l U E i M

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

mSHHTGTOK

October 30, 1934

m i s H DA.LIAS

Referring your telegram October 26, with respect to

a p p l i c a b i l i t y of Regulation T to loan on s e c u r i t i e s by

national bank to a customer. I t i s assumed that national

bank in question i s not a "member" of a national s e c u r i t i e s

exchange, as that term i s defined, in paragraph 3 of sec t ion

3(a) of the Securi t ies Exchange Act of 1934. By d e f i n i t i o n

banks are neither "brokers" nor "dealers" under that Act or

under Regulation T. Accordingly, loan by the national bank

to i t s customer i s not a f f ec t ed by Regulation T or by any

rul ing which has been issued by Board under the Secur i t i e s

Exchange Act of 1934. However, issuance of regulat ion ap-

p l i c a b l e to banks under sect ion 7(d) of that Act i s at

present time receiving consideration of Board's s t a f f .


MORRILL

T

F E D E R A L


" ' ' 324 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 9009 t h e f e d e r a l r e s e r v e b o a r d

November 2, 1934.

Dear Sir:

The agreements executed by the Federal reserve banks and

the Secretary of the Treasury, se t t ing forth the arrangements with

respect to transactions between the Secretary of the Treasury and

the Federal reserve banks pursuant to Section 13b of the Federal

Reserve Act as amended, provide that whenever the Federal reserve

bank shal l have made one or more loans, discounts, advances and

purchases or commitments, pursuant to the provisions of Section

13b of the Federal Reserve Act, i t may cer t i fy the facts to the

Secretary in such manner as he shal l prescribe by regulation and

that upon receipt of such c e r t i f i c a t i o n in proper form the Secretary

of the Treasury w i l l make payment to the Federal reserve bank as

outlined in paragraphs 2 and 3 of the agreement.

Advice has been received by the Federal Reserve Board that

three Federal reserve banks already have forwarded to the Secretary

of the Treasury a c e r t i f i c a t i o n of the loans made by them under

Section 13b of the Federal Reserve Act, and as a l l of the banks have

made such loans, the Federal Reserve Board suggests that considera-

t ion be given to the des irabi l i ty of the c e r t i f i c a t i o n promptly by


X-9009

- 2 -

your bank to the Secretary of the Treasury of the loans which have

been made by i t i n order that payment may be received from the

Treasury in accordance with the provis ions of the agreement above

referred t o .

The Board be l i eves that i t i s desirable a l s o for the Fed-

eral reserve banks to c e r t i f y to the Secretary of the Treasury the

industr ia l loans hereafter made by them as of ten as such act ion i s

j u s t i f i e d , from the standpoint of pract ica l operation, by the a -

mount of new loans made since the previous c e r t i f i c a t i o n .

I t w i l l be appreciated i f you w i l l g ive consideration to

th is matter and advise the Board of the decis ion reached i n connec-

t ion therewith.

Very truly yours,


TO GOVERNORS OF ALL I . E . BA.HKS.


8 2 8

X-9010



For immediate re lease . November 2, 1934.

CASH TRANSACTIONS IN UNREGISTERED SECURITIES.

Ruling Noi 34 interpreting Regulation T. The Federal Reserve

Board has been requested to reconsider i t s rulings numbered 16 and 27

interpreting Regulation T, wherein i t held in e f f e c t that credit may

not be extended on unregistered securi t ies in connection with bona

f ide cash transactions for the limited periods and subject to the terms

and conditions spec i f ied in section 6 of the regulation. On reconsid-

eration the Board i s of the opinion that extensions of credit on un-

registered securi t ies for the limited periods and subject to terms and

conditions spec i f ied in section 6 of Regulation T, may be permitted

when such extensions of credit are incident to bona f ide cash transac-

tions in such secur i t i e s . The Board, therefore, now rules that sect ion

6 should be interpreted as applying to bona f ide cash transactions in

unregistered, non-exempted securi t ies as well as to bona f i d e cash

transactions in registered non-exempted securi t ies and the Board conse-

quently revokes rulings numbered 16 and 27.


327

X-9011

November 3 , 1934.

Dear S ir :

Consideration has been given to the report of the Federal

Reserve Agents' Committee on Uniform Examination Charges adopted

at the conference i n June, 1934, and the Board approves the f i r s t

recommendation of the Committee, which reads as fo l lows:

At l eas t one regular examination of each State member bank, including i t s trust department, sha l l be made during each calendar year by examiners for Federal reserve banks e i ther independently or j o i n t l y vdtb State "banking author-i t i e s . Under certain circumstances more than one such examination annually may be des irable , i n which event the Federal reserve agents should be empowered to have an ad-d i t i ona l examination made. A copy of each report of exam-inat ion sha l l be furnished to each State member bank examined.

The Board be l i eves i t advisable , however, to defer ac t ion

on the question of general uniform charges u n t i l a f t e r completion

of the examinations made in connection xvith c e r t i f i c a t i o n s to the

Federal Deposit Insurance Corporation, and to continue i n e f f e c t

u n t i l July 1, 1935, the instruct ions regarding charges f o r examina-

t ions contain ..3d in the Board's l e t t e r of Mar eh 2, 1334, X-7910-a,

which read as f o l l o w s :

"it i s the Board's opinion that charges may properly be waived for exaniuations of State member bailee aade s o l e l y to develop the information rcq-dred for c e r t i f i c a t i o n to the Federal Deposit Insurance Corporation, an! that in such i n -stances the quest!en of waiving the charge should be l e f t to the determination of the Federal Reserve Agent. The Board f e e l s , however, that in cases where the examination i s


36.9011 •

mm mm

regarded as a regular ex@,mi nation. of the nature for which charges have consistently been made, the charge should not be waived simply because of the fact that the report of examination vzill serve as a basis for c e r t i f i c a t i o n to the Federal Deposit Insurance Corporation. I t w i l l be appreciated i f you w i l l advise the Board of each case in which a charge i s not made for the examination giving a concise statement of tlx, reasons why the charge was not rnadv in the particular case,"

/ It i s assumed that pract ica l ly a l l of the examinations made

between October 1, 1934, and July 1, 1935, vzill be used as a basis for

c e r t i f i c a t i o n to the Federal Deposit Insurance Corporation. The in -

structions i n the Board's l e t t e r dated July 36, 1930, X-6665, w i l l

continue to apply to examinations other than for c e r t i f i c a t i o n purposes.

I t i s believed that the instructions in the tvo l e t t e r s are s u f f i c i e n t l y

f l e x i b l e to provide for a l l circumstances.

I t i s assumed a l so that i n so far as p r a c t i c a b l e t h e Federal

reserve agents w i l l obtain the cooperation of the State banking depart-

ments in making jo in t examinations, thereby minimising inconvenience

and expense to the banks examined.

Very truly yours,

Chester Morril l , Secretary,

TO ALL mEBM, £bSKBVE AGMTS.




November 7, 1934.

SUBJECT: Salaries of Officers of Federal Reserve Banks.

Dear Sir:

In the Board's l e t t er X-7863 of April 16, 1934, you were

advised that the Board had considered a suggestion that some

method he adopted "by which proposed changes, at l eas t with respect

to those of an important character, in the sa lar ies of o f f i c e r s of

Federal reserve banks might "be considered somewhat informally in

advance of submission of de f in i t e recommendations by boards of

directors of Federal reserve "banks.

This suggestion has been given further consideration "by the

Board. I t s committee on salaries and expenditures of the Federal

reserve "banks and i t s committee for your d i s t r i c t would "be glad to

have "brought to their attention, in such manner as you may think

most expedient, any proposed changes in salaries of o f f i c er s of your

bank which you would l ike to have considered informally in advance

of the submission of def in i te recommendations by your board of d i -

rectors. In order that any such procedure may not delay the sub-

mission of d e f i n i t e recommendations for changes in sa lar ies by your


X-9013 330

- 2 -

board, of directors , the Board's committees would appreciate your

taking up with than any changes you ,_'ould l ike to have considered

in the manner indicated above not later than the f i r s t of December,

i f pract icable .

Very truly yours,

hr) pvu-U.


TO ALL F . R . CHAIRMEN EXCEPT NEW YOBK, CLEVELAND, ATLA.NTA, CHICAGO AND MINNEAPOLIS.




X-9014

November 8, 1934.


Dear Sir:


Government securi t ies between Federal reserve banks, the



"N0X0YD" - Treasury B i l l s to be dated November 14, 1934, and to mature May 15, 1935.



word "NOXOWL" on page 172.

truly yours,

— - v . C. i joel l , Assistant Secretary.





November 8, 1934

Dear Sir:

There are being forwarded to you today

under separate cover, for the use of your tank,

two copies of Report Ho. 1455 of the Committee

on Banking and Currency of the United States

Senate on stock exchange pract ices .

TO ALL F. R. AGENTS (No copies to Governors or extra copies to banks one copy to "be sent to Mr. Kitzmil ler . )

Very truly yours,

S. R. Carpenter, Assistant Secretary.


333 *59016? :



For immediate re lease November 8, 1934.

/ SECURITIES DEPOSITED FOR SALE.

RULING NO. 35 INTERPRETING REGULATION T. The Federal Reserve Board has

been asked to rule on the following question ar i s ing under Regulation T.

A customer maintaining with a broker a re s t r i c t ed account which i s not

a special account de l ivers certain reg i s tered , non-exempted s e c u r i t i e s

to such broker with the request that he s e l l the s e c u r i t i e s and del iver

the entire proceeds of the sa le to the customer. May the broker comply

with the customer's request? On the basis of the f a c t s submitted, the

Board rules that the broker may permit the withdrawal of the amount for

which such s e c u r i t i e s are so ld , i f the del ivery of such s ecur i t i e s into

the account, the sale of the s e c u r i t i e s , and the withdrawal of the funds

from the account, a l l occur on the same day, so that the withdrawal of

funds const i tutes a part of a combination of transactions nhich does not

resul t in a net withdrawal or an increase in the excess of the adjusted

debit balance of the account over the maximum loan value of the secur i -

t i e s in the account in v i o l a t i o n of sect ion 4(d) of the regulat ion.


X-9017



For immediate r e l e a s e . November 8, 1934.

'V17HBRAVAL OF PROCEEDS OF SALE OF UNREGISTERED, NON-EZEMFTED SECURITIES FROM RESTRICTED NEW ACCOOlfT.

Ruling No. 36 i n t e r p r e t i n g Regulat ion T. The Federal Reserve

Board has been asked whether under Regulat ion T a broker may pay to

a customer from a r e s t r i c t e d new account t-oe proceeds of the s a l e of

u n r e g i s t e r e d , non-exempted s e c u r i t i e s s o l d i n such account. In r ep ly

the Board r u l e s t h a t , i n the absence of other m a t e r i a l f a c t s , the broker

may permit t he withdrawal of any pa r t of the proceeds of such s a l e , i f

the s a l e , the payment of the proceeds in to the account , and the payment

of the proceeds from the account , a l l occur on the same day so t h a t the

withdrawal of the proceeds c o n s t i t u t e s a pa r t of a combination of t r a n s -

ac t ions which does not r e s u l t in a net withdrawal or i n an inc rease in

the excess of t h e ad jus t ed debi t balance of the account over the maximum z

loan value of the s e c u r i t i e s in the account i n v i o l a t i o n of s e c t i o n 4(d)

of the Regula t ion .



X-9019 WASHINGTON


November 10, 1934.

SUBJECT: Issuance of Voting Permits to Holding Company A f f i l i a t e s .

Dear Sir:

In a l e t t e r to a l l Federal Reserve Agents dated September 28,

1934 (X-8028), the Federal Reserve Board outlined the circumstances

and conditions under which general voting permits would be granted to

holding company a f f i l i a t e s , and stated that i t desires to i ssue general

voting permits in a l l cases where reports of current simultaneous exam-

inations of holding company a f f i l i a t e s and their subsidiaries are ava i l -

able and indicate condition, management and relat ionships to j u s t i f y .

It was also stated that as a condition precedent to the granting of

general voting permits the Board w i l l require holding company a f f i l i a t e s

and their subsidiary banks in general to comply with the same conditions

as to elimination of cr i t i c i zed a s s e t s , corrections of management p o l i -

c i e s , and relat ionships , as i f they were applying for and being admitted

to membership in the Federal Reserve System.

Thereafter, Mr. Leo H. Paulger, Chief of the Board's Divis ion

of Examinations, addressed a l e t t er dated September 29, 1934 (Exam.53),

to a l l Federal Reserve Agents requesting a report concerning the pro-

gress made in completing and analyzing the simultaneous examinations


X-9018

of tanks and. holding company a f f i l i a t e s as outlined in the Board's l e t t e r

dated January 20, 1934 (X-7763) and Mr. Paulger•s l e t t e r dated February

16, 1934 (Exam. 20), and concerning the extent to which such banks and

holding company a f f i l i a t e s have been, or w i l l be, able to make the elim-

inations and corrections referred to in the Board's l e t t e r of September

28, 1934 (X-8028).

The Board des ires to issue during this year, or at the ear l i e s t

practicable date, general voting permits in a l l cases in which reports

of current simultaneous examinations of holding company a f f i l i a t e groups

are available and indicate f inancia l condition, management and re la t ion-

ships which j u s t i f y the issuance of such permits. However, from the abovo

mentioned reports as to the status of each holding company a f f i l i a t e , and

from the information contained in the Board's f i l e s , i t i s apparent that,

in many cases, holding company a f f i l i a t e s w i l l not be able to obtain gen-

eral voting permits prior to the January, 1935 meetings of the banks in -

volved, either because arrangements could not be made with the national

and State supervisory authorit ies for simultaneous examinations, or be-

cause the holding company a f f i l i a t e s and their subsidiary member banks

have not completed their rehabi l i tat ion programs of have not made the re -

quired eliminations and corrections, and apparently w i l l not be i n a po-

s i t i o n to do so prior to the January, 1935 meetings.

In a l l cases i n which i t has been or w i l l be impracticable to

i ssue general voting permits prior to the January, 1935 meetings of the


- 3

O ; O U X-9018

banks, the Board w i l l consider the issuance of l imited voting permits

to vote the stock owned or controlled "by holding company a f f i l i a t e s at

the regular annual meetings, or any adjournments thereof , held by share-

holders of the subsidiary member banks prior to April 1, 1935, for the

following purposes:

1. To e lect directors of the subsidiary member banks.

2. To act thereat upon such matters of a routine nature as are ordinarily acted upon at the annual meetings of the subsidiary member banks.

In a l l cases in which the Board has received applications for vot-

ing permits on F.H.B. Form P - l , with exhibits , from holding company a f -

f i l i a t e s in your d i s t r i c t which desire to vote the stock of their sub-

sidiary member banks at the next annual meeting only for the purposes

set forth in 1 and 2 above, i t w i l l not be necessary for the Board to

receive any request for limited voting permits for such holding company

a f f i l i a t e s . I f , however, any such holding company a f f i l i a t e desires to

vote the stock which i t owns or controls of i t s subsidiary member banks

at the January, 1935 meetings for any purposes other than those set

forth in 1 and 2 above, i t w i l l be necessary that the Board be advised

of the additional purposes for which a limited voting permit i s desired.

If you have not already done so, please obtain and furnish to the Board

such information together with a detai led outl ine of the plan or plans

for which such shares are to be voted. Such information when forwarded

to the Board should be accompanied by your recommendation and that of


— 4 ••

f. 338 X-9018

the Executive Committee of your "bank concerning the issuance of a

permit for such additional purpose or purposes, and concerning any

additional requirenents to "be prescribed as a condition to the i s s u -

ance thereof.

In view of the fac t that i t i s impossible at th i s t ine to deter-

mine which of the holding company a f f i l i a t e s w i l l be able to obtain

general voting p e m i t s prior to the January, 1935 meetings, i t w i l l

be appreciated i f you w i l l advise the Board, at the ear l i e s t poss ib le

date concerning any holding company a f f i l i a t e which desires to vote

the stock of any of i t s subsidiary member banks for purposes other

than those stated in 1 and 2 above, except such holding company a f f i l -

i a t e s as have already been granted general voting permits. In any

case in which the Board has not received by December 1, 1934, inform

nation that a holding company a f f i l i a t e desires a l imited voting per-

mit to vote the stock of i t s subsidiary member banks for purposes in

addition to those stated in 1 and 2 above, the Board w i l l consider

that i t w i l l not be necessary to i ssue to such holding company a f f i l -

i a t e a l imited voting permit covering any purposes other than those

mentioned in 1 and 2 above.

As a condition precedent to the issuance of a l imited voting

permit for the purposes set for th in 1 and 2 above, the Board wi l l r e -

quire the fol lowing:


X-9018

Prior to the issuance of the l imited voting permit

the Federal Reserve Agent shal l s a t i s f y himself

that each of the subsidiary banks of the applicant

has charged off or otherwise eliminated (a) a l l

losses in loans and discounts, (b) a l l depreciation

i n stocks and defaulted securi t ies (c) a l l depre-

c ia t ion in secur i t i es not of the four highest grades as

c l a s s i f i e d by a recognized investment service organ-

i za t ion regularly engaged in the "business of rat ing

or grading securi t ies and (d) a l l other los ses ; as

shown by the l a t e s t available reports of examinations

by the appropriate supervisory author i t ies , except

that the charge-offs and eliminations required by (b)

and (c) above may be based upon current appraisals of

marketable securi t ies sat i s factory to the Federal

Reserve Agent.

Prior to the issuance of the limited voting permit

the Federal Reserve Agent shal l s a t i s f y himself that

the holding company a f f i l i a t e has substant ia l ly per-

formed any agreement or agreements heretofore ex-

ecuted by i t as a condition to the issuance of a lim-

i t ed voting permit by the Federal Reserve Board.

Prior to the issuance of the l imited voting permit the

Federal Reserve Agent and the Executive Committee of


r fr

6 ~ : • 340

X-9018

the Federal reserve "bank shal l approve the issu#-

ance of such permit.

The above requirements are minimum conditions which should

"be complied with prior to the issuance of a l imited vot ing permit

and i n certain cases additional requirements may "be imposed, depend-

ing upon the f a c t s and circumstances in any particular case. How-

ever, i n any case in which, in your opinion, compliance with con-

dit ions prescribed in connection with the issuance of a l imited vot -

ing permit i s impracticable or impossible prior to the annual meet-^,.

ing of any of the banks involved, please advise the Board concerning /

a l l of the pertinent facts and circumstances in such case, and fur-

nish the Board with your recommendations as to what modification, i f

any, should be made in the conditions prescribed.

I t i s contemplated that in authorizing the issuance of lim-

i t ed voting permits hereafter the Board w i l l continue the use of the

ANCIGAB telegram procedure outlined in i t s l e t t e r dated December 21,

1933 (X-7730). Instead of writing out the above mentioned conditions

fol lowing the l e t t e r MC" i n each AUCIGAE telegram, as has been done

heretofore, in future AUGIGAB telegrams these conditions w i l l be

referred to by a code word which w i l l have the meaning se t opposite

such word as fo l lows:

AECIEBAT Prior to the issuance of the l imited voting permit authorized herein, ( l ) the Federal Reserve Agent sha l l s a t i s f y himself that each of the subsidiary


- 7 -

341 X-9018

"banks of the applicant has charged off or otherwise eliminated, (a) a l l losses i n loans and discounts, (b) a l l depreci-ation in stocks and defaulted s e c u r i t i e s , (c) a l l depreciation in secur i t i e s not of the four highest grades as c l a s s i f i e d "by a recognized investment service organization regularly engaged i n the "business of rating or grading secur i t i es and (d) a l l other losses ; as shown by the l a t e s t avai lable reports of examinations by the appropriate supervisory authori t ies , exeept that the charge-offs and eliminations required by (b) and (c) above may be based upon current appraisals of marketable secur i t i e s s a t i s -factory to the Federal Reserve Agent; (2) the Federal Reserve Agent sha l l s a t i s f y him-se l f that the applicant has substant ial ly performed any agreement or agreements here-tofore executed by i t as a condition to the issuance of a l imited voting permit by the Federal Reserve Board; (3) the Federal Reserve Agent and the Executive Committee of the Federal reserve bank sha l l approve the i s su -ance of such permit.

Likewise, in. future AHCIGAR telegrams, instead of writing out,

following the l e t t e r »D" in each AITCIGAR telegram, as has been done

heretofore, the purposes for which stock of subsidiary member banks

may be voted as set forth in 1 and 2 of page 2 of this l e t t e r , such

purposes w i l l be referred to by a code word which w i l l have the mean-

ing set opposite such word as fo l lows:

AHCILCO To e lec t directors of such (bank) at the annual (meeting) of shareholders, or at any adjournments thereof , at any time prior to April 1, 1935, and to act thereat upon such matters of a routine nature as are ordinarily acted upon at the annual meetings of such (bank),


» 8 *• 4>

X-9018 °

Where tlio l imited voting permit covers raore than one subsidiary

member bank, please use the plural instead of the singular of the words

inclosed in parentheses above. I t w i l l he appreciated i f you w i l l

promptly forward to the Board two executed copies of any l imited voting

permits issued by you.

In order that general voting permits may be issued in a l l cases

at the e a r l i e s t date practicable, you are requested to continue your

e f for t s to complete simultaneous examinations of holding company a f f i l i a t e

groups in your d i s t r i c t and, in each case in which such examinations have

been completed, to furnish to the Board your recommendations concerning

the conditions upon which a general voting permit should be issued. Re-

gardless of whether simultaneous examinations have been completed or

recommendations furnished in a l l cases, i t w i l l be appreciated i f you

w i l l complete and forward to the Board, i f you have not already done so,

at the ear l i e s t poss ible date, Part II of the status reports requested

in .Mr. Paulger1s l e t t e r dated September 29, 1934 (Exam. 53). I t was con-

templated that Part II of such report covering each holding company a f -

f i l i a t e group in your d i s t r i c t would be forwarded to the Board as soon

as information was obtained in each case, without waiting for the com-

ple t ion of simultaneous examinations, or for information to be obtained

concerning any other holding company a f f i l i a t e group.

Very truly yours,

Chester Morrill , Secretary,

TO ALL FEDERAL RESERVE AGENTS,


X-9019

843

U S ^ 5 . R A L R E S E R V E B O A R D


For immediate re l ease , November 13# 1934«

SUBSTITWIOliC OF UMREGISTERED, UOJI-EXEvIPTED SECURITIES I2i OLD ACCOUNTS PY SALE AKD PURCHASE OF SUCH SECURITIES,

Ruling No. 57 interpreting .Regulation T« The Federal Re-

serve Loarti has been asked whether under Regulation ? the c*/u?titu-

t ion of x;nre/-iti vered, non-exempted secur i t ies i s permitted in a

designated old account i f such substitution i s e f fec ted by the

sale of such secur i t i es and the purchase of other such s e c u r i t i e s .

In reply to t h i s question, the Board rules thdt* i f such substitu-

t ion i s made within a period of two successive business days and

the pjrdceeds of the secur i t i es sold equal or exceed the cost of

the secur i t i es purchased so that the combination of transactions

does not resul t in an increase in the adjusted debit balance of

the account, i t i s permitted by the regulation# regardless of

Whether the sa le occurs before or af ter the purchase; Provided#

That# the broker must obtain payment for the secur i t i e s sold be-

fore he pays for the securi t ies purchased, unless the maximum

loan value of the secur i t ies in the account exceeds the adjusted

debit balance of the account by an amount not l e s s than that to

be paid for the secur i t i es purchased*


844

X-9020

>



For immediate re lease . November 14, 1934.

WITHDRAWAL OF INTEREST AID HASH DIVIDENDS FROM RESTRICTED ACCOUNTS.

Ruling Ho. 38 interpreting Regulation T. In response to

several inquir ies , the Federal Reserve Board rules that interest

and cash dividends on securi t ies in any res tr ic ted account may,

at the option of the creditor, he paid to the customer i f they

are paid on the same day on which, in accordance with the creditor's

usual pract ice , they are credited to the customer's account. This

ruling applies t o interest on coupon bonds as well as to interes t

on registered "bonds and cash dividends on stocks.




X-9021

November 17, 1934.

SUBJECT: Code Word Covering New I s sue of Treasury B i l l s •

Dear S i r :


Government s e c u r i t i e s between Federa l r e s e r v e banks, the



"NOXOZO" - Treasury B i l l s t o be dated November 21, 1934, and t o mature May 22, 1935.


serve Telegraph Code book, fo l lowing the supplemental code

word "NOXOYD" on page 172.


N&




346


November 17, 1934*

Dear S i r :

The Board r e c e n t l y r ece ived a l e t t e r from an a p p l i c a n t f o r an

i n d u s t r i a l loan under Sect ion 13b of the Federa l Reserve Act s t a t i n g

t h a t he had r ece ived a b i l l from the Federa l r e s e r v e bank t o which the

a p p l i c a t i o n was submit ted, f o r s eve ra l hundred d o l l a r s , r e p r e s e n t i n g

the charge made by an ou ts ide f i rm of a u d i t o r s f o r making an examina-

t i o n i n connect ion with t he a p p l i c a t i o n . The a p p l i c a n t f o r t h e loan

s t a t e s t h a t he e i t h e r overlooked e n t i r e l y a paragraph i n t h e bank1s

a p p l i c a t i o n form r e l a t i n g t o payment of expenses, or e l s e took i t f o r

granted t h a t when he f u r n i s h e d a f u l l d e t a i l e d r e p o r t by a u d i t o r s of

recognized s tanding t h e r e would be l i t t l e , i f any, expense involved f o r

f u r t h e r i n v e s t i g a t i o n .

A f t e r cons ide r ing t h e correspondence i n t h i s case , and the

r e p l i e s t o t h e Board1s t e legram of October 12, 1934, Trans 2124, i t i s

f e l t t h a t , i n order t o avoid misunders tandings , i t would be d e s i r a b l e

f o r the Federa l r e s e r v e bank be fo re under taking any i n v e s t i g a t i o n or

examination i n connect ion with an a p p l i c a t i o n f o r a loan under s e c t i o n

13b which may involve expense t o the a p p l i c a n t t o advise such a p p l i c a n t

as t o the bank ' s p o l i c y wi th r c s p e c t t o the payment of t h e expense of


' 347 - 2 - X-9022

such i n v e s t i g a t i o n or examination and t o give t h e a p p l i c a n t an e s -

t ima te of the amount of t h e charges i t w i l l be expected t o pay wherever

i t i s p o s s i b l e t o do s o . I t does not appear t o be s u f f i c i e n t t o r e l y

upon a p r i n t e d s ta tement i n t h e a p p l i c a t i o n form, s ince such a s t a t e -

ment may be overlooked or no t f u l l y apprec ia t ed by t h e a p p l i c a n t .


-fafUAXtA)


TO TEE CHAIRMEN OP ALL F. R. BAlKS.




X-9023

November 19, 1934.

SUBJECT: Holidays during December, 1934«

Dear S i r :

The Federa l Reserve Board i s advised t h a t

t h e Havana Agency of the Federa l Reserve Bank of

A t l a n t a w i l l be c losed on Fr iday , December 7 i n

observance of Cuban Memorial Day.

On Christmas Day the o f f i c e s of the Fed-

e r a l Reserve Board and a l l Federa l r e s e r v e banks

and branches w i l l be c l o s e d .

P lease n o t i f y branches•


A s s i s t a n t Sec re t a ry

TO GOVERNORS OF ALL FEDERAL RESERVE BANKS. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis



X-9024

November 20, 1934•

Dear S i r :

There are enclosed herewith copies of

s ta tement rendered by the Bureau of Engraving

and P r i n t i n g , cover ing the cos t of p repa r ing

Federa l r e se rve notes f o r the month of October,

1934.


0 . E. Foulk, F i s c a l Agent

Enclosure

TO ALL FEDERAL RESERVE AGESfTS.


350

X-9024-a

Statement of Bureau of Engraving and P r i n t i n g f o r f u r n i s h i n g Federal Reserve Notes Se r i e s 1928, October 1 t o 31, 1934.

Tota l $5 $10 =05

= CO

o $50 #100 Sheets Amount

Boston, . . . 15,000 7,000 22,000 $ 1,892.00 New York, . . 34,000 - 150,000 30,000 30,000 244,000 20,984.00 Ph i lade lph ia , 30,000 144,000 48,000 - - 222,000 19,092.00 Cleveland, . . - 48,000 40,000 - - 88,000 7,568.00 Richmond, . . - 11,000 38,000 - - 49,000 4,214,00 A t l a n t a , . . . 14,000 - - - - 14,000 1,204.00 Chicago, . . • 24,000 140,000 36,000 - — 200,000 17,200.00 S t . L o u i s , . . 54,000 52,000 19,000 • - 125,000 10,750.00 Minneapol i s , . 17,000 16,000 22,000 - - 55,000 4,730.00 Kansas C i t y , . - 28,000 20,000 - - 48,000 4,128.00

173,000 454,000 380,000 30,000 30,000 1,067,000 91,762.00

1,067,000 s h e e t s , © #86.00 per M, $91,762.00

Ser ies 1934

New York $10, 38,000 s h e e t s , @ $86.00 per M 3,268,00 $95,030.00




X-9025

November 21, 1934.

SUBJECT: Expense, Main Lines , Leased Wire System, October, 1934.

Dear S i r :

Inclosed herewith you w i l l f i n d two mimeo-graphed statements. X-9025-a and X-9025~b, covering i n d e t a i l operations of the main l i n e s , Leased Wire System, during the month of October, 1934.

Please credit the amount payable by your bank for your share of the expense of the Leased Wire System, to the Federal Reserve Ba^k of Richmohd i n your dai l y statement of cred i t s through the Gold S e t -tlement Fund for the account of the Federal Reserve Board, and advise the Federal Reserve Bank of Richmond by wire the amount and purpose of the c r e d i t .

Very t ruly yours,

F i s c a l Agent.

Inc losures .



X-9025-a REPORT SHOTOTG CLASSIFICATION AMD 2TUMBER OF WORDS TRANSMITTED OVER MAIF LIZES

OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE ImOITTH OF OCTOBER, 1934.

Words sent by Net Federal Business New York charge- reserve reported able to other bank Per cent of t o t a l

From by banks F. R. Banks ( l ) business bank business (*)

Boston 32,425 1,809 34,234 4 .31 New York 159,534 - 159,534 20.11 Philadelphia 31,296 1,959 33,255 4 .19 Cleveland 52,026 1,685 53.711 6.77 Richmond 48,937 1,730 50,667 6.39 Atlanta 51,187 1,669 52,856 6.66 Chicago 83,712 2,027 85,739 10.81 St- Louis 64,771 2,021 66,792 8 .42 Minneapolis 38,257 1,630 39,887 5 .03 Kansas City 64,797 1,704 66,501 8.38 Dallas 55,127 2,204 57,331 7 .22 San Francisco 88,958 3,958 92,916 11.71

Total 771,027 22,396 793,423 100.00

F. E. Board business 406,406

Reimbursable business Incoming & Outgoing.

Total words transmitted over main l i n e s . . .

1 ,199,829

697,7^3

1,897,572

(*) These percentages used in calculat ing the pro rata share of leased wire expense as shown on the accompanying statement (X-9025-b)

( l ) Number of words sent by New York to other F. R. Banks for their sole benef i t charged to banks indicated in accordance with act ion taken at Governors' Conference November 2-4 , 1925.


X-9025-b

HEPOHT OF EXPENSE MAIIT 1,1:33 FEDERAL El SERVE LEASED WERE SYSTEM, OCTOBER, 1934.

Ret ire -ment

Operators' Contribu-

Oper-ators1

over- Wire Total

Pro rata share of to ta l

Payable Federal Reserve

to

Fame of Bank Salaries t ions time rental expenses 1 expenses Credits Board

Boston $260.00 $ 23.40 $ - $ — $283.40 $672.26 $283.40 $388.86 ITerr York 1,345.80 121.12 21.00 — 1,487.92 3,136.69 1 ,487.92 1,648.77 Phi ladelphia 225.00 20.25 245.25 653.54 245.25 408.29 Cleveland 306.66 27.60 33^.26 1,055.96 334.26 721.70 Richmond 190.00 17.10 — 230.00(a) 437.10 996.69 437.10 559.59 Atlanta 270.00 24.30 294.30 1,038.80 294.30 744.50 Chicago 4 , 1 3 1 . 0 0 ( f ) 368.45 9.75 — 4,R09.20 1,686.11 4 ,509.20 2,823.09(*) St- Louis 195.00 17.55 — 212.55 1,313.32 212.55 1,100.77 Minneapolis 200.00 18.00 — 218.00 784.56 218.00 566.56 Kansas City- 287.00 25.83 — — 312.83 1,307.08 312.83 994.25 Dallas 251.00 22.59 273.59 1,126.15 273.59 852.56 San Francisco 380.00 34.20 414.20 1,826.49 4 l 4 . 2 0 1,412.29 Federal Reserve Bd» — — 15,645.62 15,645.62 ***

Total $8,041.46 $720.39 $30.75 $15,875-62 $24,668.22 $15,597.65 $9,022.60 $9,398.14

Less Reimbursable Charges: 9,070.57 $15,597.65

2,823.09(a) $6,575.05

C & ) Main l i n e renta l , Richmond-Washington. (#) Includes sa lar i e s of Washington operators. wv (*) Credit. Ol (a) Amount reimbursable to Chicago.


November 21, 1934.

Dear S i r :

There I s i nc lo sed f o r your in format ion and

guidance a copy of the te legram dated November 15,

1954, from the Federa l Reserve Board t o Mr. Sargent

A s s i s t a n t Federa l Reserve Agent a t San F r a n c i s c o ,

r ega rd ing the i n t e r p r e t a t i o n of the term " c a p i t a l

s tock" as used in s tandard cond i t i on of membership

numbered 10 in connection wi th su rp lus requ i rements



I n c l o s u r e .

TO ALL F. R. AGENTS.


355

C O P Y X-9026-a

T E L E G R A M


WASHINGTON

November IE, 1954.

SARGENT - San Franc isco

Your te legram November 8 r e Bank , Washington.

Sec t ion 9 of the Federa l Reserve Act as amended prov ides t h a t

f o r the purposes of membership the terra " c a p i t a l s tock" s h a l l

i nc lude the amount of ou t s tand ing c a p i t a l no t e s and debentures

l e g a l l y i s sued by the bank and purchased by the Recons t ruc t ion

Finance Corpora t ion . Accordingly the Board cons ide r s t h a t the

term " c a p i t a l s tock" as used in s tandard cond i t ion of member-

sh ip numbered 10 r ega rd ing su rp lus inc ludes c a p i t a l n o t e s and

debentures as desc r ibed above as wel l as c a p i t a l s tock of a l l

c l a s s e s .

MORRILL





November 23, 1934.

SUBJECT: Code Word Covering New I s sue of Treasury B i l l s .

Dear S i r :


Government s e c u r i t i e s between Federa l r e se rve banks, the



serve Telegraph Code book, fo l lowing t h e supplemental code

word "NOXOZO" on page 172.

"NOXPAD" - Treasury B i l l s t o be dated November 28, 1934, and t o mature May 29, 1935.


»ry t r u l y yours ,

J . C. Noel l , J . C. Noel l , A s s i s t a n t S e c r e t a r y .





X-9028

llov ember 24, 1934

Dear Sir:

There i s inclosed for your information a copy of a

l e t t e r received from Mr. Worthington, Deputy Governor of the

Federal Reserve Bank of Kansas City, regarding the at t i tude

of Dun & Bradstreet with reference to credit ratings of con-

cerns that have mortgaged their real estate and plant equip-

ment and in some instances made assignments of receivables to

secure industrial loans; a copy of a l e t t er from Mr. Rounds,

Deputy Governor of the Federal Reserve Bank of New York, in

regard to the questions raised in Mr. Worthington's l e t t e r ;

and a copy of the Board's reply to Mr. Worthington.

Very truly yours


Inclosures.

TO GOVERNORS OF ALL F. R. BANKS EXCEPT KANSAS CITY.


C o p y x -9028 -a

f e d e r a l j r e s e r v e m m o f

k a h s a s c i t y

November 2, 1934.

Federal Reserve Board, Washington, D . 0 .

Gentlemen:

In the handling of negotiations for industr ia l loans an obstacle has developed i n th i s d i s t r i c t which may or may not have been "brought to your at tent ion "by other Federal r e -serve banks. I t i s the a t t i tude of Dun & Bradstreet, Inc. , with reference to credit ratings of concerns that have mort-gaged their rea l es tate and plant equipment and, in some instances , made assignment of receivables to secure industr ia l loans. One loca l applicant, whose loan has been approved by our Industrial Advisory Committee and our Executive Committee, has about decided to withdraw his application because he has been informed by the Kansas City o f f i c e of Dun & Bradstreet that the pledging of his real e s ta te , machinery and a portion of h i s receivables wi l l make i t necessary for them to eliminate h i s rating from their reference books. If th i s i s done, the applicant f e e l s that he w i l l be unable to obtain shipments of raw materials except on a C.O.D. b a s i s . This a t t i tude of Dun & Bradstreet w i l l have a tendency to destroy the value of an industr ia l loan to such an applicant. The matter has been d i s -cussed with the l o c a l manager of the mercantile agency, who has agreed to submit i t to New York but doubts whether the instruc-t ions of the New York o f f i c e w i l l enable him to g ive a s a t i s -factory rating to such concerns as may take advantage of the provisions of the law under which we are making these industr ia l loans.

It i s suggested that the Federal Reserve Board may deem i t advisable to take th i s matter up direct with Mr. Whiteside, President of Dun & Bradstreet, I n c . , or with other responsible o f f i c i a l s at their headquarters in New York.

Very truly yours,

(Signed) C. A. Worth!ngton

C. A. Worthington, Deputy Governor.

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

X-9028-b 359

OF HEW YOEK

November 13, 1934.

Mr, E. 1. Smead Chief, Division of Bank Operations

Federal Reserve Board Washington, D. C.

Dear Mr. Sniead;

Referring to Mr. Worthington's l e t t e r of November 2 addressed to the Board concerning the pol icy or at t i tude of Dun & Brad-s tree t , Inc. with reference to credit ratings of concerns which have mortgaged their real es tate and plant equipment to secure industrial loans, l.Ir. Whiteside, President of Dun & Bradstreet, Inc . , i s now in Washington in the Government service. Mr. Boy Foulke, Vice President of the company, i s well known to one of our o f f i c e r s , and in discussing this matter with Mr. Foulke he has explained that i t i s , of course, the func-tion of the rating agency to advise i t s c l i ents of any fac t s coming to i t s attention with reference to the f inancial status of concerns rated by them. These facts may he d i f ferent ly interpreted according to the view taken by the subscriber to the service . Mr. Foulke says, however, that so far as their rating of such concerns i s a f fec ted by these loans, they have been incl ined to consider the loan a constructive factor . He does not reca l l any instance where the rat ing of the concern has been lowered because of the loan. On the other hand, he did reca l l some iin-stances where the rating had been raised. He said that he knew of a few cases where a rating had been lowered at about the time a loan was granted but that i t was not the result of the granting of the loan, but rather the result of a review of the s i tuat ion and that the rating would have been lowered even though the loan had not been granted.

Mr. Foulke has been in contact with us i n connection with a number of applications and he expressed the opinion that the making of industrial loans as had been done in this d i s t r i c t i s altogether desirable from the standpoint of the creditors of the borrower . as well as from the borrower*® standpoint. *

Mr. Foulke indicated a will ingness to review any spec i f i c case that we might bring to his attent ion, and i f Mr. Worthington w i l l sub-mit the fac t s in the case he has mentioned, we w i l l be glad to take i t up with Mr. Foulke.

There i s , of course, no escaping the facts in these s i t -uations and creditors w i l l almost invariably consider that any concern which has given a chattel mortgage upon i t s machinery and equipment, or which has made an assignment of i t s accounts receivable, i s a l e s s desirable credit r i sk from the point of view of the unsecured trade creditors than i t was before such mortgage or assignment was made. This i s a fact which can not be escaped. I t i s only fa ir to say, however, that th i s change in att i tude

CO P I

FED3RA.L RESERVE BAH


Federa l Reserve Bank of Hew York 2 . X-9028-1)

i s not a lone the r e s u l t of the a c t u a l g iv ing of the mortgage or making of the ass ignment , but i s a l s o the r e s u l t of the d i s c l o s u r e of the extended s i t u a t i o n which raade necessary t h i s a c t i o n .

We have been mindful of t h i s adverse e f f e c t on t h e c r e d i t s t and ing of a borrower by the t a k i n g of c o l l a t e r a l i n t h i s form and have t r i e d t o avoid t ak ing of c h a t t e l mortgages or ass ignments of a c -counts r e c e i v a b l e wherever we can p rope r ly do so and i n many cases i n l i e u thereof have taken t h e agreement of the borrower not to g ive a c h a t t e l mortgage or to make an assignment of accounts r e c e i v a b l e t o any o the r p a r t y without our consent . There a r e s i t u a t i o n s , however, where i t i s imposs ib le to make a loan on a reasonab ly sound b a s i s without t ak ing t h e s e s t e p s , and i t may g e n e r a l l y be considered t h a t i f t h e t a k i n g of t h i s s t e p r e s u l t s i n a lowering of t h e c r e d i t r a t i n g of the borrower, then such c r e d i t r a t i n g was p rev ious ly h igher than j u s t i f i e d and was due f o r a lower ing i n any e v e n t . I t would not seem to the w r i t e r t h a t t h i s i s a mat te r t o be g r e a t l y con-cerned about and a t l e a s t from the p o i n t of view of our hand l ing of t he se c a s e s , we do not b e l i e v e i t r e p r e s e n t s a s e r i o u s o b s t a c l e to the g r a n t i n g of these l o a n s .

I f t h e r e i s any f u r t h e r i n fo rma t ion t h a t you d e s i r e , we s h a l l be glad t o be of s e r v i c e .


(Signed) L. R. Rounds

L. R. Rounds Deputy Governor


C O P Y X-9028-c

November 23, 1934,

Mr. C• A. Worthington, Deputy Governor, Federa l Reserve Bank of Kansas Ci ty , Kansas C i ty , Missour i .

Dear Mr. Worthington:

Upon r e c e i p t of your l e t t e r of November 2, r e l a t i n g to the a t t i -

tude of Dun & B r a d s t r e e t wi th r e f e r e n c e to c r e d i t r a t i n g s of concerns

tha t have mortgaged t h e i r r e a l e s t a t e and p l a n t equipment and, i n sane

i n s t a n c e s , made ass ignments of r e c e i v a b l e s to secure i n d u s t r i a l l o a n s ,

we c a l l e d Mr. Rounds, who i s i n charge of malung i n d u s t r i a l loans a t

the Fede ra l Reserve Bank of New York, and asked him whether he had en-

countered o b s t a c l e s s i m i l a r to those s e t f o r t h i n your l e t t e r . Mr.

Rounds advised us t h a t s i m i l a r d i f f i c u l t i e s had not been encountered by

h i s bank, but t h a t he would be glad to con tac t one of t h e o f f i c e r s of

Dun & B r a d s t r c e t , not f o r the purpose of i n f l u e n c i n g the company's

r a t i n g procedure i n any way, but f o r the purpose of f i n d i n g out the ex-

t e n t to which i t s r a t i n g s a r e a f f e c t e d by the i n d u s t r i a l loans made by

the Federa l Reserve banks .

For your i n f o r m a t i o n , t h e r e i s i n c l o s e d a copy of a l e t t e r r ece ived

from Mr. Rounds, under da te of November 13, i n which he s e t s f o r t h the

r e s u l t of h i s d i s c u s s i o n with Mr. Foulke, Vice P r e s i d e n t of Dun &

B r a d s t r e e t , I n c .

I t i s unders tood from your l e t t e r t h a t the Kansas Ci ty Manager of

Dun & Brads t r e e t i s submi t t ing the f a c t s i n the case you mention t o h i s


Mr. C. A. Worthington - #2

• 362 X-9028-C

Hew York o f f i c e , and i t i s assumed t h a t he w i l l r e c e i v e a r e p l y i n harmony

TTith the p o s i t i o n o u t l i n e d i n Mr. Rounds ' l e t t e r . This rrould seem t o

make i t unneces sa ry f o r e i t h e r your "bank or the Board to t a k e t h e m a t t e r

up f o r m a l l y vrith Dun & B r a d s t r e e t , I n c .

Very t r u l y y o u r s ,

(Signed) Ches te r M o r r i l l

Ches te r M o r r i l l , S e c r e t a r y .

I n c l o s u r e .


363

X-903'0"



For immediate r e l e a s e . November 24, 1934.

The S e c u r i t i e s Exchange Act of 1934 placed a d d i t i o n a l r e s p o n s i b i l i -

t i e s on the Federa l Reserve Board looking toward t h e p reven t ion of t he

excess ive use of c r e d i t f o r t he purchase or ca r ry ing of s e c u r i t i e s •

The r e s e a r c h and a d m i n i s t r a t i v e work of t h e Board 's s t a f f i n t h i s connec-

t i o n has been c a r r i e d on in the Div is ion of Research and S t a t i s t i c s . In

view of the importance of t h i s a c t i v i t y the Board has now c r e a t e d a new

d i v i s i o n f o r t h i s work which w i l l be c a l l e d the Div i s ion of S e c u r i t i e s

Loans. Dr* Carl E, Pa r ry who has been A s s i s t a n t D i r ec to r of t h e Board 's

Divis ion of Research and S t a t i s t i c s w i l l be the Chief of the new

d i v i s i o n .

Dr. Lauchl in Cur r ie , who has been engaged i n r e s e a r c h i n t h e monetary

f i e l d i n the Treasury Department, has been appointed by the Board as As-

s i s t a n t D i r e c t o r of the Div is ion of Research and S t a t i s t i c s , and Dr.

Woodlief Thomas, who has been a member of the s t a f f of t h e d i v i s i o n , has

a l s o been des igna ted A s s i s t a n t D i r ec to r of the d i v i s i o n . Under t he

genera l s u p e r v i s i o n of Dr. E. A. Goldenweiser, the D i r e c t o r , i t i s con-

templated t h a t t he work of the d i v i s i o n invo lv ing r e s e a r c h i n t h e

monetary f i e l d w i l l come under Dr $ Curr ie and r e s e a r c h i n banking and

bus iness f i e l d s w i l l come under Dr. Thomas•



WASHINGTON


X-9031

November 26, 1934.

Dear S i r :

The Federa l Reserve Board has been advised t h a t a l e t t e r , s imi -

l a r t o t he one i n c l o s e d , has been forwarded by t h e o f f i c e of the Comp-

t r o l l e r of t h e Currency t o a l l banks which, according t o t h e records

of the Compt ro l l e r ' s o f f i c e , have two banking i n s t i t u t i o n s doing b u s i -

ness w i th in t h e same room. In advis ing t h e Board t h a t such l e t t e r s

have been s en t t o the banks concerned, the Compt ro l l e r ' s o f f i c e has

suggested t h a t the Federa l Reserve Board and the Fede ra l r e s e r v e banks

lend t h e i r moral support i n c o r r e c t i n g the p r a c t i c e r e f e r r e d t o .

The p r i n c i p l e s expressed in t he l e t t e r of t h e Deputy Comptrol ler ,

dated October 27, 1934, a re i n accord wi th t h e p o l i c y which has been

fol lowed by the Board f o r some time i n Connection wi th a p p l i c a t i o n s f o r

membership of banks whose banking q u a r t e r s have been shared by b u i l d i n g

and loan a s s o c i a t i o n s and other f i n a n c i a l o r g a n i z a t i o n s . Repl ies t o

the Board 's l e t t e r da ted August 15, 1934, X-7982, addressed to a l l Fed-

e r a l r e s e r v e agen t s , r e f l e c t genera l agreement w i t h t h e p r i n c i p l e t h a t

o rgan i za t i ons whose a c t i v i t i e s might embarrass member banks or o ther

banks which are in su red by the Federa l Deposit Insurance Corpora t ion ,

or which might render the supe rv i s ion of such banks more d i f f i c u l t ,


- 2 - X-9031

should be excluded from t h e banking q u a r t e r s of such banks, or f rom

q u a r t e r s e a s i l y a c c e s s i b l e t h e r e f r o m .

I t i s suggested , t h e r e f o r e , t h a t i n s i t u a t i o n s of t h i s na tu re

you give due c o n s i d e r a t i o n t o t h e p r i n c i p l e s and p o l i c i e s which have

been expressed .



I n c l o s u r e .



C O P Y X-9031-a ^ 8 6

October 27, 1934.

Board of Directors Bank

Gentlemen!

Many years ago i t was made c lear to t h i s o f f i c e that there are a great many objections t o a National bank occupying the same or adjoining room with some other bank or f inanc ia l in -s t i t u t i o n . These objections have become increas ingly aggravated, part icu lar ly during the past few yearA. The objectionable f e a -tures to such c lose i d e n t i f i c a t i o n between two banking i n s t i t u -t ions have become so pronounced that some States have passed laws prohibiting State banks from occupying the same building with another bank.

I t has come to my at tent ion that your bank and a comparatively few other National banks in the country are occupy-ing the same or adjoining room with another bank or f i n a n c i a l i n -s t i t u t i o n in which j o i n t l y occupied rooms are found signs and other material indicat ing Federal Deposit Insurance as administered by the Federal Deposit Insurance Corporation, Washington, D. C. To the ordinary depositor reading the s igns , the assumption i s that the other bank or f i n a n c i a l i n s t i t u t i o n , as wel l as your bank, have deposits insured by the Federal Deposit Insurance Cor-poration.

In view of the foregoing, m i l you please advise me what arrangements you can make looking towards a discontinuance of the operation of your bank i n the same or adjoining room with the other bank or f inanc ia l i n s t i t u t i o n which i s now doing busi -ness in the same or adjoining room.

Very t ru ly yours,

Deputy Comptroller.

TM-l/RMH


X-9032

November 28, 1934.

SUBJECT: The Use of Valuation Reserves in Lieu of Actually Charging Off Losses and Depreciation in Securi t ies .

Dear Sir:

For your information there are inclosed a

copy of a l e t t e r received by the Board from Mr. J. M.

Peyton, Chairman of the Board at the Federal Reserve Bank

of Minneapolis, dated November 19, 1934, and a copy of

the Board's reply thereto, which are self-explanatory.

Very truly yours,


Inclosures



368

Copy FEDERAL RESERVE BANK X-9052-a

OF MINNEAPOLIS

November 19, 1934

Mr. Chester Morrill, Secretary, Federal Reserve Board,

Washington, D. C.

Dear Mr. Morrill ,

From your l e t t e r X-9018 of November 10, 1934, I

quote as fol lows:

"Prior to the issuance of a l imited voting permit the Federal Reserve Agent shal l s a t i s f y himself that each of the subsidiary banks of the applicant has charged of f or otherwise eliminated - (a) . * * * * *"

Undoubtedly the question w i l l ar ise as to whether a reserve set up against any of those items named in (a ) , (b) , (c) or (d) of t h i s paragraph w i l l be sat i s factory to the Federal Reserve Agent. Personally, i f any bank desired to se t up a re -serve adequate to cover the depreciation in secur i t i e s , assuming that i t has eliminated the other requirements through actual charge o f f , i t would be my incl inat ion to recommend the bank for a l imited voting permit under those conditions.

Before taking de f in i t e action i n the matter and be-fore advising the banks with regard to t h i s de ta i l , I would appreciate a word from you informing me i f i t w i l l be sa t i s fac tory to the Board to issue a l imited voting permit under these circum-stances.

Very truly yours,

(Sgd.) J. N. Peyton CHAIRMAN OF THE BOARD


369

Copy X-9052-b

November £6, 1954.

Mr. J . M. Peyton, Federa l Reserve Agent, Federa l Reserve Bank of Minneapol is , Minneapol is , Minnesota.

Dear Mr. Peyton:

Reference i s made t o your l e t t e r of November 19 i n which you

r e q u e s t i n fo rma t ion a s t o whether or no t the use of r e s e r v e s by s u b s i d -

i a r y banks c o n s t i t u t e s s a t i s f a c t o r y e l i m i n a t i o n of l o s s e s and d e p r e c i a -

t i o n as a cond i t i on p receden t t o the i s suance of l i m i t e d vo t ing p e r m i t s ,

as o u t l i n e d i n the Board ' s l e t t e r of November 10, 1934 (X-9018).

The Board c o n s i d e r s t h a t t h e charge o f f or e l i m i n a t i o n of e s t i -

mated l o s s e s and d e p r e c i a t i o n i n a s s e t s a s r e q u i r e d i n paragraph num-

bered 1 on page 5 of such l e t t e r may be e f f e c t e d p r o p e r l y through the

e s t ab l i shmen t and maintenance of v a l u a t i o n r e s e r v e s , provided t h a t i n

a l l r e p o r t s and publ i shed s t a tements of cond i t ion such r e s e r v e s be

deducted from the r e s p e c t i v e a s s e t s a g a i n s t which a l l o c a t e d , thereby

r e p o r t i n g such a s s e t s i n t h e same amounts as i f t he charge o f f 3 a c t u a l l y

had been made, and t h a t t h e l o s s e s t o provide f o r which the r e s e r v e s

were e s t a b l i s h e d a r e charged a g a i n s t the r e s p e c t i v e r e s e r v e s a s soon

as such l o s s e s a r e d e f i n i t e l y de termined.

Very t r u l y y o u r s ,

(Signed) Ches ter M o r r i l l Chester M o r r i l l ,

S e c r e t a r y .


370

X-9033



For immediate re l ease . November 28, 1934.

Mr. L. B. Williams, former Chairman and Federal Reserve Agent

of the Federal Reserve Bank of Cleveland has accepted the p o s i t i o n

of Chairman of the Board of the National City Bank of Cleveland.

The Federal Reserve Board wishes to announce that the Deputy

Chairman - Mr. E. S. Burke, J r . , of Cleveland, Ohio, who has "been

serving as Class »C" Director and Deputy Chairman since March 1933,

i s now Acting Chairman of the Board; and Mr. W. H. Fletcher , who

has "been Ass i s tant Federal Reserve Agent at that Bank for a period

of twelve years , i s now Acting Federal Reserve Agent.

These men are not only known and highly regarded i n the Federal

Reserve Bank of Cleveland, hut i n a l l "banking and business c i r c l e s

of that D i s t r i c t .



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 H0V6Dlb6r 30, 1934,

SUBJECT: Code Word. Covering New Issue of Treasury B i l l s .

Dear S i r :

In connection with te legraphic transact ions i n

Government s e c u r i t i e s between Federal reserve hanks, the

f o l l o w i n g code word has "been designated to cover a new


"NOXPEN" - Treasury B i l l s to he dated December 5, 1934, and to mature June 5, 1935

This word should he inserted i n the Federal Re-

serve Telegraph Code hook, fo l lowing the supplemental

code word "NOXPAD" on page 172.


J . C. N o e l l , Ass i s tant Secretary.

TO G0VEE.WS OF ALL F. B. BASKS



WASHINGTON


X—9035

November 30, 1934

Dear S ir :

There i s inclosed, for your information

a copy of a l e t t e r addressed by the Federal Reserve

Board to the Governor of the Federal Reserve Bank

of Chicago, suggesting that , i n a l l cases where ap-

p l i c a t i o n s for industr ia l loans are refused, the

applicant be advised, f u l l y as to the reasons for

the dec i s ion of the FecLeral reserve bank.


Inclosure Chester Morrill Secretary.



o $

X-9035-a

November 30, 1934.

Mr. G. J . Schal ler , Governor, Federal Reserve Bank of Chicago, Chicago, I l l i n o i s .

Dear Governor Schal ler:

Receipt i s acknowledged of your l e t t e r of November 5, 1934,

i n reply to the Board's l e t t e r of October 31, 1934, in which reference

was made to the appl icat ion of Parret & Company, Normal, I l l i n o i s , for

an industr ia l loan, and i n which i t was s tated as the f e e l i n g of the

Federal Reserve Board that where an appl icat ion f o r an indus tr ia l loan

i s refused "by a Federal reserve "bank the applicant ordinari ly should

be advised of the reasons making such re fusa l necessary.

Your l e t t e r s ta tes that your Executive Committee has reached

the conclusion that i t i s desirable not to go into s p e c i f i c reasons

for dec l in ing appl icat ions due to the f a c t that i n some cases they r e -

f l e c t on the a b i l i t y and i n t e g r i t y of the appl icants . You a l so s t a t e

that i t would appear that your pract ice in t h i s regard i s not out of

l i n e with the pract ice of commercial "banks.

The Board f e e l s that a spec ia l r e s p o n s i b i l i t y r e s t s upon

the Federal reserve "banks i n the making of industr ia l advances and

that i t i s h ighly important that , i n a l l cases where an appl icat ion

f o r an industr ia l loan i s not approved, i t "be made clear to the ap-

p l i cant that the "bank's act ion i s not the resu l t of an arbitrary de-

c i s i o n of the Industrial Advisory Committee not to recommend approval


374

Mi* . Or* <X • Schaller — 2 — X—9035*51

or of the Federal reserve "bank not to grant the loan, "but i s i n ac-

cordance with the requirements of the law as to the purpose of the ad-

vance or that the loans be made on a reasonable and sound bas i s .

In certain instances which have come to the at tent ion of the

Board, the applicants have indicated a f ee l ing that the bank's decision

not to make the loan was in contravention of the purposes sought to be

accomplished by sect ion 13b of the Federal Reserve Act and i t i s be-

l ieved that such a misunderstanding can be avoided, a t l eas t i n a number

of cases, only by a f u l l explanation of the reasons for the re fusa l .

The Board suggests, therefore, that whenever an application i s

denied for the reason that the business i s not an established industrial

or commercial concern within the meaning of the law, or the proceeds of

the loan are not to be used for the purpose of furnishing working capita l ,

or the application i s i n e l i g i b l e for other reasons, you explain f u l l y in

your l e t t e r to the applicant why the Federal reserve bank i s without

authority to make the loan. Also where the loan cannot be made because

of the credit standing of the applicant, future business prospects, un-

sat i s factory management, i n s u f f i c i e n t security, e t c . , i t i s suggested

that your l e t t e r contain a frank and f u l l explanation of the circum-

stances which impel the decision that the loan cannot be made on a

reasonable and sound bas i s . When more than one reason ex i s t s for the

re fusa l , a l l important reasons should be f u l l y explained. The Board

f e e l s that such a procedure w i l l be productive of the most sa t i s fac tory


375

Mr. G. J . Schaller - 3 - X-9035-a

resul t s as i t w i l l leave no p o s s i b i l i t y of misunderstanding on the

part of the applicant as to the reasons for the "bank's act ion and

w i l l make clear that the Industrial Advisory Committee and the bank

are proceeding i n accordance with the intent of the law.

If cases do ar i se where i t i s f e l t that the reasons for the

refusal of the application should not be put i n a l e t t e r to the appl i -

cant, i t i s suggested that, wherever practicable, you arrange to have

one of your f i e l d men ca l l on the applicant and explain to him i n a

frank and fr iendly manner the reasons for the bankss act ion, or, i f

more convenient, that the applicant be advised that i f he w i l l c a l l at

the bank the o f f i c e r s i n charge of the Industrial Loan Department w i l l

be glad to go f u l l y into the reasons why the application was not approved.

Of course, i so lated instances may ar i se where i t would not be

advisable to s t a t e , either in a l e t t e r or an interview, one or more of

the reasons for not granting the application, but in such a case the

other important reasons, i f any, should be f u l l y explained and i t should

be made clear i n any event that the bank's decis ion i s not an arbitrary

one.

Very truly yours,



* 376 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-9036

December 3, 1934.

SUBJECT: Code Words Covering Hew Issues of Treasury Notes and Treasury Bonds.

Dear Sir:

In connection with telegraphic transactions "between

Federal reserve banks covering Government secur i t i e s , the

fol lowing code words have been designated to cover new issues

of Treasury Notes and Treasury Bonds:

"NOWKED" 1 l / 8 $ Treasury Notes, Series E-1936, to be dated December 15, 1934 and to mature June 15, 1936.

"NOWCILO" 3 l / 8 $ Treasury Bonds of 1949-52 to be dated December 15, 1934, and to mature December 15, 1952.

These code words should be inserted in the Federal

Reserve Telegraph Code book, on page 172.

Very truly yours,

' ' 'W J . C. Noell ,


TO GOVERNORS OF ALL F. B. BANKS




X-9037

Deceuber 4, 1934.

Dear S i r :

In accordance r/ith the Board's telegram of

Kovember 28 c a l l i n g a conference of the chairmen of

the Industrial Advisory Corcuittees, to he held i n

Washington on Tuesday December 18, 1934, there i s i n -

c losed a l i s t of topics suggested by the Board for con-

s iderat ion a t that conference. I t w i l l be appreciated

i f you w i l l mail or wire, in time to reach the Board

not l a t e r than Monday morning December 10, a l i s t of

any addit ional topics you would l i k e to have discussed

at the conference.

Very tru ly yours,

Chester Morri l l , Secretary.

Inclosure

CH&IBMTS OF EACH INDUSTRIAL ADVISORY (XMIITT15E


X-9037-

FOR DISCUSSION WITH THE CHUBMTO OF THE INDUSTRIAL ADVISORY COIfi/IITOBES

1 . flhat i s f e e l i n g i n regard to operation of Sect ion 13b "by the

Federal Reserve "banks,

(a) Among i n d u s t r i a l i s t s , whether p o t e n t i a l borrowers or not?

(b) Among other business leaders?

( c ) Among f i n a n c i a l i n s t i t u t i o n s ?

2. Need for working capi ta l f o r industry and commerce.

(a) Has experience indicated that there was a substan-t i a l need not being met through usual sources of cred i t?

(b) I f such need now e x i s t s can i t be adequately met under the present Sect ion 13b?

3 . Assuming that there w i l l be a continuing need f o r 13b advances or

commitments,

(a) Will appl icat ions f o r the most part take the form o f :

(1) Appl icat ions for d i r e c t advances,

(2) Appl icat ions involving separate advances by the Federal Reserve bank and by f inancing i n s t i t u t i o n , or

(3) Applicat ions from f inanc ing i n s t i t u t i o n s for commitments covering proposed advances.

(b) Should the ra tes charged by the Federal Reserve banks be so f i x e d as to encourage amplications under 1 , 2 or 3 above?

4 . Recognising that subsection "a™ of Sect ion 13b i s designed to meet

emergency s i t u a t i o n s , should i t be a permanent prov i s ion of law,

and i f so , should i t be amended as regards:

(a) Requirement that applicant be unable to obtain r e q u i s i t e a s s i s t a n c e from usual sources .


W 9 %.9037-a

(b) Requirement that loans "be for working c a p i t a l purposes.

( c ) Requirement that loans be made on a reasonable and sound b a s i s .

(d) Requirement that loans be confined to e s tab l i shed bus ines se s .

Should subsect ion Nbn of Sect ion 13b be a permanent prov i s ion of

law, and i f s o , should i t be amended as regards;

(a) Authorization of advances through f inancing i n s t i t u t i o n s other than member banks.

(b) Amount of ob l iga t ion as to l o s s susta ined.

(c ) Authorizat ion of separate loans by Federal Reserve banks aad by a f inancing i n s t i t u -t i o n on which repayments are made pro rata .

Would the making of loans f o r working cap i ta l purposes presumably

have been conducted more e f f e c t i v e l y i f Intermediate Credit Banks

a f f i l i a t e d with the Federal Reserve banks had been s e t up f o r

t h i s purpose as provided i n the f i r s t b i l l proposed by the Federal

Reserve Board? I f s o , why?

What has been experience as regards appl icat ions?

(a) Bxtent to which fear of r e j e c t i o n and of p o s s i b l e adverse e f f e c t upon a p p l i c a n t ' s cred i t standing has discouraged submission of app l i ca t ions .

(b) Extent of and reasons f o r withdrawal of a p p l i -cat ions . '

( c ) I s character of appl i ca t ions improving" I s the proportion of appl i ca t ions for d i r e c t advances dec l in ing?

(d) Has there been any substant ia l number of com-p l a i n t s of a lack of courtesy on the part of the Committee or of o f f i c i a l s or employes of Federal Reserve banks?


/ 380 • 3 • X-9037-a

(e ) la there any evidence that Federal Reserve "banks are requiring an excess ive amount of c o l l a t e r a l to secure loans?

( f ) Is there evidence of any other ground for c r i t i c i s m of e i ther the committees or the "basks?

0 . Assuming that more par t i c ipa t ions "by and commitments to f i n a n c i a l

i n s t i t u t i o n s are des i rab le , what i s your recommendation as to

how to "best obtain the cooperation of f i n a n c i a l i n s t i t u t i o n s

to t h i s end?

9 . Has the Federal Reserve bank taken adequate measures to bring to

the a t t e n t i o n of f i n a n c i a l i n s t i t u t i o n s , and p a r t i c u l a r l y of

member banks, the advantages to them of a c t i v e l y seeking out

commercial and indus tr ia l enterprises i n the i r t e r r i t o r y i n

need of addi t iona l working cap i ta l and furnish ing such c a p i t a l

under the protec t ion of a commitment from the Federal Reserve

bank?

10. What, i n your experience, has been the most important s e r v i c e

rendered industry and commerce under Sect ion 13-b?

11. Has the administrat ion of Sect ion 13-b to date had any e f f e c t not

shown i n regular reports of Federal Reserve Banks on the

extension of cred i t through regular and usual channels to

industry and commerce by pr ivate f inancing i n s t i t u t i o n s ?

12. Recommendations, not covered elsewhere, on the subject of the

administrat ion of Sect ion 13-b.


X-9039

IHTEBPHSTlTIOl'l 01 BlHIi-TG ACT OF 1933

(Copies to be sent to a l l Federal reserve "banks)

November 26, 1934.

Mr. . President, _________ nat ional Bank of .

Dear S ir :

This r e f e r s to your l e t t e r of August 21, 1934, addressed to

the Board's General Counsel, with regard to the interpretat ion of

the ru l ing published on page 394 of the federa l Reserve B u l l e t i n for

June, 1934, as to the absorption of exchange or c o l l e c t i o n charges

by member banks under the provis ions of sec t ion 19 of the f edera l

Reserve Act. You s ta te that the __________ clearing house banks are

at present employing a uniform analys i s of account formula which i n -

cludes exchange charges and other out-of-pocket expenses and you re -

quest a rul ing on the question whether the waiving of any exchange

charges or other out-of-pocket expenses would be i n v i o l a t i o n of the

law. I t i s understood that you wish to be informed whether any such

exchange charges or other out-of-pocket expenses may lawfu l ly be i n -

cluded i n an ana lys i s of an account which a l so includes a credit a l -

lowed the customer for in teres t or for the reasonable value of the

account to the bank. In th i s connection, you a l s o ask whether i t

would be permissible for the c learing house rules to be amended to

provide for waiving of out-of-pocket charges for a nominal sum for


X-9039 °

any one customer without regard for the amount of his balance, i n order

to eliminate the annoyance of inconsequential charges against an account.

Replying to your f i r s t question you are advised that the waiv-

ing of any exchange charges or other out-of-pocket expenses and the i n -

clusion of such charges or expenses by a member bank in an analysis of

an account which also includes a credit allowed the customer for interes t

or for the reasonable value of the account to the bank, would involve

a payment of interest to the extent that such credit o f f s e t s such charges

waived and absorbed by the bank, and would, accordingly, be i n v io la t ion

of the law i f the depos i t i s payablecn demand, except as indicated below.

The Federal Reserve Board has recently had occasion to consider

whether member banks of the Federal Reserve System may lawful ly operate

in accordance with the provisions of a clearing house rule reading as

fo l lows:

"No bank shal l make a regular practice of absorb-ing for any customer a l l exchange or co l l ec t ion charges or other out-of-pocket expenses incurred on behalf of such customer; but, in exceptional circumstances, when i t would create f r i c t i o n or misunderstanding to charge a customer for i s o l a t -ed items of t r i v i a l amounts, the banks may ab-sorb such individual items, including i so la ted exchange and co l lec t ion charges and charges for telephone c a l l s , telegrams and similar items, provided that the banks act in good f a i t h and do not u t i l i z e the absorption of such items as a basis for s o l i c i t i n g accounts or attempting to obtain an advantage over competitors."

Where the amount of such items absorbed does not vary with or

bear a substant ia l ly direct re lat ion to the amount of the customer's

balance, the absorption of such items can not be considered an indirect

payment of interes t within the meaning of sect ion 19 of the Federal


X-9039

Reserve Act, unless such items are included in an analysis of accounts

which involves their "being o f f s e t in whole or in part "by an analysis

credit allowed to the customer for interest or the earning value of

the account. Even where the bank analyzes accounts in th is manner,

i t i s "believed that the absorption of i so lated items of the character

described above i n t r i v i a l amounts may be disregarded i n accordance

with the rule that the law takes no notice of inconsequential matters.

The Board, therefore, sees no objection to the adoption of a rule sub-

s t a n t i a l l y in accordance with that quoted above.

Your l e t t e r suggests that a member bank be permitted to absorb

such charges i n amounts up to $2.00 per month for any one customer in

order to eliminate the annoyance of inconsequential charges against

an account. While the Board does not f e e l that i t would be advisable

to prescribe any f ixed amount of charges which might be absorbed under

the above-quoted rule , i t i s believed that such a rule w i l l afford a

sat i s factory basis for treatment of exchange charges and other out-of-

pocket expenses by member banks which may see f i t to operate under a

rule of th i s kind.

Very truly yours,

(Signed) Chester Morrill Chester Morril l ,

Secretary.




X-9040

December 6, 1934#

Dear S i r :

The Federa l Reserve Board has given c o n s i d e r a t i o n t o the

r e p l i e s r e c e i v e d t o i t s t e legram of Ju ly 14, 1934, Trans 2036, wi th

regard t o expenses of the members of the i n d u s t r i a l adv i so ry commit-

t e e s .

As you know, s e c t i o n 13b (d) of the Federa l Reserve Act, as

amended, reads i n p a r t as f o l l o w s :

"Each member of such committee s h a l l be a c t i v e l y engaged in some i n d u s t r i a l p u r s u i t w i th in the Federa l Reserve d i s t r i c t i n which the committee i s e s t a b l i s h e d , and each such member s h a l l serve wi thout compensation but s h a l l be e n t i t l e d t o r e c e i v e from the Federa l Re-serve bank of such d i s t r i c t h i s neces sa ry expenses while engaged i n the bus iness of the committee, or a per diem allowance i n l i e u thereof t o be f i x e d by the Federal Reserve Board.11

While t h e Board i s sympathetic t o t he sugges t ion t h a t t he

members of the i n d u s t r i a l advisory committees should r e c e i v e a com-

pensa t ion f o r t h e i r s e r v i c e s , i t i s c l ea r from the p r o v i s i o n of

s e c t i o n 13b r e f e r r e d t o above t h a t t he law contemplates t h a t the

s e rv i ce s rendered by the members of the committees s h a l l be wi thout

compensation and t h a t any per diem f i x e d by the Federa l Reserve

Board should be i n l i e u of necessa ry expenses, and, t h e r e f o r e ,


2 X-9040

should bear some r e l a t i o n s h i p t o such expenses . Accordingly, t h e

Federa l Reserve Board has approved t h e reimbursement of members of

the i n d u s t r i a l adv i so ry committees as f o l l o w s : ( l ) A member en-

gaged on bus iness f o r t h e committee i n t h e c i t y i n which h i s p lace

of bus iness i s loca ted may be reimbursed f o r t h e a c t u a l expenses

i ncu r r ed by him, (2) A member engaged on bus iness f o r the commit-

t e e ou t s ide the c i t y i n which h i s p lace of bus iness i s l oca t ed may

be paid a per diem of $10.00 a day plus a c t u a l t r a n s p o r t a t i o n ex-

penses , o r , i f he so e l e c t s , may be reimbursed f o r t h e a c t u a l ex-

penses i ncu r r ed by him.


4 & V & 4 Z 5 / h z ) c r v u ^

Chester M o r r i l l , Secretary#



X-9041

F E D E R A L R E S E R V E 2 2 6 ^ 2

STATEME IT FOR THE PRESS

For immediate r e l e a s e . December 7, 1934.

HIIvIE WHEN PAYMENT IS DEEMED RECEIVED IN CASH TRANSACTIONS IN UNREGISTERED, NON-EXEMPTED SECURITIES.

Ruling No. 39 i n t e r p r e t i n g Regula t ion T. Sec t ion 4 ( f ) of

Regula t ion T provides i n p a r t t h a t t he r e c e i p t i n good f a i t h of

a check or d r a f t drawn on a bank which i n t h e o rd ina ry course of

bus iness i s payable on p r e s e n t a t i o n , or the shipment i n good

f a i t h of s e c u r i t i e s wi th s i g h t d r a f t a t t a ched may, f o r the pu r -

poses of the r e g u l a t i o n , be deemed to be the r e c e i p t of payment

of t he amount of such check or d r a f t . The Federa l Reserve

Board has been asked, i n view of r u l i n g number 34 i n t e r p r e t i n g

Regula t ion T, whether t h i s app l i e s t o "cash t r a n s a c t i o n s " i n

u n r e g i s t e r e d , non-exempted s e c u r i t i e s . In r e p l y , the Board

r u l e s t h a t the p rov i s ions of s e c t i o n 4 ( f ) of the r e g u l a t i o n

regard ing the t ime when payment i s deemed t o be r ece ived apply

t o "cash t r a n s a c t i o n s " i n u n r e g i s t e r e d , non-exempted s e c u r i t i e s

as wel l as t o "cash t r a n s a c t i o n s " i n other s e c u r i t i e s •


387

X-9042

L1RH a l 1 r e s e r v e STATEI/IENT FOR.TilE PRESS

For immediate r e l e a s e * December 7, 1934.

JURISDICTION OF BUSINESS CONDUCT COMMITTEE TO GRANT EXTENSIONS OF TIME IN CONNECTION VflTKCASH TRANSACTIONS.

Ruling No. 40 i n t e r p r e t i n g Regula t ion T. In r e p l y t o s e v e r a l

i n q u i r i e s r ega rd ing ex tens ions of time i n connect ion wi th "cash

t r a n s a c t i o n s " ^ the Federal Reserve Board r u l e s t h a t the j u r i s d i c t i o n

of the bus iness conduct committee or o ther s u i t a b l e committee of a

n a t i o n a l s e c u r i t i e s exchange t o g ran t ex tens ions of time under sec -

t i o n 6 of Regula t ion T i s no t conf ined t o members of t h a t exchange

or to t r a n s a c t i o n s on t h a t exchange. Assuming the c i rcumstances

warrant an ex tens ion of t ime, t he committee may g ran t such an ex-

t e n s i o n of time t o any member of t h a t exchange or t o any broker or

dea le r who t r a n s a c t s a bus iness i n s e c u r i t i e s through the medium of

a member of t h a t exchange. Furthermore, the committee may g ran t

t hese persons such an ex tens ion of time not only i n connect ion wi th

t r a n s a c t i o n s e f f e c t e d on the exchange, but a l so i n connect ion wi th

t r a n s a c t i o n s not e f f e c t e d on the exchange. This a p p l i e s t o "cash

t r a n s a c t i o n s " i n u n r e g i s t e r e d , non-exempted s e c u r i t i e s , as we l l as

to other "cash t r a n s a c t i o n s " ; and i t i s not neces sa ry t h a t t h e

t r a n s a c t i o n involve a s e c u r i t y r e g i s t e r e d on the exchange i n ques-

t i o n , or any o ther r e g i s t e r e d s e c u r i t y .


388

X-9045

December 7, 1954.

SUBJECT: General Policy of Treating Appreciation and Depreciation in Securit ies in Connec-t ion with Applications for Voting Permits.

Dear Sir;

In connection with the issuance of l imited and general vot-

ing permits to holding company a f f i l i a t e s under the provisions of

section 5144 of the Revised Statutes of the United States , i t i s the

Board's pol icy , as you know, to require that holding company a f f i l -

ia tes and their subsidiary banks charge off or otherwise eliminate

from their assets the following:

(a) a l l l o s s e s in loans and discounts, (b) a l l depreciation in stocks and defaulted s e c u r i t i e s , (c) a l l depreciation in secur i t i e s not of the four highest grades as c l a s s i f i e d by a recog-nized investment service organization regularly engaged in the business of rating or grading se-cur i t i e s and (d) a l l other l o s s e s , as shown by the l a t e s t available report of examination.

In connection with the elimination of depreciation in secur-

i t i e s under (b) and (c) above, the question has arisen as to what ex-

tent appreciation in secur i t ies may be deducted from the depreciation

in other s e c u r i t i e s . This same general question has been ruled upon

by the Board in connection with applications for membership, in a

l e t t e r to a l l Federal reserve agents dated December 9, 1933 (X-7705).


- 2 - X-9043

The principles stated in that l e t t e r should be applied with respect

to the elimination of depreciation in secur i t i es in cases involving

the issuance of voting permits.

You are a lso advised that in connection with the elimina-

tion of depreciation in secur i t i es under (b) and (c) above, such

elimination, in the case of readily marketable s ecur i t i e s , may be

based upon current market values of such secur i t i e s .

Very truly yours,





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 December 8, 1934.


Dear S ir :


Government securi t ies "between Federal reserve "banks, the



"NOXPIG-" - Treasury B i l l s to "be dated December 12, 1934, and to mature June 12, 1935



code word "NOXPEN" on page 172.

Very truly yours,

" ~ ~ 7 - J. C. Noell , Assistant Secretary.

/

TO GOVERNORS OF AIL F. R. BANKS Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

: 391 FEDERAL RESERVE BOARD

WASHINGTON


X-9045

December 10,1934

SUBJECT: Complimentary Copies of Federal Reserve Bul let in for State Bank Examiners.

Dear Sir:

The Federal Reserve Board w i l l furnish a compli-

mentary copy of the Federal Reserve Bul let in during the

year 1935 to each State bank examiner who may desire i t .

Please send to th i s o f f i c e , not later than December 30,

1934 a l i s t showing the name and address of each State

hank examiner in your d i s t r i c t who desires to receive a

complimentary copy of each issue .

sry truly yours,

Assistant Secretary

TO ALL F.R. AGENTS.




X-9046

December 14, 1934.

SUBJECT: Code T7ord Covering New Issue of Treasury B i l l s .

Dear S ir :


Government s e c u r i t i e s "between Federal reserve banks, the

fo l lowing code word has been designated to cover a new


This word should be inserted i n the Federal Re-


code word "ITOXPIG" on page 172.

"SOXPOL" - Treasury B i l l s to be dated December 19, 1934, and to mature June 19, 1935.

n Very truly yours,

J. C. ?oe l l J. C. ? o e l l , Assistant Secretary.

TO GOVERNORS OF ALL F. R. BAMS Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

3 9 3

X-9047


STA.TEMBE) FOR THE PRESS

December 14, 1934.

For release at 4:30 p. m.

The Federal Reserve Board announces that the Federal Re-

serve Bank of Atlanta has established a rediscount rate of 2§$

e f f e c t i v e December 15, 1934.


X-9048

December 15, 1934.

SUBJECT $ Approval of Reduction of Preferred Stock or Capital Notes or Debentures by the Federal Reserve Board.

Dear Sir;

This refers to a question raised by one of the Federal Re-

serve .Agents with regard to whether or not the approval of the

Federal Reserve Board of the retirement of preferred stock of a

national bank or of the retirement of capital notes or debentures

or preferred stock of a State member bank i s required.

In connection with the inquiry regarding the retirement

of preferred stock of a national bank# you are advised that the

Board has heretofore taken the posit ion that in view of the provi-

sions of sect ion 302 of the Ibiergency Banking Act of March 9, 1933,

the Board's approval i s not required with respect to the reduction

of preferred stock of a national bank. Under the terms of such

sect ion 302, preferred stock issued by national banks i s made sub-

ject to retirement in such manner and upon auch conditions as may

be provided i n the Articles of Association of the bank# with the

approval of the Comptroller of the Currency,

Under the provisions of the Federal Reserve Act a State


395 - 2 - A-9048

member bank i s not required to obtain the approval of Vne Federal

Reserve Board of a reduction in i t s capital stock, either common or

preferred, unless the particular State member bank i s subject to a

condition of membership requiring the Board's approval of a reduc-

t ion of i t s capital stock. The Bfard f e e l s that in any case where

the Board's approval of the reduction of the capita l stock of a

State member bank i s required under a condition of membership such

approval would be required of a reduction of preferred stock as well

as commdn stock.

Under the provisions of sect ion 9 of the Federal Reserve Act,

as amended, as you know, the terms "capital" and '^capital stock",

for the purposes of membership of State banks in the Federal Reserve

System, shal l include the amount of outstanding capita l notes or

debentures l e g a l l y issued by the applying bank and purchased by the

Reconstruction Finance Corporation. In view of t h i s f a c t , the

Board f e e l s that i n any case where, under a condition of membership,

the Board's approval of the reduction of the capital stock of a State

member bank i s required# approval of the reduction of capital notes

or debentures lawfully issued by such bank and purchased by the Re-

construction Finance Corporation would also be required* On the

other hand* in the case of any State member bank not subject t o such

a condition of membership, the Board's approval of a reduction of

such cap?tel notes or debentures issued by the bank would not be

required.


396 - 3 - X-9048

The Board understands that provision i s usually made, among

other things, for the retirement from time to time of capital notes

or debentures or preferred stock out of earnings of the bank and that ,

accordingly, there may bo numerous reductions in comparatively small

amounts of capital notes or debentures or preferred stock issued by

State member backs. In the circumstances# the Board f e e l s that i t

i s appropriate to authorize the respective Federal Reserve Agents,

in cases in which the Board's approval i s required, t o approve on the

Board'e behalf reductions of capital notes or debentures or preferred

stock issued by State member banks where, in the opinion of the Fed-

eral Reserve Agent, a l l of the circumstances involved warrant such a

reduction and where after such reduction i s accomplished the member

bank w i l l have an unimpaired capital and surplus of not l e s s than

one-tenth of the amount of i t s deposit l i a b i l i t i e s * Each of the Fed-

eral Reserve Agents i s accordingly hdreby authorized to approve on

behalf of the Board, in the circumstances and within the l imitat ions

described, reductions of capital nctes or debentures or preferred

stock issued by State member banks i n any case where the Board's

approval of such reduction i s required.

I t i s requested that in any such case the Board be advised

for i t s records of the reduction which, has been e f f e c t e d with the

Agent's approval. Of course, should any case arise in which for

any rec son v-he i'eecral Reserve Agent i s in doubt as t o the wisdom


397

-4« A-9048

of the proposed reduction or i s unwilling to give h is approval thereto

under the authority granted herein, the bank's appl icat ion may be sub-

mitted t o the Board for determination, together with current informa-

t ion as t o the condition of the applying bank, i t s reason for desiring

to e f f e c t the reduction and any other information, including the

•iigeiit's comments and recommendation, which may be of ass is tance to

the Board in passing upon the application*

I t i s assumed, of course, that in passing upon any proposed

reduction of capi ta l notes or debentures or preferred stock, the

Agent w i l l g ive consideration to the general condition of the i n s t i -

tut ion and the s u f f i c i e n c y of i t s remaining c a p i t a l structure, with

due regard to the maintenance of lawful capi ta l requirements and an

adequate r a t i o of capital to deposits in view of a l l the circumstances

involved in the particular case.

Fni le , as noted above, the Board's approval of reductions of

capi ta l stock or cap i ta l notes or debentures i s not required under

the law in some cases, the Board f e e l s , in view of the important e f -

f e c t which a reduction in the cap i ta l stock of a bank may have on i t s

f inanc ia l condition, that the respect ive Federal .Reserve Agents should

endeavor to keep themselves informed as t o any proposed reductions i n

ihe capi ta l stock or capi ta l notesôr debentures of State member

banks* whether the Board's approval i s required in such cases or not,

and t o take such act ion as may be appropriate in any case where the


: 398

-5~ X-9048

proposed, reduction would not be to the t e s t i n t e r e s t s of the bank.

The Board would l ike t o be advised for i t s records of each

reduction e f f e c t e d in the capital stock or cap i ta l notes or deben-

tures of a State member bank, and the Board w i l l be glad t o give

consideration to any such proposed reduction in any case in which

the Federal Reserve Agent f e e l s that the circumstances warrant, even

though the Board's approval of the reduction i s not required under

the condit ions #f membership to which the part icular State member

bank i s subject*

Very t ru ly yours»

Q&upCDo hD/rULdUi

Chester Morril l , S e c r e t a r y .

TO ALL FEDERAL RESERV3 AGENT'S,


JC-9049



For r e l e a s e i n morning papers , December 15, 1934. Monday, December 17, 1934.

REDUCTION IN INTEREST RATE ON TIME AND SAVINGS DEPOSITS

The Federa l Reserve Board has reduced from 3% t o 2*|%

the maximum r a t e of i n t e r e s t t h a t may be paid on t ime and savings

depos i t s by member banks, and the Federa l Deposit Insurance Corpora-

t i o n has made a corresponding r e d u c t i o n i n t h e maximum r a t e t h a t

may be pa id by S t a t e banks and t r u s t companies which are insu red by

the Corporation# The new maximum r a t e w i l l become e f f e c t i v e on

February 1, 1935. The r e d u c t i o n in the depos i t r a t e i s i n harmony

wi th the p r e v a i l i n g downward t r e n d i n i n t e r e s t r a t e s , and i s expected

t o support t h a t t r e n d , p a r t i c u l a r l y i n regard t o r a t e s on long- t ime

money, which are an important f a c t o r i n bus iness r e cove ry .

The r educ t ion i s i n l i n e wi th t he a c t i o n taken by S ta te

banking a u t h o r i t i e s i n s eve ra l S t a t e s and a l so wi th vo lun ta ry agree-

ments made by c l e a r i n g house a s s o c i a t i o n s and o the r banking groups .

The decrease i n r a t e s on time depos i t s should have a tendency t o

b r ing about a d e c l i n e i n the cos t t o borrowers and t o encourage de-

p o s i t o r s t o seek investment f o r t h e i r i d l e f u n d s . A more f avo rab l e

c a p i t a l market may be expected t o c r e a t e a more f a v o r a b l e mortgage

market as we l l as encourage r e fund ing opera t ions and t h e under tak ing


- 2 - X-9049

of new c a p i t a l p r o j e c t s g e n e r a l l y , a development e s s e n t i a l t o recovery#

The Federa l Reserve Board 's a c t i o n i n t h i s ma t t e r i s i n

accordance wi th t he duty imposed upon i t by the Banking Act of 1933,

which provides t h a t 11 The Federa l Reserve Board s h a l l f rom time t o

time l i m i t by r e g u l a t i o n the r a t e of i n t e r e s t which may be paid by mem-

ber banks on t ime d e p o s i t s • " This p rov i s ion of t h e law p laces upon the

Federa l Reserve Board the r e s p o n s i b i l i t y of r a i s i n g or lowering from

time t o t ime t h e maximum r a t e t h a t may be paid by member banks on time

and savings d e p o s i t s i n accordance wi th p r e v a i l i n g economic condi t ions

and the requi rements of the pub l i c i n t e r e s t .

The Federa l Reserve Board's Regula t ion Q, as amended to

reduce t he maximum r a t e t o 2 ^ , w i l l appear i n the December i s s u e of the

Federa l Reserve B u l l e t i n .

In a d d i t i o n t o the amendment reducing t h e maximum r a t e of

i n t e r e s t t o t h e r e g u l a t i o n , as amended, w i l l ( l ) permit the com-

p u t a t i o n of i n t e r e s t on t ime and savings d e p o s i t s a t a r a t e no t i n excess

of 2jf/o compounded q u a r t e r l y i n s t e a d of (as provided i n t he old r e g u l a -

t i o n ) a t a r a t e no t i n excess of the maximum compounded semi-annual ly ,

(2) enable member banks t o pay i n t e r e s t on time and savings d e p o s i t s

r ece ived dur ing t h e f i r s t f i v e days of any ca lendar month a t t he maximum

r a t e p r e s c r i b e d i n t h e r e g u l a t i o n c a l c u l a t e d from the f i r s t day of t he

month, and (3) permit f o r e i g n branches of American banks t o ob ta in

a u t h o r i t y from t h e Board t o pay i n t e r e s t on time and savings d e p o s i t s

a t r a t e s c o n s i s t e n t w i th compet i t ive cond i t ions p r e v a i l i n g i n t h e


3- X-9049

l o c a l i t i e s where the f o r e i g n branches are s i t u a t e d . The a c t i o n of

the Board does not a f f e c t t he payment of i n t e r e s t by member banks a t

a r a t e h igher than the maximum in accordance wi th t h e . t e r m s of any

c o n t r a c t l e g a l l y en te red i n t o p r i o r t o and i n f o r c e on December 18,

1934.


402' FEDERAL RESERVE BOARD

WASHINGTON


December 17, 1934

SUBJECT: Expense, Main Lines , Leased Wire System, November, 1934.

Dear S i r :

Inclosed, herewi th you w i l l f ind, two mimeo-graphed s t a t e m e n t s , X-9050-a and X-9050-b, cover ing i n d e t a i l o p e r a t i o n s of the main l i n e s , Leased Wire System, dur ing the month of November, 1934.

P l ease c r e d i t t h e amount payable "by your hank f o r your share of the expense of t h e Leased Wire System, t o the Fede ra l Reserve Bank of Richmond i n your d a i l y s ta tement of c r e d i t s through the Gold S e t -t lement Fund f o r t h e account of the Federa l Reserve Board, and a d v i s e the Federa l Reserve Bank of Richmond "by wi re the amount and purpose of the c r e d i t .


Q-€ F i s c a l Agent.


TO GOVERNORS OF ALL F. R. BANKS -


X—9050—a REPORT SHCWIFG CLASSIFICATION AIT NUMBER OF WORDS TRANSMITTED OVER MAIK LIMES

OF TEE FEDERAL RESERVE LEASED WISE SYSTEM FOR TEE MOJVTE OF FOVELiBER, 1934

Words sent by 2!et Federal Business ITew York charge- reserve reported able to other bank Per cent of t o t a l

From by banks F. R. Banks (1) business bank business (*)

Boston 32,o4o 1,617 33,657 4.67 17ew York 149,635 - 149,635 20.75 Philadelphia 25,228 1,739 26,967 3 .74 Cleveland 44,076 1,576 45,652 6-33 Richmond 45,996 1,622 47,618 6.60 Atlanta 45,732 1,542 47,274 6 .56 Chicago 75,395 1,976 77,371 10.73 St. Louis 58,791 1,809 60,600 8.40 Minneapolis 33,876 1,501 35,377 4.91 Kansas City- 58,960 1,723 60,703 8.42 Dallas 49,872 2,097 51,969 7.21 San Francisco 81,094 3,107 84,201 11.68

Total 700,715 20,309 721,024 100.00

F. R. Board business 317,744 1,038,768

Reimbursable business Incoming & Outgoing 574,360

Total words transmitted over main l ines • 1,613,128

(*) These percentages used in calculat ing the pro rata share of leased "ire expense as shown on the accompanying statement (X-9050-b)

( l ) Uumber of words sent by i'ew York to other F. R. Banks for their sole benef i t charged to banks indicated in accordance with action taken at Governors' conference "ovenrber 2-4, 1925 O

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

41

REPORT OF EXPENSE iO.117 LIMES FEDERAL RESERVE LEASED WIRE SYSTEM, NOVEMBER, 1934.

X-5050-b

Name of bank

Retire- Oper-ment ators1

Operators' Contribu- over-Salaries tions time

Wire rental

Total expenses

Pro rata share of tota l expenses Credits

Payable to Federal Reserve Board

Boston $Tew York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City-Dallas San Francisco Federal Reserve

Total

$260.00 1,345.80

225.00 306.66 190.00 270.00

4,057.60 195.00 200.00 287.00 251.00 380.00

Bd.

$ 23.40 121.12

20.25 27.60 17.10 24.30

(#) 371.50 17.55 18.00 25.83 22.59 34.20

$7,968.06 $723.44

Less Reimbursable Charges

$ $ -

230.00 (&)

2.00

15,598.73 $2.00 $15,828.73

$283.40 $737 1,466.92 3,276

245.25 334.26 437.10 294.30

4,431.10 212.55 218.00 312.83 273.59 414.20

1?.598.73 = $24,522.23 $15,791.15

999 1,042 1,035 1,694 1,326

775 1,329 1,138 1,844

• 59 .58 .22 .90

.34

.61

:S

5283.40 1,466.92

245.25 334.26 437.10 294.30

4,431.10 212.55 218.00 312.83 273.59 4 l4 .20

$454.05 1,809.74

345.34 665.32 605.12 741.60

2,736.7l(*) 1,113.91

557.34 1,016.78

864.95 1,430.21

8,731.08 $15,791.15

$8,923.50 $9,604.35

2,736.71(a) $6,867.65

(&) Main l ine rental , Richmond--7a shington (#) Includes salaries of Washington operators. (*) Credit- O (a) Amount reimbursable to Chicago.




X-9051

December 26# 1934.

SUBJECT: Minimum retirement allowances.

Dear Sir:

Bequests have "been received from two Federal Reserve tanks

for authority to grant retirement allowances to certain employees,

who have attained age 65, in excess of the allowances to which they

are ent i t l ed under the provisions of Subsection 1 of Section 3 of

the Rules and Regulations governing the Retirement System of the

Federal Reserve banks.

The Board i s impressed with the des irab i l i ty of enabling the

Federal Reserve banks to make provision for minimum retirement allow-

ances, somewhat in excess of those provided for in Subsection 1 of

Section 3, whenever in the judgment of their directors , a f t er taking

into consideration the circumstances and conditions a f f e c t i n g the

personnel of their respective banks, i t i s desirable to do so, and

recognizes the fact that a minimum allowance that may be deemed s a t i s

factory for one bank may not be so for another bank.

In the circumstances and in order to allow s u f f i c i e n t f l e x i -

b i l i t y in th is matter without the necess i ty of action by the Federal


—2— 1-9051

Reserve Board separately for each Federal Reserve bank, the Board

hereby authorizes your bank to make such addit ional contributions to

cover the cost of allowances granted in accordance with the l a s t para-

graph of Section 9 of the Rules and Regulations of the Retirement

System as may be necessary to bring the minimum retirement allowance,

under the regular cash refund annuity plan, to employees r e t i r i n g

at or a f t e r age 65 up to such amount as the board of d irectors of

your bank may allow, but not to exceed $30 per annum for each year's

sorvico to a maximum of 16 years, or the actuarial equivalent there-

of in one of the optional forms that the member may se l ec t under

Subsection 6 of Section 3 of the Rules and Regulations. In deter-

mining length of service for th is purpose any service rendered up

to the time of retirement may be counted, even though a portion of

such service may not be creditable service as defined in Section 1

of the Rules and Regulations.

Very truly yours,


TO ALL GOVERNORS




X-9052

December 20, 1934#

Dear S i r :

The Board 's l e t t e r of Apr i l 29, 1933, X-7425, on the sub-

j e c t of indebtedness of o f f i c e r s and employees, s t a t e d t h a t t h e r e

should be a prompt r e p o r t t o the Board of any indebtedness of the

kind r e f e r r e d t o i n t he l e t t e r incur red by the Federa l r e s e r v e agent

or any member of h i s s t a f f a f t e r Ju ly 1, 1933, and such r e p o r t

should con ta in in fo rma t ion s imi l a r t o t h a t c a l l e d f o r i n the Board1s

l e t t e r wi th r e s p e c t t o indebtedness ou ts tanding on t h a t d a t e .

I t was suggested by the Board i n correspondence wi th some

of the Federa l r e s e r v e agents during the p a s t year t h a t t hey r e p o r t

t o t h e Board, as i ncu r r ed , indebtedness c r ea t ed by members of t h e

s t a f f of t he a g e n t ' s department and t h a t a r e p o r t be submit ted as

of January 1 and J u l y 1 of each year with regard t o the p rogress be -

ing made i n t h e l i q u i d a t i o n of t he indebtedness p r e v i o u s l y r e p o r t e d .

Fur the r c o n s i d e r a t i o n has been given t o t h i s m a t t e r , and i t

w i l l be s u f f i c i e n t f o r the Board 's purposes i f i n t h e f u t u r e a r e -

po r t i s r e c e i v e d from you as of January 1 and J u l y 1 of each year

g iving the i n fo rma t ion reques ted i n the second paragraph of t h e

Board 's l e t t e r of Apr i l 29, 1933, regard ing the indebtedness


408 -2 X-9052

incu r r ed by t h e Federa l r e s e r v e agent and t h e members of h i s s t a f f

during the preceding s i x months (excluding c u r r e n t b i l l s f o r ordinary-

persona l or household expenses bu t i nc lud ing o ther indebtedness i n -

curred dur ing the s i x months' p e r i o d ) , and con ta in ing a s t a t emen t , i n

connect ion with t h e e x i s t i n g indebtedness of each i n d i v i d u a l , of the

program f o r the l i q u i d a t i o n of such indeb tednes s . I t w i l l be appre-

c i a t e d i f you w i l l a r range t o submit r e p o r t s as of January 1 and

Ju ly 1 of each year t o the Board i n accordance wi th t h i s p rocedure .

A copy of t h e Board 's l a t t e r of Apr i l 29, 1933, i s a t t a c h e d .

Very t r u l y - y o u r s ,

Chester M o r r i l l , Secre ta ry*

Inc losu re

TO ALL FEDERAL RESERVE AGE1ITS




April 29, 1933.

SUBJECT: Indebtedness of Officers and Employees.

Dear Sir:

Because of the special relationship that ex i s t s with member

banks and the high responsibi l i ty rest ing upon the Federal reserve

banks in connection therewith, the Board f e e l s that i t i s especial ly

important that the Federal Reserve Agents and their a s s i s tant s ,

including the members of their s t a f f s engaged in audits and examina-

t ions , should re fra in from incurring any indebtedness, d irec t ly or

ind irec t ly , to member banks, their subsidiaries or a f f i l i a t e s , or

otherwise placing themselves in any pos i t ion which may result in

questions being raised as to the independence of their judgment or

their disinterestedness in the discharge of their r e s p o n s i b i l i t i e s

with respect to such banks under the Federal Reserve Act. Further-

more, i n order to avoid the p o s s i b i l i t y of embarrassment in connection

with the performance of their o f f i c i a l duties , i t i s the view of the

Board that they should refrain fro® incurring any indebtedness to

others except for legitimate and necessary purposes, and that ,

whenever any indebtedness i s incurred by them (excluding, of course,


X-742S — 2 —

current b i l l s for ordinary personal and household expenses, "but not

excluding indebtedness incurred to others to obtain funds for pay-

ment of such b i l l s ) , there should be prompt disclosure of a l l the

facts to the Federal Reserve Board.

The Board desires that each Federal Reserve Agent prepare and

transmit to i t as promptly as poss ible a f ter July 1, 1933, a report

showing as of that date any indebtedness of the agent and members of

h i s s ta f f (excluding, of course, current b i l l s for ordinary personal

and household expenses, but not excluding indebtedness incurred to

others to obtain funds for payment of such b i l l s ) . The report should

set forth the name of the person, firm, corporation, or i n s t i t u t i o n to

which the indebtedness i s due, the date on which i t was or ig inal ly

incurred ( indicating whether before or af ter such o f f i c e r or employee

entered the serv ice ) , the maturity of the indebtedness, the unpaid

balance, a description of the security therefor, i f any, a br ief

statement of the purpose for which the indebtedness was incurred and

the progress being made in l iquidating i t , and any comment that the

Agent may wish to make in connection therewith. In addition, there

should be a prompt report to the Federal Reserve Board of any indebt-

edness of the kind referred to incurred by the Agent or any member of

his s ta f f a f ter July 1, 1933, and such report should contain informa-

t ion similar to that called for above with respect to indebtedness

outstanding on that date.

The Board bel ieves that the directors of the Federal reserve

banks w i l l f e e l that the same general principles should be applied to

the members of the s t a f f s of the Federal reserve banks, part icular ly

the o f f i c e r s , the heads of departments, and other employees occupying Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

X-7425 4 1 1 . - 3 -

responsible pos i t ions , except that the reports mentioned would he made

to the Boards of Directors instead of to the Federal Reserve Board. It

requests, therefore, that th i s l e t t e r be brought to the attent ion of

the Board of Directors of each bank, with the suggestion that they

consider the advisabi l i ty of adopting these principles i f they have

not already been established, of taking appropriate steps to obtain

from such o f f i c e r s and employees information similar to that cal led

for with respect to the Federal Reserve Agents and the members of their

s t a f f s , and of requiring a l l such o f f i c e r s and employees promptly to

report to the Board of Directors any indebtedness of the kind referred

to that may thereafter be incurred.

In th is connection, the Board desires to c a l l attent ion to

i t s circular l e t t e r of May 7, 1924 (X-4048) which contains the following

statement;

n * * * the Federal Reserve Board be l ieves i t w i l l be as obvious to the directors of the Federal reserve banks as i t i s to i t s e l f that the good conduct and repute of the Federal Reserve System require that the o f f i c e r s of the reserve banks sha l l give their entire t ine and attent ion to the a f f a i r s of the banks and not be i d e n t i f i e d with ary outside business i n t e r e s t s , "

The Board f e e l s confident that the directors of the Federal

reserve banks w i l l recognize the importance of s t r i c t conformity with

the principles set forth in that l e t t e r . While i t re fers part icularly

to the o f f i c e r s of Federal reserve banks, i t i s equally applicable to

heads of departments and employees occupying responsible posi t ions in

the banks, as wel l as to the Federal reserve agents and the members of

their s t a f f s . If any of then has any connection with a business con-

cern of any kind, tho Board requests that i t be promptly advised with

respect thereto.


1-7425 413

e— —

The Board w i l l "be p leased to have an acknowledgment of the

r e c e i p t of t h i s l e t t e r , toge ther r i t h a s tatement of the a c t i o n

t ha t has "been or Trill be taken i n regard to t he se m a t t e r s .


Chester M o r r i l l , Sec re ta ry .

TO AGEHTS OF ALL F . R. BANKS.


4 1 3

X-9053



For immediate r e l e a s e # December 19, 1934#

A conference of the Chairmen of the I n d u s t r i a l Advisory Commit-

t e e s was held i n Washington on Monday and Tuesday, December 17th and

18 th . The conference was c a l l e d on November 28th f o r the purpose of

reviewing t h e work done by the I n d u s t r i a l Advisory Committees during

the l a s t five months i n making recommendations t o the Federa l Reserve

banks of t h e i r r e s p e c t i v e d i s t r i c t s under Sec t ion 13b of the Federa l

Reserve Act, and a l so f o r the purpose of exchanging views and adopt ing

methods by means of which t o continue t h i s work i n t h e most e f f e c t i v e

manner p o s s i b l e i n accordance with t he p rov i s ions of t h e law.

The fo l lowing Chairmen were p resen ts

Mr# A. M# Creighton - Boston Mr. William H. Pouch - New York Mr# J . E. But terworth - Ph i l ade lph i a Mr# F. A. Smythe - Cleveland Mr# John Sanford - A t l an t a Mr# Max Eps t e in - Chicago Mr. Wm# K# Norr i s - St* Louis Mr * Sheldon V# Wood - Minneapolis Mr# Walter J . Berkowitz - Kansas Ci ty Mr * Clarence Ousley - Dal las Mr# Ralph Burnside - Po r t l and , Oregon.

A f t e r a complete d i s c u s s i o n of the s u b j e c t ma t t e r and adop t ion of

a program f o r t he f u t u r e , t he Chairmen i s sued t h e fo l l owing s t a t emen t :

11 At t h e i r meetings the l a s t two days, the chairmen of the


414

- 2 - X-9053

I n d u s t r i a l Advisory Committees reviewed the progress made t hus f a r i n

extending c r e d i t t o i n d u s t r y f o r working c a p i t a l purposes and cons idered

means of making b e t t e r known to bankers and bus ines s men g e n e r a l l y the

advantages and b e n e f i t s which the i n d u s t r i a l loan p rov i s ions of the Fed-

e r a l Reserve Act open t o them.

"Under Sec t ion 15b which was added to t h e Federal Reserve Act, on

June 19, 1934, member banks and other f i nanc ing i n s t i t u t i o n s which make

advances maturing i n f i v e years or l e s s t o e s t a b l i s h e d i n d u s t r i a l or

commercial e n t e r p r i s e s f o r the purpose of f u r n i s h i n g working c a p i t a l ,

may procure from the Federa l Reserve banks commitments t o r e d i s c o u n t or

purchase such advances when r e q u e s t e d . I n d u s t r i a l advances, covered by

such commitments, a re among the most l i q u i d a s s e t s t h a t member banks can

ho ld . I t i s a l so provided by the Amendment t h a t i n e x c e p t i o n a l circum-

s tances the Federa l Reserve banks may make d i r e c t advances of c r e d i t t o /

e s t a b l i s h e d i n d u s t r i a l or commercial e n t e r p r i s e s which are unable t o

ob ta in r e q u i s i t e f i n a n c i a l a s s i s t a n c e on a reasonab le b a s i s f rom the

usual s o u r c e s .

"Experience brought out a t y e s t e r d a y ' s conference i n d i c a t e s t h a t

as a r e s u l t of t he r ead ines s of the Federa l Reserve banks t o g ran t com-

mitments t o t ake over such loans , an i nc r ea s ing number of bus ines ses

i n need of working c a p i t a l are f i n d i n g i t p o s s i b l e t o get t h e des i r ed

c r e d i t through t h e i r l o c a l banks• This i s a hopefu l c o n d i t i o n ; and

s ince the p r o v i s i o n of the law au tho r i z ing the Federa l Reserve banks

to make commitments t o banks and o ther f i n a n c i n g i n s t i t u t i o n s l i m i t s


- 3 - ^-9053

the r i s k t h a t need be assumed by the l a t t e r and g ives t o the advances

a l i q u i d c h a r a c t e r , i t i s t o be expected t h a t an i n c r e a s i n g number of

a p p l i c a n t s t o whom advances may be made on a sound and reasonab le b a s i s

w i l l be able to ob t a in t h e i r requirements from t h e i r l o c a l i n s t i t u t i o n s •

!!Up t o December 12, 1934, the I n d u s t r i a l Advisory Committees had

recommended approval of 1,055 a p p l i c a t i o n s f o r i n d u s t r i a l advances

amounting t o $51,000,000 most of which have been ac ted on and approved

by the Federa l Reserve banks . The a d d i t i o n a l working c a p i t a l thus p ro-

vided goes t o a v a r i e t y of i n d u s t r i e s , r e p r e s e n t i n g comprehensively the

whole f i e l d of e n t e r p r i s e . S u b s t a n t i a l as t hey a r e , i t i s not be l i eved

t h a t advances thus f a r approved are f u l l y i n d i c a t i v e of the b e n e f i t s

which i n d u s t r y has de r ived from the i n d u s t r i a l loan program of t he

Federa l Reserve System, f o r many of these b e n e f i t s a re no t of a na tu re

t o be d i sc losed by the f i g u r e s of a p p l i c a t i o n s approved. For example,

i n some cases where an a p p l i c a t i o n i s made t o a Federa l Reserve bank i n

the b e l i e f t h a t c r e d i t i s no t a v a i l a b l e e lsewhere , t he Reserve bank has

been able to d i r e c t the app l i can t t o a l o c a l i n s t i t u t i o n w i l l i n g t o

supply h i s needs . In some cases a l so where a d i r e c t advance has been

approved by a Reserve bank and i s about t o be made, a member bank or

o ther f i n a n c i n g i n s t i t u t i o n w i l l decide t o t ake t he loan i t s e l f wi thout

secur ing a commitment. In other cases , the genera l knowledge t h a t i n -

d u s t r i a l loans are being made by t h e Federa l Reserve banks has encouraged

member banks and other f i n a n c i n g i n s t i t u t i o n s t o make advances t o i n -

d u s t r y on t h e i r own i n i t i a t i v e .

"Since the Chairmen of the I n d u s t r i a l Advisory Committees he ld


- 4 - X-9053-

t h e i r f i r s t conference i n Washington on September 27, they have cooper-*

a ted wi th the Federa l Reserve banks i n b r ing ing t o t he a t t e n t i o n of

banks and the pub l i c through correspondence, magazine a r t i c l e s , pamphlets,

r a d i o addresses and group meetings the advantages made a v a i l a b l e t o com-

merce and i n d u s t r y by the r e c e n t amendment t o the Fede ra l Reserve Act#

The program adopted by the conference yes t e rday provides f o r a con t inu-

ance of t he se e f f o r t s .

! tAttached i s a summary of the l a t e s t f i g u r e s on i n d u s t r i a l advances

approved by the I n d u s t r i a l Advisory Committees and the Federa l Reserve

banks11.


INDUSTRIAL ADVANCES AMD COMMITMENTS UNDER SECTION 13-B OF THE FEDERAL RESERVE ACT SUIZ'ARY BY FEDERAL RESERVE BANKS, JUNE 19 TO DECEMBER 12, 1934 B-8I7

i

(Amounts in thousands of d o l l a r s ) (Not f o r p u b l i c a t i o n )

Federa l Reserve

Bank

Appl ica t ions rece ived - ne t

Appl ica t ions .under

cons idera t ion

Tota l a p p l i c a t i o n s recommended f o r approval by I n d u s t r i a l Advisory

Committee*

Total" a p p l i c a t i o n s approved by Federal

Reserve Bank*

Advances made

Corami tments o u t -

s tanding Number Amount Number Amount Number Amount Number Amount

Boston 264 11,324 54 2,420 S3 5,831 52 3,996 1,677 1,244

New York 477 27,230 90 6,639 127 9,031 129 9,393 784 2,364

P h i l a d e l p h i a 32s 15,153 60 2,519 92 5,127 55 4,6o4 1,980 107

Cleveland 4l4 10,890 33 966 108 4,467 90 3,657 595 927

Ri chraond 271 9,922 30 1,551 74 5,148 72 5,046 1,367 204

At lan t a 351 .8 ,406 47 1,220 108 2,835 104 2,621 787 562

Chicago 727 37,227 46 9,309 75 5,288 46 2,754 800

S t . Louis 259 8,911 71 2,166 58 2,679 58 2,680 459 944

Minneapolis 6i4 12,823 112 2,426 137 3,637 120 2,990 1,306

Kansas City- 241 6,920 16 1,136 4 i 2,179 36 1,894 262 192

Dal las 342 9,347 25 1,653 67 2,662 59 2,273 709 —

San Francisco 520 14,971 220 7,255 85 2,503 72 2,216 250 576 TOTAL 4,863 173,754 804 39,260 1,055 51,387 893 44,124 10,976 7,120

FEDEBAL RESERVE BOARD DIVISION OF BANK OPERATIONS *With and without c o n d i t i o n s .

DECEMBER 17, 1934. ^




X-9054

December 20, 1934.

Subject: Issuance of Limited Voting Permits to Holding Company A f f i l i a t e s in connec-t ion with Revision by Reconstruction Finance Corporation of Dividend Rates upon Preferred Stock.

Dear S i r :

The Federal Reserve Board has received advice that the

Reconstruction Finance Corporation has authorized a further rev i s ion

of the dividend rates on preferred stock subscribed for or purchased

by the Corporation. Certain banks are required to amend the ir char-

ters i n order to obtain the benef i t of such rev i s ion , and other banks

may e l e c t whether or not they w i l l amend their charters in connection

with such rev i s ion . I t i s understood that such amendments are f o r

the purpose of bringing the charters of such banks into conformity

with the present standard form of charter prescribed by the Reconstruc-

t ion Finance Corporation. The f a c t s concerning such r e v i s i o n are se t

out more f u l l y i n Reconstruction Finance Corporation Loan Agency Bu l l e -

t i n No. 396 dated November 21, 1934, which has been placed i n the hands

of a l l Reconstruction Finance Corporation Agency Managers and Custo-

dian Banks.

As you know, the Board addressed a l e t t e r dated November 10,


- 3 - X-9054

1934 (X-9018) to a l l Federal Reserve Agents in which i t stated that i t

would consider the issuance to holding company a f f i l i a t e s , upon compli-

ance with certain minimum conditions, of l imited voting permits for the

purpose of e l ec t ing directors and acting upon routine matters at the

1935 annual meetings of their subsidiary member banks. These purposes

were stated a f ter the code word ANCILCO on page 7 of such l e t t e r .

Upon receipt of authority from the Board to i ssue a l imited voting per-

mit for the purposes stated a f ter the code word AUCILCO on page 7 of

the Board's l e t t e r to a l l Federal Reserve Agents dated November 10,

1934 (X-9018) (hereinafter referred to as organization purposes), and

upon compliance by the holding company a f f i l i a t e with the conditions

imposed by the Board upon the issuance of a permit for such organiza-

t ion purposes, you are hereby authorized, in cases where the holding

company a f f i l i a t e so requests, to add to the statement o f the purposes

for which the permit i s issued the following words:

and to act thereat upon such amendments to the (charter) of such (bank) as may be prescribed by the Reconstruction Finance Corporation in connec-t ion with the revis ion of dividend rates upon preferred stock subscribed for or purchased by such corporation, which amendments sha l l be in form approved by the appropriate supervisory author i t ies .

By way of i l l u s t r a t i o n , in cases where a holding company a f -

f i l i a t e i s to be given permission to act upon the amendments pre-

scribed by the Reconstruction Finance Corporation, the period at the

end of the statement of organization purposes should be changed to a


JS» X-9054

comma, so that the entire statement of purposes in the voting permit

w i l l read thus:

To e lec t directors of such ("bank) at the annual (meeting) of shareholders, or at any adjournments thereof, at any time prior to April 1, 1935, and to act thereat upon such matters of a routine nature as are ordinarily acted upon at the annual meetings of such (bank), and to act thereat upon such amendments to the (charter) of such (hank) as may "be prescribed by the Reconstruction Finance Corporation in connection with the revis ion of dividend rates upon preferred stock subscribed for or purchased by such corporation, which amendments shal l be in form approved by the appropriate super-visory author i t i es .

In some cases the Board has granted or w i l l grant authority

to vote for organization purposes at the 1935 annual meetings of the

subsidiary member banks by a telegram or l e t t e r to you which s ta tes such

purposes at length instead of using the code word A1TCILC0. In such

cases, as well as in cases where the code word ANCILCO i s used, you

are authorized to add to the statement of organization purposes the

words set forth i n the s ingle spaced passage on page 2 of th i s l e t t e r .

A l imited voting permit to vote upon the Reconstruction F i -

nance Corporation amendments should not be issued prior to the i s s u -

ance of a l imited voting permit to vote for organization purposes, nor

before compliance with the conditions imposed by the Board upon the

issuance of a l imited voting permit for organization purposes. Per-

mission to vote upon the Reconstruction Finance Corporation amendments

may, however, be granted in the same permit which grants authority to


- 4 - X-9054

vote for organization purposes, as outlined above.

In certain cases holding company a f f i l i a t e s may request a per-

mit to vote upon the Reconstruction Finance Corporation amendments

af ter permits have "been issued to such holding company a f f i l i a t e s to

vote for organization purposes at the 1935 annual meetings of their sub-

sidiary member banks. In such cases, you are hereby authorized to i ssue

a separate l imited voting permit to vote upon the Reconstruction Finance

Corporation amendments, which l imited voting permit shal l contain the

following statement of purposes:

To a c t , at any regular or special (meeting) of shareholders of such (bank), or at any adjourn-ments thereof, at any time prior to April 1, 1935 upon such amendments to the (charter) of such (bank) as may be prescribed by the Recon-struct ion Finance Corporation in connection with the revis ion of dividend rates upon preferred stock subscribed for or purchased by such corpor-at ion, which amendments shal l be in form approved by the appropriate supervisory authori t ies .

Where the l imited voting permit covers more than one subsidiary

member bank, please use the plural instead of the singular of the ap-

propriate words inclosed i n parentheses above. I t w i l l be appreciated

i f you w i l l promptly forward to the Board two executed copies of any

l imited voting permits issued by you under the authorization contained

in th is l e t t e r .

I t i s understood, of course, that no permit to act upon the

Reconstruction Finance Corporation amendments w i l l be issued unless the

issuance of such permit meets with your approval. I f , i n any case in—


X-9054 ^ 4 , 2 2

vo lv ing the i s suance of such a l i m i t e d v o t i n g p e r m i t , c i rcumstances

a r e p r e s e n t which you "believe should be "brought to i t s s p e c i a l a t -

t e n t i o n , tho Board w i l l "be g lad to consider the ma t t e r p r i o r to t h e

i s suance of t h e l i m i t e d v o t i n g p e r m i t , i n the l i g h t of your comments

and recommendations.



to a l l federal deserve agehts


X-9055

LE.R.I 2. A l l IE I E ® £ . £ £ . £ .

STATElvGNT FOR TliE PRESS

For r e l e a s e a t 5:00 p# m» December 20, 1954#

The Federa l Reserve Board announces t h a t t h e Federa l

Reserve Bank of Kansas Ci ty has e s t a b l i s h e d a r e d i s c o u n t r a t e

of 2 l / 2 per cen t , e f f e c t i v e December 21, 1934 •




December 22, 1934

SUBJECT: Code Word Covering New I s sue -of Treasury B i l l s .

Deer S i r ;


Government s e c u r i t i e s between Federa l r e se rve banks, t h e

fo l l owing code word has been des igna ted t o cover a new

i s sue of Treasury B i l l s ;

* "NOXPUT1' - Treasury B i l l s t o be da ted December 26, 1934, and t o mature June 26 ,1935.

This word should be i n s e r t e d i n t h e Fede ra l Re-


code word "NOXPOL" on page 172.

Very t r u l y you r s ,

TO GOVERNORS OF ALL F.R.BANKS


4 2 5

X-9057

REMARKS OF MR. MARRINER S. ECCLES, GOVERNOR OP THE FEDERAL RESERVE BOARD, AT A MEETING OF THE FEDERAL RESERVE BOARD WITH

REPRESENTATIVES OF THE INDUSTRIAL ADVISORY COMMITTEES IN WASHINGTON ON DECEMBER 18,

1934

There are many who f e e l t h a t the making of d i r e c t loans t o i n -

d u s t r y does no t belong i n the Federa l r e se rve banks . There are o the r s

who f e e l t h a t the Federa l Reserve System can perform a u s e f u l f u n c -

t i o n i n t h i s under tak ing , but whatever the opinions may be wi th r e f e r -

ence t o the problem, Congress decided t h a t i s s u e l a s t s e s s i o n and

de lega ted the r e s p o n s i b i l i t y t o the Federal Reserve System of making

such loans• The I n d u s t r i a l Advisory Committees have been chosen t o

undertake t h i s impor tant r e s p o n s i b i l i t y , and are i n a p o s i t i o n which

r e q u i r e s the p a t r i o t i c g iv ing of t h e i r t ime , e f f o r t and thought wi th -

out compensation i n t h i s emergency. Their e f f o r t s i n t h i s connect ion

are g r e a t l y app rec i a t ed by the Board. The r e s u l t s up t o t h e p r e s e n t

time are i n d i c a t i v e of the f i n e work the committees have done i n t h e i r

r e s p e c t i v e communities, and while the r e s u l t s are d i s a p p o i n t i n g to

some i t i s not the f a u l t of the I n d u s t r i a l Advisory Committees or of

the Federa l r e s e r v e banks•

I t i s a d i f f i c u l t t h ing to c r e a t e c r e d i t where t h e r e i s no

b a s i s f o r c r e d i t . I t i s p e r f e c t l y n a t u r a l a f t e r f o u r or f i v e years

of the most d e v a s t a t i n g depress ion t h i s country has ever seen t h a t

t h e r e would be many bus inesses i n a s t a t e of f i n a n c i a l c o l l a p s e , which

would immediately grasp a t every e f f o r t of t h e Government toward


426 - 2 - X-9067

provid ing c r e d i t , which expla ins the deluge of a p p l i c a t i o n s t h a t has

come to the I n d u s t r i a l Advisory Committees• I t i s f e l t t h a t whi le

the f i e l d f o r c r e d i t of t h i s kind i s much more l i m i t e d than many

people thought p r i o r t o the passage of the l e g i s l a t i o n , t h e r e has

been much more good accomplished than i s i n d i c a t e d by the a c t u a l

volume of loans approved. The program of d i r e c t lending has caused

the banks t o give more c o n s i d e r a t i o n t o c r e d i t s t han they would have

been i n c l i n e d t o give i n the p a s t . I t has a l so tended t o r e l i e v e the

p ressu re being exe r t ed f o r the l i q u i d a t i o n of ou t s t and ing c r e d i t s , so

t h a t i t i s d i f f i c u l t t o measure t h e amount of t o t a l c r e d i t t h a t has

been c a r r i e d t h a t otherwise would have been r e t i r e d , or the amount of

new c r e d i t t h a t t he banks have extended which p o s s i b l y would not have

been extended had i t not been fo r t h i s l e g i s l a t i o n . There have been

a number of cases where the committees have done very va luab le work

i n adv i s ing companies with r e f e r e n c e t o changes t hey could make i n

management and p o l i c y .

All t h a t t h e committees can do i s t o do the b e s t t h e y can and

a t tempt t o develop as many loans i n the r e s p e c t i v e communities as i t

i s p o s s i b l e t o develop, being as l i b e r a l i n t h e i r i n t e r p r e t a t i o n of

e l i g i b l e c r e d i t as i t i s p o s s i b l e t o b e . Inasmuch as t h e count ry i s

i n a cond i t i on of gene ra l bus iness depress ion , an improvement i n bus-

i n e s s volume, p r i c e s and p r o f i t s over a pe r iod of time can be expected ,

the banks can be more l i b e r a l i n the ex tens ion of c r e d i t than they

could be i f the country was a t the peak of p r o s p e r i t y f a c i n g t h e


3- X-9057

c r e d i t dangers i n h e r e n t i n a pe r iod of d e f l a t i o n * I t would be b e t t e r

t o e r r on the s ide of l i b e r a l i t y i n t he p r e sen t s i t u a t i o n than on t h e

s ide of conserva t i sm. While the banks do not want t o incur l o s s e s

knowingly, i t i s not expected t h a t no l o s s e s w i l l r e s u l t . The Federa l

Reserve System should be prepared t o show t h a t t h e i r p o l i c y has been

l i b e r a l , t h a t the borrower has been given the b e n e f i t of t h e doubt,

and t h a t t he Federa l r e s e r v e banks have been w i l l i n g t o assume every

reasonable r i s k .

Most i n d i v i d u a l banks cannot t ake any s u b s t a n t i a l l o s s e s wi th -

out becoming i n s o l v e n t and t h e earn ings of t he banks are so low a t

the p re sen t t ime t h a t t hey are not i n a p o s i t i o n t o take l o s s e s ,

whereas the Federa l r e s e r v e banks can, w i t h o u t d i s a s t e r , assume a

g r e a t e r r i s k than t h e p r i v a t e bank. I f l o s se s do develop t h e y a re

s o c i a l i z e d , and do not tend t o de s t roy t h e banking system as do the

l o s se s i n i n d i v i d u a l banks which cause the banks t o c lo se •

Bankers have a t h r e e f o l d du ty . They must sa feguard t he funds

of t h e i r d e p o s i t o r s , and they must sa feguard the p r i n c i p a l and ea rn

dividends f o r t h e i r s tockholders • They are charged i n a very l a r g e

measure wi th a more impor tant r e s p o n s i b i l i t y than e i t h e r of the above,

t h a t of c r e a t i n g and ex t ingu i sh ing t h a t p a r t of the coun t ry 1 s money

supply r e p r e s e n t e d by checking accounts . This l a s t duty t o t he com-

munity a t l a r g e i s o f t e n over looked. A c o n t r a c t i o n of loans and i n -

vestments which may be d e s i r a b l e on i n d i v i d u a l grounds, may be unde-

s i r a b l e from the viewpoint of the country as a whole f o r t h e reason


4,2 - 4 - X-9057

t h a t a c o n t r a c t i o n of loans involves a l so a c o n t r a c t i o n of d e p o s i t

money or d e p o s i t currency* In the process of l i q u i d a t i o n from 1929

t o 1933 approximately o n e - t h i r d of t h e t o t a l depos i t s of t h e country

was so ext inguished# The process of recovery r e q u i r e s t h a t a sub-

s t a n t i a l p a r t of t h i s l o s t depos i t currency be r e p l a c e d . This can be

done i f t h e banking system as a whole w i l l expand i t s loans and i n v e s t -

ments . In the event t h a t the banking system f a i l s to do t h i s t he

Government i s then f o r c e d t o supply the d e f i c i e n c y . That can be sup-

p l i e d through Government f i n a n c i n g and budgetary d e f i c i t s , t he banks

c o n s t a n t l y i n c r e a s i n g t h e i r investments i n Government bonds. I f t he

banks f a i l t o t ake Government bonds, and f a i l t o i n c r e a s e loans and

inves tments , t he d e f i c i e n c y must be suppl ied e i t h e r through t h e Fed-

e r a l Reserve System buying such bonds as a re r e q u i r e d , t h e c r e a t i o n of

a c e n t r a l bank upon the f a i l u r e of t he Federa l r e s e r v e banks t o take

t h e bonds, or the i s suance of currency by the Government. The d e s i r -

able way i s t o do i t through the p r i v a t e banking system t o the g r e a t e s t

e x t e n t p o s s i b l e , bu t i t cannot be done and i t w i l l not be done i f the

bankers f e e l t h a t the banks a re unsound un less they are l i q u i d . We

found i n the depress ion t h a t t h e r e i s no such t h i n g as l i q u i d i t y ex-

cept i n t h e case of paper which can be converted i n t o cur rency through

r e d i s c o u n t i n g wi th t h e Federa l r e s e r v e banks, and what appeared t o

be a sound bond wi th an $85,000,000,000 n a t i o n a l income appeared t o

be p e r f e c t l y unsound wi th a $50,000,000,000 income•

Bankers have i n s i s t e d , and t h e r e can be no ques t ion of t h e i r


- 5 X-9057

s i n c e r i t y , t h a t they a re w i l l i n g and anxious t o make good commercial

l o a n s . But t h a t i s not enough. We must f r a n k l y f a c e the f a c t t h a t

t he supply of such loans i s not s u f f i c i e n t both t o o f f s e t the l i q u i d -

a t i o n of old loans and t o b r ing about t h e r e q u i s i t e expansion of t o t a l

a s s e t s and d e p o s i t s . Even i n 1929 commercial loans e l i g i b l e f o r r e -

d i scoun t ing a t t he Federa l r e s e r v e banks comprised only 12.7% of the

member banks ' t o t a l earn ing a s s e t s . At the p r e s e n t t h e y are l e s s than

8/&. Bankers cannot conf ine themselves t o such loans and s t i l l supply

an adequate amount of depos i t cu r rency . In o the r words# i f the bank-

e r s of t h i s count ry are t o perform t h e i r money supplying f u n c t i o n s

s a t i s f a c t o r i l y they must be prepared t o i n c r e a s e t h e i r ea rn ing a s s e t s

o ther than commercial l oans . I t i s t r u e t h a t t h e banks have inc reased

t h e i r hold ings of Government s e c u r i t i e s by approximately f i v e b i l l i o n

d o l l a r s , however, even with t h i s i n c r e a s e t h e c o n t r a c t i o n of a l l loans

and inves tments has been about $18,000,000,000 s ince 1929. I should,

however, l i k e t o see banks i n c r e a s e t h e i r holdings of o the r i n v e s t -

ments, sound r e a l e s t a t e mortgage loans and l o c a l loans of good se -

c u r i t y bu t wi th a m a t u r i t y much longer than s i x months.

I would not make t h e sugges t ion i f I thought t h a t i t would

prove d e t r i m e n t a l to the i n t e r e s t s of t h e d e p o s i t o r s or s tockholders

of banks . I a p p r e c i a t e thoroughly the harrowing n a t u r e of t h e bank-

e r s ' exper iences wi th f r o z e n a s s e t s i n the p a s t . I t i s p o s s i b l e ,

however, t h a t wrong lessons are being drawn from our 1929 t o 1933

banking expe r i ences . S u p e r f i c i a l l y , t h e t r o u b l e may have appeared


6 X-9057

t o have been lack of s u f f i c i e n t l i q u i d i t y # But no banking system can

be both l i q u i d enough t o pay off any s u b s t a n t i a l amount of i t s depos i t s

a t a momentT s n o t i c e and a t t he same t ime serve t h e coun t ry by p ro-

v id ing t h e amount of money necessa ry f o r bus iness s t a b i l i t y . Funda-

menta l ly , t he r e a l t r o u b l e l a y i n t he circumstances t h a t gave r i s e

t o t h e need of g r e a t l i q u i d i t y . These c i rcumstances are now happ i ly

p a s t and hence t h e need of g r e a t l i q u i d i t y i s o b v i a t e d . The insurance

of bank d e p o s i t s i s designed t o p r o t e c t t he banks from runs • Banks

may lose d e p o s i t s t o o ther banks, but as a system t h e y a re going t o

ga in r a t h e r than lose d e p o s i t s . We have the w i l l and, we b e l i e v e ,

possess t h e power to prevent the r ecu r rence of widespread l i q u i d a t i o n

and t h e c o l l a p s e of va lues t h a t have c h a r a c t e r i z e d r e c e n t y e a r s .

If we can get the p r i v a t e c r e d i t system t o f u n c t i o n i n the

f i e l d of mortgage loans , we w i l l go a long way toward causing the

p r i v a t e banking s t r u c t u r e t o occupy 'the p lace t h a t i t was designed

t o occupy. If the banks f a i l t o do t h a t , t hen i t becomes i n e v i t a b l e

t h a t t h e Government must cont inue i n t h e f i e l d of p rov id ing p r i v a t e

c r e d i t as t hey have been doing i n the p a s t . I f t h i s tendency i s not

s topped, i t w i l l only be a sho r t time be fo re we have s o c i a l i z e d and

n a t i o n a l i z e d t h e c r e d i t s t r u c t u r e of America. And t h i s i s a s i g n i f i -

cant and dangerous t r e n d t h a t many bankers a re e n t i r e l y unaware o f .

The a d m i n i s t r a t i o n cannot be blamed f o r t h a t development because

t he p o l i t i c a l p r e s su re and circumstances t h a t have developed have

f o r c e d the a d m i n i s t r a t i o n i n t o the c r e d i t f i e l d on an unprecedented


431 - 7 - X-9057

sca l e and i t becomes the duty of a l l of us t o t r y t o d i v e r t so f a r as

we p o s s i b l y can i n t o p r i v a t e channels the c r e d i t f u n c t i o n s • With be-

tween ^13,000,000,000 and v l5 ,000,000,000 of time d e p o s i t s i n the

banks, t h e r e should be no he s i t ancy on t h e p a r t of t h e banks t o en t e r

the mortgage f i e l d . E i the r t h a t should occur or time d e p o s i t s should

be divorced from commercial depos i t s so t h a t t ime d e p o s i t s can be

used i n the f i e l d i n which they were designed t o be used .

The Board a p p r e c i a t e s the t ime t h a t you have given t o come t o

Washington t o d i scuss the problems p e r t a i n i n g t o i n d u s t r i a l loans

and the i n t e r e s t t h a t you have shown and t h e coopera t ion t h a t you

have given* The Board pledges i t s support t o the I n d u s t r i a l Advisory

Committees i n t h e i r work.




X-9058

December 24, 1934

SUBJECT: Holidays during January, 1935.

Dear Sir:

On Hew Year*8 Day the o f f i c e s of the Federal Reserve Board

and a l l Federal reserve "banks and "branches w i l l "be c losed.

The Board i s advised that the fo l lowing holidays w i l l a l so

"be observed "by Federal reserve "banks and "branches during the month

of January:

Tuesday, January 8

Saturday, January 19

Hew Orleans Anniversary of Bat t l e of Hew Orleans

Anniversary of Birthday of General Robert E. Lee

Monday, January 28

Ei chmond Charlotte

Atlanta Birmingham Hashvi l le Jacksonvi l le

Louisv i l l e Memphis

Dallas El Paso Houston San Antonio

Havana Agency Anniversary of Birthday of Jose Marti


- 2 -

On the da t e s given the o f f i c e s mentioned w i l l not p a r t i c i p a t e

i n e i t h e r the t r a n s i t or the Federa l r e se rve note c l e a r i n g through

the Gold Set t lement Fund. Please inc lude t r a n s i t c l e a r i n g c r e d i t s

f o r the o f f i c e s a f f e c t e d on each of the hol idays wi th your c r e d i t s

f o r the fo l lowing bus iness day. Ho d e b i t s covering shipments of

Federa l r e se rve no tes f o r the head o f f i c e s concerned should be i n -

cluded i n your note c l e a r i n g of Saturday, January 19.

P lease n o t i f y branches .


J . C. Hoel l , A s s i s t a n t Secre tary

TO GOVEEHORS OF ALL F. E. BAMS




X-9060

December 26, 1934

SUBJECT: Amendments t o c h a r t e r s S t a t e member banks .

Dear S i r ;

There i s i nc losed f o r your i n fo rma t ion and

guidance a copy of a l e t t e r which t h e Federal Reserve

Board has addressed t o one of t h e Federa l Reserve Agents

with regard t o the forwarding t o the Board of copies of

amendments to the c h a r t e r s of S t a t e member banks .


hf~)cnsuJf Chester M o r r i l l ,

S e c r e t a r y .

Inc losure



435

C0F>Y X-9060-a

December 26, 1934

Mr. J .N.Peyton , Federa l Reserve Agent, Federal Reserve Bank of Minneapolis , Minneapol is , Minnesota

Dear Mr. Peyton:

Receipt i s acknowledged of Mr. B a i l e y ' s l e t t e r of October 13,

1934, i n c l o s i n g a c e r t i f i e d copy of the amended a r t i c l e s of i nco rpo ra -

t i o n of the Saul t Savings Bank, Saul t Sa in te Marie, Michigan, executed

i n connect ion with the r ecen t r e d u c t i o n i n the b a n k ' s common c a p i t a l

s tock and the s a l e by i t of p r e f e r r e d s tock A and p r e f e r r e d s t o c k b.

This document i s somewhat voluminous, and Mr. Bai ley has r eques ted

advice as to whether the Board d e s i r e s documents of t h i s kind to be

submit ted t o i t i n connect ion with s i m i l a r t r a n s a c t i o n s a f f e c t i n g

S t a t s member banks.

As you know, when a S t a t e member bank a p p l i e s f o r admission

t o membership i n the Federa l Reserve System, a copy of t h e c h a r t e r of

the bank, t o g e t h e r wi th a l l amendments t h e r e t o , i s forwarded t o t h e

Board f o r i t s i n fo rma t ion and r e c o r d s . The Board a l so d e s i r e s t h a t

any amendments t o a s t a t e bank ' s c h a r t e r , while i t remains a member of

the Federa l Reserve System, should be f u r n i s h e d t o t h e Board f o r i t s

i n fo rma t ion and in order t h a t i t s r e co rds r ega rd ing t h e co rpo ra t e powers

and s t a t u s of the bank may be complete. I t w i l l be a p p r e c i a t e d i f in

each case you w i l l submit the amendment to t h e counsel f o r your bank,


4 3 6 X-9060-a

Mr. J .N.Peyton — 2

i n order t h a t he may be s a t i s f i e d as t o a l l t he l e g a l a s p e c t s involved ,

and advise t h e Board of the opinion of your counsel when t h e copy of

the amendment i s forwarded t o the Board. Of course , i n any such case

tho opinion of your counsel should con ta in advice as t o whether a l l

requi rements of the S t a t e law have been complied w i t h . I f i n any case

i t appears t h a t a c o r r e c t i o n in the proceedings i s neces sa ry , i t i s

assumed t h a t you w i l l t ake app rop r i a t e s t e p s i n order t h a t t he neces -

sary c o r r e c t i o n may be e f f e c t e d .

While i n some eases i t may bo d e s i r a b l e f o r t h e Federa l

r e s e r v e bank t o o b t a i n copies of under ly ing documents showing the a c t i o n

taken by tho s tockho lde r s and/or d i r e c t o r s of the i n s t i t u t i o n involved

load ing up t o t h e amendment to i t s c h a r t e r , i n order t h a t tho counsel

f o r the Fede ra l r e s e r v e bank may be s a t i s f i e d as t o tho l e g a l a s p c c t s

of the m a t t e r , copies of such under ly ing documents need not be forwarded

t o the Board f o r i t s r e c o r d s . In t h i s connect ion, t he Board f e e l s t h a t

the ques t ion as to what under ly ing documents, i f any, need be obta ined

i n any p a r t i c u l a r case i s a ques t ion which must be determined i n view

of the c i rcumstances involved i n each case and t h a t t h i s ques t ion should

be determined by the Federa l Reserve Agent and counsel f o r t h e Federa l

r e se rve bank i n the e x e r c i s e of a reasonable d i s c r e t i o n i n each ca se .

I t i s assumed t h a t , i n the absence of s p e c i a l c i rcumstances , the counsel

f o r t h e Federa l r e s e r v e bank w i l l r e l y i n each case upon in fo rma t ion

rece ived from the S t a t e superv i sory a u t h o r i t i e s t h a t a p p r o p r i a t e a c t i o n

has been taken by the s tockho lde r s and/or d i r e c t o r s looking toward the

amendment of the c h a r t e r of the bank.


X-9060-a Mr. J .N.Peyton — 3

In r e p l y to Mr. B a i l e y ' s s p e c i f i c i nqu i ry with regard t o

whether the Board d e s i r e s copies of amendments t o c h a r t e r s of S t a t e

member banks covering the reduc t ion of c a p i t a l s tock and the issuance

of p r e f e r r e d s tock , you are advised t h a t the Board would l i k e t o r e -

ceive copies of any such amendments which should be submitted i n the

manner descr ibed i n d e t a i l above with regard t o amendments t o the

cha r t e r of a S t a t e member bank. In t h i s connection, i t may be noted

t h a t , under the p rov i s ions of s ec t i on 9 of the Federal Reserve Act

as amended, the terms " c a p i t a l " and " c a p i t a l s tock" , f o r the purposes

of membership of S t a t e banks in the Federa l Reserve system, s h a l l

include the amount of outs tanding c a p i t a l notes and debentures l e g a l -

ly i ssued by the applying bank and purchased by the Recons t ruc t ion

Finance Corpora t ion . I t i s understood t h a t i n most cases no amend-

ment to the c h a r t e r of a S t a t e member bank i s necessary f o r the i s -

suance of such c a p i t a l no tes or debentures , bu t , i n view of the f a c t

t h a t such c a p i t a l notes and debentures are under the law considered

c a p i t a l and c a p i t a l s tock f o r membership purposes, the Board i n each

case would l i k e to rece ive a copy of the agreement of the bank cover-

ing the issuance of such c a p i t a l notes or debentures , t o g e t h e r with

advice of the counsel f o r the Federal r e se rve bank t h a t he i s s a t i s -

f i e d as t o the l e g a l aspec t s involved.

In any case i n which the Board has not h e r e t o f o r e been

fu rn i shed with copies of amendments to t he c h a r t e r of S t a t e member

banks or copies of agreements covering the issuance of c a p i t a l notes


438 X-9060-a

Mr. J .N.Peyton — 4

or debentures so ld t o the Recons t ruc t ion Finance Corpora t ion , i t w i l l

be apprec i a t ed i f , when such a f a c t comes t o your a t t e n t i o n , you w i l l

ob ta in copies of such documents and forward them t o t h e Board, wi th

app rop r i a t e advice as t o whether your counsel i s s a t i s f i e d as t o the

l e g a l a spec t s invo lved . As a mat te r of convenient procedure , i n t h i s

connect ion , and i n connect ion with any f u t u r e amendments t o c h a r t e r s

or agreements cover ing t h e issuance of c a p i t a l no tes or debentures t o

t h e Recons t ruc t ion Finance Corpora t ion , you may wish t o cons ider the

a d v i s a b i l i t y of having the examiner f o r t h e Federa l r e s e r v e bank d e t e r -

mine a t the t ime of examination of each S t a t e member bank whether t h e r e

have been any amendments to i t s c h a r t e r , or agreements cover ing the

issuance of c a p i t a l no tes or debentures sold to the Recons t ruc t ion

Finance Corpora t ion , copies of which have not p rev ious ly been forwarded

to the Board, r a t h e r than t o make s p e c i a l i n q u i r i e s of member s t a t e banks

i n t h i s connec t ion .

In the s p e c i f i c case r e f e r r e d t o by Mr. B a i l e y , i t i s assumed

t h a t your counsel was s a t i s f i e d as t o the l e g a l a spec t s of the amend-

ments to the a r t i c l e s of i n c o r p o r a t i o n of the Saul t Savings Bank, but i t

w i l l be app rec i a t ed i f you w i l l f u r n i s h the Board with d e f i n i t e advice

on t h i s p o i n t .


(Signed) Chester M o r r i l l





X-9061

December 26, 1934

Dear S i r :

There are a t t a ched copies of the minutes of t h e meetings

of the Chairmen of the I n d u s t r i a l Advisory Committees he ld i n

Washington on December 17 and 18, 1934. There i s a l s o a t t a ched

a summary s ta tement of t h e meeting of the members of the Federal

Reserve Board with r e p r e s e n t a t i v e s of the i n d u s t r i a l Advisory

Committees on the norning of December 18, 1934. I t w i l l be

app rec i a t ed i f you w i l l hand t o the o ther members of your com-

m i t t e e the e x t r a cop ies of the minutes and s ta tement which are

enc losed .

You w i l l be advised i n due cqurse of any a c t i o n taken

by the Board i n connect ion wi th t h e r e s o l u t i o n s adopted a t t h e

December 18 meeting of t h e Chairmen,

The Federal Reserve Board wishes aga in to express i t s

a p p r e c i a t i o n of T.he coopera t ion of the r e p r e s e n t a t i v e s of che

I n d u s t r i a l Advisory Committees i n p a r t i c i p a t i n g i n the con-

s i d e r a t i o n of the ques t ions involved i n the i n d u s t r i a l loan


X-9061

—2«~

a c t i v i t y * and a s s u r e s you of i t s d e s i r e to be of any a s s i s t a n c e

i t can t o t h e committees i n ca r ry ing on t h e i r work.


-tfatfiAZZv IY) oiAdi{ Chester M o r r i l l ,

S e c r e t a r y .

I n c l o s u r e s

TO ALL REPRESENTATIVES OF INDUSTRIAL ADVISORY COMMITTEES WH0 ATTENDED MEETINGS IN WASHINGTON ON DEC.3fffl.iiE 17, and 13, 1934, AND ALSO TO MR. J . B. H0LTZCLAT7, CHAIRMAN OF RICHMOND COMMITTEE.




t h e f e d e r a l r e s e r v e b o a r d December 26, 1934

Dear S i r :

There are a t t a c h e d , f o r your i n fo rma t ion , copies

of the minutes of the meetings of the Chairmen of the i n -

d u s t r i a l Advisory Committees he ld i n Washington on December

17 and 18, 1934, and a copy of a summary s ta tement of the

meeting of t h e members of t h e Federa l Reserve Board with

r e p r e s e n t a t i v e s of t h e I n d u s t r i a l Advisory Committees on

the morning of December 18, 1934. A copy of a l e t t e r

addressed by the Board today to each of the members of the

I n d u s t r i a l Advisory Committees who a t t ended these meet ings

i s a l so enc losed .


Chester M o r r i l l S e c r e t a r y .

I n c l o s u r e s

TO AIL FEDERAL RESERVE AGENTS AMD GOVERNORS Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

442 X-9063

Upon c a l l of t he Chairman, Mr. A. M. Creighton, a supper meeting

of the Chairmen of t h e I n d u s t r i a l Advisory Committees was he ld a t t h e

Car l ton Hotel a t seven o ' c l o c k - Monday, December 17, 1934 with t h e

fo l lowing p r e s e n t :

Mr, A. M. Creighton - Boston, Mr. Will iam H. Pouch - New York, Mr. J . S. Butterworth ~ P h i l a d e l p h i a , Mr. F. A« Smythe - Cleveland, Mr. John Sanford - A t l a n t a , Mr. Max Eps te in - Chicago, Mr. Wm. E. Norr is - S t . Louis , Mr. Sheldon V. Wood - Minneapol is , Mr. Clarence Ousley - Da l l a s , Mr. Ralph H. Burnside - Po r t l and , Oregon, Mr. S. F. Gilmore - S t . Louis , Mr. W. M. Hale - San F ranc i s co .

Upon motion duly p resen ted and seconded t h e fo l lowing o f f i c e r s

were e l e c t e d :

Mr. A. M. Creighton - Chairman Mr. Wil l iam H. Pouch - Vice Chairman Mr. J . E. Butterworth - Sec re t a ry

Upon motion duly p resen ted and seconded the fo l lowing answers given

below are the unanimous consensus of opinion of the meet ing, wi th excep-

t i o n s noted where they occur :

QUESTIONS ANSWERS

1. What i s f e e l i n g i n regard t o ope ra t i on of Sec t ion 13b by the Federa l r e s e r v e banks,

(a ) Among i n d u s t r i a l i s t s , (a) Where they a re acqua in ted , or whether p o t e n t i a l borrowers have a knowledge of the law, or no t ? t hey are f a v o r a b l e .

Among o ther bus iness l e a d e r s ?

(b) Same answer as above.


- 2 - X-9063

QUESTIONS

(c ) Among f i n a n c i a l i n s t i t u -t i o n s ?

ANSWERS

(c) F i n a n c i a l i n s t i t u t i o n s which are acquain ted wi th t he law are f a v o r a b l e ; our g r e a t duty i s t o acqua in t more wi th t h e r e a l p o s s i b i l i t i e s under the law*

2 . Need f o r working c a p i t a l f o r i n d u s t r y and commerce•

(a) Has exper ience i n d i c a t e d t h a t t h e r e was a subs tan-t i a l need not being met through usua l sources of c r e d i t ?

(b) I f such need now e x i s t s can i t be adequa te ly met under the p r e sen t Sect ion 13b?

(a) Yes. While the need apparen t -l y i s no t as g r e a t as a t f i r s t thought , t h e r e i s need and t h i s p re sen t law t akes care of i t , a l l of which i s supported by the number of loans t h a t have been made i n t h e s h o r t pe r iod we have been o p e r a t i n g .

(b) Yes. We f e e l t h a t p r a c t i c a l l y a l l worthy cases so f a r p r e -sented have been taken care of e i t h e r d i r e c t l y or i n d i r e c t l y and e x i s t i n g needs can be taken care of i n the f u t u r e •

3« Assuming t h a t t h e r e w i l l be a cont inuing need f o r 13b ad-vanc e s or c omrni tments ,

( a ) Wil l a p p l i c a t i o n s f o r the most p a r t take the form o f ;

( l ) Appl ica t ions f o r d i r e c t advances•

(2) Appl i ca t ions invo lv -ing sepa ra t e advances by the Federa l r e s e r v e bank and by f i n a n c i n g ins t i t u t i on, or'

( 3 a - l ) At the p r e s e n t t ime most of the a p p l i c a t i o n s a re f o r d i -r e c t advances i n most of t he Federa l r e s e r v e d i s t r i c t s a l though t h e percentage v a r i e s c o n s i d e r a b l y ,

(3a~2) There i s no gene ra l r u l e throughout the e n t i r e System. App l i ca t ions d i r e c t t o Fed-e r a l r e s e r v e banks a re de-c reas ing and those t o the


444 -3«* 1 -9063

QUESTIONS AHSHERS

(3) Appl i ca t ions from f i n a n c i n g i n s t i t u -t i o n s f o r commitments cover ing proposed advances•

(b) Should t he r a t e s charged by the Federa l r e s e r v e banks be so f i x e d as t o encourage a p p l i c a t i o n s under 1, 2 or 3 above?

4e Recognizing t h a t subsec t ion ! ,a" of Sec t ion 13b i s designed t o meet emergency s i t u a t i o n s , should i t be a permanent p ro-v i s i o n of law, and i f so, should i t be amended as r e g a r d s :

(a) Requirement t h a t a p p l i c a n t be unable t o ob ta in r e q u i -s i t e a s s i s t a n c e from usua l sources •

(b) Requirement t h a t loans be f o r working c a p i t a l pu r -poses .

(c ) Requirement t h a t loans be made on a r easonab le and sound b a s i s •

(d) Requirement t h a t loans be conf ined t o e s t a b l i s h e d b u s i n e s s e s .

l o c a l banks a re i n c r e a s i n g i n the m a j o r i t y of the d i s t r i c t s • Most members of t h e Committee f e e l t h a t a p p l i c a n t s should be encouraged t o make a p p l i c a -t i o n s through t h e l o c a l banks, which should be encouraged as i t i s most advantageous f o r the l o c a l banks .

(3a-3) I f f i n a n c i n g i n s t i t u t i o n s r e -f e r s to Fac tor and Finance Companies, t h e r e has been very few cases of t h i s k ind ,

(b) I t seemed t o be t h e consensus of opinion t h a t the p r e s e n t r a t e s were s a t i s f a c t o r y and should be con t inued . Such r a t e s should encourage the l o c a l banks t o coopera te•

The Committee f e e l s t h a t s e c t i o n 13b should be cont inued i n i t s p resen t form as long as t he emergency e x i s t s and t h a t sub-d i v i s i o n s a , b , c and d be con-t i n u e d . Two Members be l i eved t h a t b might be broadened t o inc lude p r o p r i e t a r y c a p i t a l .


445

X-9063

QUESTIONS AKSWERS

5* Should subsec t ion "b" of Sec-t i o n 13b be a permanent pro-v i s i o n of law, and i f so, should i t be amended as

(a ) Au tho r i za t ion of advances through f i n a n c i n g i n s t i -t u t i o n s o ther than member banks .

(b) Amount of o b l i g a t i o n as t o l o s s s u s t a i n e d .

I t was the consensus of opinion t h a t subsec t ion ! fb" of Sec t ion 13b should be r e t a i n e d and a, b and c be not changed i n t h e law.

(c) Au tho r i za t ion of sepa ra t e loans by Federa l r e se rve banks and by a f i n a n c i n g i n s t i t u t i o n on which r e -payments are made pro r a t a ,

6 . Would t h e making of loans f o r working c a p i t a l purposes p r e -sumably have been conducted more e f f e c t i v e l y i f In te rmedi -a t e Credi t Banks a f f i l i a t e d wi th the Federa l r e s e r v e banks had been s e t up f o r t h i s pur -pose as provided i n the f i r s t b i l l proposed by the Federa l Reserve Board? I f so, why?

The Committee f e l t t h a t the answer to t h i s ques t ion i s NO; the Chicago Chairman d i s s e n t i n g ,

7 . What has boon exper ience as r egards a p p l i c a t i o n s ?

(a ) Extent t o which f e a r of r e j e c t i o n and of p o s s i b l e adverse e f f e c t upon a p p l i -c a n t ' s c r e d i t s tanding has d iscouraged submission of a p p l i c a t i o n s .

(b) Extent of and reasons f o r withdrawal of a p p l i c a t i o n s •

(a ) I t i s no t f e l t t h a t f e a r of r e -j e c t i o n and adverse e f f e c t upon an a p p l i c a n t ' s c r e d i t has d i s -couraged a p p l i c a t i o n s i n more than a few i n s t a n c e s •

(b) N e g l i g i b l e , and u s u a l l y f o r the reason tha t a p p l i c a n t has found t h a t funds would not be needed, or has obta ined funds from usua l banking s o u r c e s .


446

vui^STIGUS

(c) I s cha rac t e r of a p p l i c a - (c ) t i o n s improving? I s the p ropo r t i on of a p p l i c a t i o n s f o r d i r e c t advances de-c l i n i n g ?

(d) Has t h e r e been any sub- (d) s t a n t i a l number of com-p l a i n t s of a lack of cour tesy on t h e p a r t of the Committee or of o f -f i c i a l s or employees of Federa l r e se rve banks?

X-9063

ANSWERS

Character of a p p l i c a t i o n s i s improving and v a r y i n g . The p ropor t ion of a p p l i c a t i o n s f o r d i r e c t advances i s con t inu ing i n vary ing p r o p o r t i o n s •

We are not aware of any com-p l a i n t of l ack of cou r t e sy on the p a r t of the Committee or o f f i c i a l s or employees of the Federa l r e s e r v e banks•

(e) Is t h e r e any evidence t h a t Federa l r e s e r v e banks are r e q u i r i n g an excess ive amount of c o l l a t e r a l t o secure loans ?

(e) There i s no evidence t h a t Fed-e r a l r e s e r v e banks a re r e q u i r -ing an excess ive amount of c o l l a t e r a l t o secure l o a n s . On the o ther hand, every e f f o r t i s being made t o make loans when the s e c u r i t y may be regarded as r e a s o n a b l e .

( f ) I s t h e r e evidence of any o ther ground f o r c r i t i c i s m of e i t h e r t h e committees or t h e banks ?

( f ) There i s no evidence of any o ther ground f o r c r i t i c i s m of e i t h e r the Committees or t he Federa l r e se rve banks•

Assuming t h a t more p a r t i c i p a -t i o n s by and commitments t o f i n a n c i a l i n s t i t u t i o n s are d e s i r a b l e , what i s your r e c -ommend a t i on as t o how to b e s t ob ta in the coopera t ion of f i n a n c i a l i n s t i t u t i o n s t o t h i s end?

8 . I t i s the consensus of opinion t h a t more p a r t i c i p a t i o n s by and commitments t o f i n a n c i a l ins t i -t u t i o n s are d e s i r a b l e , and t h i s can be b e s t ob ta ined by d i r e c t con tac t wi th t h e a p p l i c a n t s and the banks . Fur the r t h a t the p r e sen t p u b l i c i t y be cont inued w i th in each d i s t r i c t and t h a t t h i s be supplemented by p u b l i c i t y of a n a t i o n a l c h a r a c t e r and t h a t the a id of t h e Federa l Reserve Board be s o l i c i t e d i n t h i s con-n e c t i o n .

Has the Federa l r e s e r v e bank taken adequate measures t o b r ing to t he a t t e n t i o n of f i n a n c i a l i n s t i t u t i o n s , and

9 . I t i s t he opin ion t h a t t h e Re-serve banks have made d i l i g e n t e f f o r t s t o acqua in t a l l f i n a n c i n g i n s t i t u t i o n s , p a r t i c u l a r l y member


447, *• G™ X-9063

;:,UE3T10HS AK'SVYERS

p a r t i c u l a r l y of member "banks, the advantages to them of ac-t i v e l y seeking out commercial and i n d u s t r i a l e n t e r p r i s e s i n t h e i r t e r r i t o r y i n need of ad-d i t i o n a l working c a p i t a l and f u r n i s h i n g such c a p i t a l under the p r o t e c t i o n of a commitment from the Federa l r e se rve bank?

banks, with the advantages to them of a c t i v e l y seeking out commercial and i n d u s t r i a l e n t e r -p r i s e s i n t h e i r t e r r i t o r y i n need of a d d i t i o n a l working c a p i -t a l and f u r n i s h i n g such c a p i t a l "by commitment from t h e Federa l r e s e r v e banks• At the same time we submit t h a t such e f f o r t s might wel l be i n t e n s i f i e d and we e s p e c i a l l y recommend t o the s eve ra l Reserve banks the a c t i o n of the Mew York Reserve Bank i n engaging the s e r v i c e s of a p rac -t i c a l and wel l known banker f o r a per iod of s eve ra l months ( the banker t o be we l l known i n the d i s t r i c t ) t o v i s i t banks and p e r s o n a l l y d i scuss with them and with borrowers i n a r r e a r s or i n temporary embarrassment the wisdom of n e g o t i a t i n g loans under the terms of Sec t ion 13b#

10. "What, i n your exper ience , has been the most important s e r -v ice rendered i n d u s t r y and commerce under Sec t ion 13b?

10# In our opinion the most important s e r v i c e s rendered t o i n d u s t r y and commerce under Sec t ion 13b are (a ) Accommodation t o i n d u s t r i a l and commercial e n t e r p r i s e s t h a t could not be obta ined o the rwise . (b) the s t i m u l a t i o n of c r e d i t conf idence and accommodation t o i n d u s t r i a l and commercial e n t e r -p r i s e s by o ther banks, many of which have changed t h e i r c r e d i t p o l i c i e s s ince the a d m i n i s t r a -t i o n of Sec t ion 13b began, and (c) the enl ightenment of many a p p l i c a n t s concerning t h e i r own a f f a i r s and p o s s i b i l i t i e s a f f o r d e d by the exper t a n a l y s i s and advice of the Advisory Committees and Federa l r e se rve o f f i c e r s •

11. Has the a d m i n i s t r a t i o n of Sec t ion 13b t o date had any e f f e c t not shown i n r e g u l a r

11. The f a v o r a b l e recommendation of loans by the s e v e r a l Federa l r e -serve banks has i n f luenced many


^ 4 4 8

- 7 - X-9063

QUESTIONS ANSWERS

r e p o r t s of Federa l r e se rve banks on the ex tens ion of c r e d i t through r e g u l a r and usua l channels t o i n d u s t r y and commerce by p r i v a t e f i n a n c i n g i n s t i t u t i o n s ?

l o c a l banks t o t ake over loans , extending c r e d i t where t hey would no t have done so o t h e r -wise#

12 • Recommendations5 not covered 12. I t i s f e l t wise t o cont inue t h i s a c t as an emergency measure# I t w i l l no t b r i ng back p r o s p e r i t y , but i t w i l l be a m a t e r i a l he lp t o many who cannot secure neces -sa ry c a p i t a l f o r two t o f i v e y e a r s . This w i l l b r idge t h e gap where the c a p i t a l market should f u n c t i o n .

e lsewhere , on the s u b j e c t of t he a d m i n i s t r a t i o n of Sec t ion 13b.

Messrs . Smythe, Burnside and Eps te in were appointed as a committee

t o fo rmula te a r e s o l u t i o n f o r p r e s e n t a t i o n a t t he a f t e r n o o n meeting re-

ques t ing t h a t some p r o v i s i o n be made f o r a l t e r n a t e s to r e g u l a r members of

the I n d u s t r i a l Advisory Committees.

Messrs . Pouch, Sanford and Burnside were appointed as a committee

t o confer wi th members of the s t a f f of the Federa l Reserve Board for the

purpose of working out p lans f o r n a t i o n a l p u b l i c i t y i n connect ion wi th the

a c t i v i t i e s of the I n d u s t r i a l Advisory Committee.

Mr. Horr i s and Mr. Wood were reques ted to prepare a r e s o l u t i o n f o r

the meeting tomorrow a f t e r n o o n with r e f e r e n c e t o the r e l e a s e of October

29, 19 34, of the Department of Commerce and sugges t ing t h a t t he Federa l

Reserve Board coun t e r ac t i n an a p p r o p r i a t e manner and a t the proper time

t h e e f f e c t s of t h i s r e l e a s e , and t o acqua in t the pub l i c wi th the e f f e c t i v e

work done by t h e Federa l Reserve System under the p rov i s i ons of Sec t ion 13b,

leaving i t t o the d i s c r e t i o n of the Federa l Reserve Board as t o what ac -

t i o n they should t ake •


449

- 8 - X—9063

Mr• Pouch then moved, which was duly seconded and c a r r i e d unan i -

mously, t h a t the Committee express i t s deep a p p r e c i a t i o n f o r the cour t e sy

and en te r t a inment shown i t t o n i g h t by the Chairman.

The meeting adjourned a t 12:20 a . m*

(Signed) J * E. But terwor th S e c r e t a r y .

Approved:

(Signed) A. M. Creighton Chairman.


450

X-9064

A meeting of the Chairmen of the I n d u s t r i a l Advisory Committees

was held i n Washington on Tuesday, December 18, 1934 a t 2:00 p . m*

PRESENT: Mr. A. M. Creighton, Boston Mr . • II. Pouch, New York Mr . J . E. But terwor th , P h i l a d e l p h i a Mr. F. A# Smythe, Cleveland Mr. John Sanford, A t l an t a Mr. Max Eps te in , Chicago Mr. W. K. Morris , S t . Louis lor. S. V. Yvood, Minneapolis Mr. W. J . Berkowitz, Kansas Ci ty Mr. Clarence Ousley, Dal las Mr. Ralph H. Burnside, Por t l and Mr• J . S. Walden, J r . , C o n t r o l l e r ,

Federa l Reserve Bank of Richmond Mr. S. F. Gilmore, C o n t r o l l e r , Federa l

Reserve Bank of S t . Louis Mr. Wo M. Hale, Cashier , Federa l Reserve

Bank of San F ranc i s co . Mr. E. L. Smead, Chief , D iv i s ion of Bank

Operations of t he Federa l Reserve Board Mr. S. R. Carpenter , A s s i s t a n t S e c r e t a r y

of the Federal Reserve Board Mr. A. M. Stone, Sec re t a ry t o Mr. Szymczak.

Mr. Sanford moved t h a t the minutes of the meeting of t h e r e p r e -

s e n t a t i v e s of the I n d u s t r i a l Advisory Committees held on September 27,

1934, and the minutes of the supper meeting of the Chairmen of the

I n d u s t r i a l Advisory Committees held a t the Car l ton Hotel on the even-

ing of December 17, 1934 be approved.

Mr. Sanford ' s motion was unanimously c a r r i e d .

Mr. Smythe p resen ted the fo l lowing r e s o l u t i o n which was unanimously

adopted:

"Resolved t h a t inasmuch as paragraph (d) of Sec t ion 13-B of the Federa l Reserve Act as amended e s t a b l i s h e s i n each Federa l Reserve D i s t r i c t an I n d u s t r i a l Advisory Committee of no t l e s s


- 2 - X-9064

" than t h r e e or more than f i v e members, and inasmuch as t he Fed-e r a l Reserve Banks r e q u i r e t h e recommendations of a p p l i c a t i o n s f o r loans by a m a j o r i t y of the members of such I n d u s t r i a l Ad-v i s o r y Committees, and inasmuch as i t i s a t t imes imposs ib le to secure t he a t tendance of a m a j o r i t y of the Committee, i t i s d e s i r a b l e t h a t such a c t i o n be au thor ized as w i l l permit the appointment of a l t e r n a t e s i n each Federa l Reserve D i s t r i c t t o serve when and i f the necessa ry m a j o r i t y cannot be p r e s e n t a t any meeting . "

Mr# Morris o f f e r e d the fo l lowing r e s o l u t i o n which, a f t e r some

d i s cus s ion , was adopted, Mr. Epste in vot ing "No.11

"Whereas the i s s u e of Dr. Theodore N. Beckman, Chief Economist i n Charge of Survey, U. S. Department of Commerce dated October 29th, has been brought t o the a t t e n t i o n of the I n d u s t r i a l Advisory Committee, i t i s f e l t t h a t t he Federa l Reserve Board should take a c t i o n when they thought a p p r o p r i a t e t o acquain t the pub l i c wi th the e f f e c t i v e work done by the Federa l Reserve System under the p rov i s ions of Sec t ion 13-B, leav ing i t t o the d i s c r e t i o n of the Federa l Reserve Board as to what a c t i o n they should t a k e . "

Mr. Pouch moved the adopt ion of the fo l lowing r e s o l u t i o n , and

h i s motion was c a r r i e d unanimously.

11 The Committee on P u b l i c i t y recommends t h a t the Federa l Reserve Board be reques ted t o take such s teps as may be neces -sa ry t o îve adequate p u b l i c i t y :

l l ) To the work of the Federa l Reserve Banks and the I n d u s t r i a l Advisory Committees i n extending loans i n ac-cordance wi th Sec t ion 13-B of the Federa l Reserve Act; and,

(2) To the o p p o r t u n i t i e s a f f o r d e d by Sec t ion 13-B of the Federa l Reserve Act f o r i n d u s t r i a l and commercial e n t e r -p r i s e s t o i n c r e a s e t h e i r working c a p i t a l upon advantageous terms and f o r banks and o ther f i n a n c i n g i n s t i t u t i o n s t o i n c r e a s e t h e i r earn ing a s s e t s through loans t h a t combine a high degree of s a f e t y and l i q u i d i t y wi th a s u b s t a n t i a l y i e l d .

"The Committee on P u b l i c i t y e s p e c i a l l y has i n mind such a r t i c l e s i n n a t i o n a l , l o c a l , or t r a d e p u b l i c a t i o n s as may be of p a r t i c u l a r i n t e r e s t t o i n d u s t r i a l and commercial concerns and f i n a n c i a l i n s t i t u t i o n s , and a l so such a r t i c l e s as may tend to r e f u t e f a l s e impressions t h a t may be c r e a t e d by c r i t i c s of the Federa l Reserve banks and the I n d u s t r i a l Advisory Committees i n r e l a t i o n t o t h e i r l o a n s - t o - i n d u s t r y a c t i v i t i e s . "


4 5 2

- 3 - X-9064

The ques t ion was then r a i s e d as to what, i f any, p u b l i c i t y should

be given t o the meetings of the chairmen of the i n d u s t r i a l adv i so ry

committees i n Washington yes te rday and today, and Mr. Szymczak was i n -

v i t e d i n t o the meeting t o p a r t i c i p a t e i n the d i s c u s s i o n .

At the conclus ion of the d i s c u s s i o n , upon motion by Mr• N o r r i s , t he ques t ion of p u b l i c i t y was r e f e r r e d t o the p u b l i c i t y committee and Mr• Szymczak wi th the unders tanding t h a t a pub l i c s ta tement would be i s sued i n t h e i r d i s c r e t i o n as soon as p o s s i b l e c o n s i s t e n t w i th t he c i rcumstances•

Reference was made t o the supplementary l i s t of t o p i c s suggested

f o r d i s c u s s i o n by members of the i n d u s t r i a l adv i so ry committees, and

i t was agreed t h a t inasmuch as the t o p i c s had been covered l a r g e l y by

the a c t i o n taken a t the meeting yes t e rday evening, no f u r t h e r d i s c u s -

s ion a t t h i s t ime was nece s sa ry . In connect ion wi th the second t o p i c ,

however, Mr. Pouch led a b r i e f d i s cus s ion on border l i n e c a s e s .

Mr. Pouch inqu i red as t o the opinion of the o ther r e p r e s e n t a t i v e s

p r e sen t on the ques t ion whether a l i m i t should be placed by the indus -

t r i a l adv i so ry committees on the amount of the advance recommended i n

any i n d i v i d u a l c a s e . I t was expressed as the genera l consensus t h a t

no l i m i t should be a p p l i e d .

The t h r e e r e s o l u t i o n s r e f e r r e d t o above were read f o r Mr. Szymczak*s

i n f o r m a t i o n .

Mr. Szymczak expressed on behalf of himself and the o the r members

of the Board, t h e i r a p p r e c i a t i o n of the work being done by the i ndus -

t r i a l adv i so ry committees and the s a c r i f i c e s which t hey a re making and


4- X-9064

the t ime t hey are spending i n ca r ry ing on t h e work of t h e committees .

He s t r e s s e d the f a c t t h a t t he Board i s very much s a t i s f i e d wi th the

committees * work and i f i t f e e l s any disappointment i n connect ion wi th

the i n d u s t r i a l loan a c t i v i t i e s , i t i s i n the t o t a l amount of loans and

c ommitment s made.

Mr. Norr is s t a t e d t h a t t he Chairmen of the i n d u s t r i a l adv i so ry

committees f e e l t h a t a g rea t dea l of good i s accomplished by t h e i r

meetings i n Washington and he expressed the opinion t h a t the meetings

should be cont inued , p o s s i b l y on a q u a r t e r l y b a s i s a t a t ime mutua l ly

agreeable t o t he Federa l Reserve Board and the chairmen of t he com-

m i t t e e s •

Upon motion by Mr. Ousley, the fo l lowing r e s o l u t i o n was adopted

unanimously:

"We wish t o record our high a p p r e c i a t i o n of t h e informa-t i o n and i n s p i r i n g addresses of Governor Eccles , Messrs . Szymczak, Hamlin, Thomas, Mi l l e r and James of the Federa l .Reserve Board and Comptroller O'Connor, and of the g rac ious c o u r t e s i e s extended t o us by members of t he Federa l Reserve Board S t a f f • We e s p e c i a l l y acknowledge t h e h e l p f u l s e c r e t a r -i a l s e r v i c e of Messrs• Stone and Carpen te r . "

Thereupon the meeting ad journed .

(Signed) J . E. But terwor th Sec re t a ry*

APPROVED:

(Signed) A. M. Creighton , - ~ Chairman.


X-9065

At the meeting he ld i n Washington on December 18, 1934, a t

10 a.m. of members of the Federa l Reserve Board and members of i t s

s t a f f wi th r e p r e s e n t a t i v e s of the I n d u s t r i a l Advisory committees of

the twelve Federa l r e s e r v e d i s t r i c t s , t he fo l lowing i n d i v i d u a l s were

p r e s e n t :

Mr. Marr iner S. Ecc l e s , Governor, Federa l Reserve Board

Mr. J . J . Thomas, Vice Governor, Federa l Reserve Board

Mr. Charles S. Hamlin, Member, Federa l Reserve Board

Mr. A. C. M i l l e r , Member, Federa l Reserve Board

Mr. George R. James, Member, Federa l Reserve Board

Mr. M. S. Ssymczak, Member, Federa l Reserve Board

Mr, J . F. T. O'Connor, Comptrol ler of the Currency and ex o f f i c i o member of the Federa l Reserve Board

Messrs . Alber t M. Croightoji , H. Pouch, J . Ebert But te rwor th , F . A. Smythe, John Sanford , Max Eps t e in , Wm. K. N o r r i s , Sheldon V. Wood and Clarence Ousley, Chairmen of the I n d u s t r i a l Advisory Committees of the F i r s t , Second, Th i rd , Four th , S ix th , Seventh, E igh th , Ninth and Eleventh Federa l Reserve D i s t r i c t s , r e s p e c t i v e l y ,

Messrs . Walter J , Berkowitz and Ralph Burns ide , members of the I n d u s t r i a l Advisory Committees of the Tenth and Twelf th Federa l Reserve D i s t r i c t s , r e s p e c t i v e l y .

Mr. Chaster M o r r i l l , S e c r e t a r y , Federa l Reserve Board

Mr. L. P. Bethea, A s s i s t a n t S e c r e t a r y , F e d e r a l Reserve Board

Mr. 3 . R. Carpen te r , A s s i s t a n t S e c r e t a r y , Fede ra l Reserve Board

Mr. E. L. Smead, Chief of the D iv i s ion of Bank Opera t ions , Federa l Reserve Board


x-9065 : 4 5 5

—

Mr. '.'/alter Wyatt, General Counsel, Federa l Reserve Board

Mr. George B. Ves t , A s s i s t a n t Counsel, Federa l Reserve Board

Mr*. C. R. McKay, Deputy Governor, Federa l Reserve Bank of Chicago

Mr. J . S . Walden, J r . , C o n t r o l l e r , Federa l Reserve Bank of Richmond

Mr. S. F . Gilmore, C o n t r o l l e r , Federa l Reserve Bank of S t . Louis

Mr. w. M. Hale , Cash ie r , Federa l Reserve Bank of San Franc i sco

Mr. Creighton s t a t e d t h a t a meeting of the Chairmen and r e p r e -

s e n t a t i v e s of the I n d u s t r i a l Advisory Committees was he ld yes t e rday

evening and t h a t t h e a c t i o n t aken a t t h a t time would be r e p o r t e d t o

the Board a t t h i s meet ing. He then c a l l e d upon the i n d i v i d u a l members

of the Fede ra l Reserve Board t o address t h e meet ing.

The substance of Governor Ecc les f s ta tement was as f o l l o w s ;

There a re many who f e e l t h a t t he making of d i r e c t l oans t o i n -dus t ry does not be long i n the Federal r e s e r v e banks. There are o t h e r s who f e e l t h a t t h e Fede ra l Reserve System can per form a u s e f u l f u n c t i o n i n t h i s unde r t ak ing , but whatever the opin ions may be wi th r e f e r e n c e t o t h e problem, Congress decided t h a t i s s u e l a s t s e s s i o n and d e l e -gated the r e s p o n s i b i l i t y t o the Federa l Reserve System of making such l o a n s . The I n d u s t r i a l Advisory Committees have been chosen t o under -take t h i s important r e s p o n s i b i l i t y , and a re i n a p o s i t i o n which r e -q u i r e s the p a t r i o t i c g iv ing of t h e i r t ime, e f f o r t and thought without compensation i n t h i s emergency. The i r e f f o r t s i n t h i s connect ion a re g r e a t l y a p p r e c i a t e d by the Board. The r e s u l t s up t o t h e p resen t time a re i n d i c a t i v e of the f i n e work the committees have done i n t h e i r r e s p e c t i v e communities, and while t h e r e s u l t s a re d i s a p p o i n t i n g t o some i t i s not the f a u l t of the I n d u s t r i a l Advisory Committees or of the Federa l r e s e r v e banks .

I t i s a d i f f i c u l t t h i n g t o c r e a t e c r e d i t where t h e r e i s no b a s i s f o r c r e d i t . I t i s p e r f e c t l y n a t u r a l a f t e r f o u r or f i v e yea r s of the most d e v a s t a t i n g depress ion t h i s country has ever seen t h a t t h e r e would be many bus ines se s i n a s t a t e of f i n a n c i a l c o l l a p s e , which would immediately grasp a t every e f f o r t of t h e Government toward providing c r e d i t , which exp la ins the deluge of a p p l i c a t i o n s t h a t has come t o t h e I n d u s t r i a l Advisory Committees. I t i s f e l t t h a t while the f i e l d f o r c r e d i t of t h i s kind i s much more l i m i t e d


X-9065

- 3 -

than many people thought p r i o r to t h e passage of t h e l e g i s l a t i o n , t h e r e has been much more good accomplished than i s i n d i c a t e d by the a c t u a l volume of loans approved. The program of d i r e c t l e n d -ing has caused t h e banks t o give more c o n s i d e r a t i o n t o c r e d i t s than they would have been i n c l i n e d t o give i n the p a s t . I t has a l s o tended t o r e l i e v e the p res su re being exer ted f o r t h e l i q u i d a -t i o n of ou t s t and ing c r e d i t s , so t h a t i t i s d i f f i c u l t t o measure the amount of t o t a l c r e d i t t h a t has been c a r r i e d t h a t otherwise would have been r e t i r e d , or the amount of new c r e d i t t h a t the banks have extended which poss ib ly would not have been extended had i t not been f o r t h i s l e g i s l a t i o n . There have been a number of cases where the committees have done very va luable work i n adv i s ing companies wi th r e f e r e n c e t o changes they could make i n management and p o l i c y .

A l l t h a t t he committees can do i s t o do t h e b e s t they can and at tempt t o develop as many loans i n the r e s p e c t i v e communities as i t i s pos s ib l e t o develop, being as l i b e r a l i n t h e i r i n t e r p r e t a t i o n of e l i g i b l e c r e d i t as i t i s p o s s i b l e to b e . Inasmuch as t h e count ry i s i n a c o n d i t i o n of g e n e r a l bus iness dep re s s ion , an improvement i n bus ines s volume, p r i c e s and p r o f i t s over a per iod of t ime can be ex-pec ted , the banks can be more l i b e r a l i n t h e ex t ens ion of c r e d i t than they could be i f the country was a t t h e peak of p r o s p e r i t y f a c i n g the c r e d i t dangers inheren t i n a per iod of d e f l a t i o n . I t would be b e t t e r t o e r r on t h e s ide of l i b e r a l i t y i n the p resen t s i t u a t i o n than on t h e s ide of conserva t i sm. While t h e banks do not want to incur l o s s e s knowingly, i t i s not expected t h a t no l o s s e s w i l l r e -s u l t . The Federa l Reserve System should be prepared t o show t h a t t h e i r p o l i c y has been l i b e r a l , t h a t t he borrower has been given t h e b e n e f i t of the doubt , and t h a t t he Federa l r e s e r v e banks have been w i l l i n g t o assume every reasonable r i s k .

Most i n d i v i d u a l banks cannot t ake any s u b s t a n t i a l l o s s e s without becoming in so lven t and the ea rn ings of t h e banks a re so low a t t h e presen t t ime t h a t they a re not i n a p o s i t i o n t o take l o s s e s , whereas t h e Federa l r e s e r v e banks can, without d i s a s t e r , assume a g r e a t e r r i s k t h a n the . p r i v a t e bank. If l o s s e s do develop they a re s o c i a l -i z ed , and do not tend t o des t roy t h e banking system as do t h e l o s s e s i n i n d i v i d u a l banks which cause t h e banks t o c l o s e .

Bankers have a t h r e e - f o l d duty . They must sa feguard t h e funds of t h e i r d e p o s i t o r s , and they must sa feguard the p r i n c i p a l and earn d iv idends f o r t h e i r s t o c k h o l d e r s . They a re charged i n a very l a r g e measure with a more important r e s p o n s i b i l i t y t han e i t h e r of t h e above, t h a t of c r e a t i n g and e x t i n g u i s h i n g t h a t p a r t of the c o u n t r y ' s money supply r ep re sen t ed by checking accounts . This l a s t duty t o the com-


X-9065

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munity a t l a rge i s o f t e n overlooked. A c o n t r a c t i o n of loans and inves tments which may be d e s i r a b l e on i n d i v i d u a l grounds, may be undes i r ab l e from the viewpoint of the country as a whole f o r the reason t h a t a c o n t r a c t i o n of loans involves a l s o a c o n t r a c t i o n of depos i t money or depos i t cu r rency . In the p rocess of l i q u i d a -t i o n from 1929 t o 1933 approximately o n e - t h i r d of the t o t a l de-p o s i t s of the country was so e x t i n g u i s h e d . The p rocess of r e -covery r e q u i r e s t h a t a s u b s t a n t i a l pa r t of t h i s l o s t depos i t currency be r e p l a c e d . This can be done i f the banking system as a whole w i l l expand i t s loans and inves tments . In t h e event t h a t t he banking system f a i l s t o do t h i s the Government i s then fo rced t o supply t h e d e f i c i e n c y . That can be suppl ied through Government f i n a n c i n g and budgetary d e f i c i t s , the banks c o n s t a n t l y i n c r e a s i n g t h e i r investments i n Government bonds. I f t he banks f a i l t o t ake Government bonds, and f a i l t o i n c r e a s e loans and inves tments , t he d e f i c i e n c y must be suppl ied e i t h e r through the Federa l Reserve System buying such bonds as are r e q u i r e d , t he c r e a t i o n of a c e n t r a l bank upon t h e f a i l u r e of the Fede ra l r e -serve banks t o take t h e bonds, or t h e i s suance of currency by the Government. The d e s i r a b l e way i s t o do i t through t h e p r i v a t e banking system t o the g r e a t e s t ex ten t p o s s i b l e , but i t cannot be done and i t w i l l not be done i f t he bankers f e e l t h a t t h e banks are unsound u n l e s s they a re l i q u i d . We found i n the dep re s s ion t h a t t h e r e i s no such t h i n g as l i q u i d i t y except i n t h e case of paper which can be conver ted in to currency through r e d i s c o u n t i n g with t h e Federal, r e s e r v e banks, and what appeared t o be a sound bond wi th an §85,000,000,000 n a t i o n a l income appeared t o be p e r -f e c t l y unsound with a $50,000,000,000 income.

Bankers have i n s i s t e d , and t h e r e can be no q u e s t i o n of t h e i r s i n c e r i t y , t h a t they a re w i l l i n g and anxious t o make good commercial l o a n s . But t h a t i s not enough. We must f r a n k l y f ace t h e f a c t t h a t t he supply of such loans i s not s u f f i c i e n t both t o o f f s e t t h e l i q u i d a t i o n of old loans and t o b r i n g about the r e q u i s i t e expansion of t o t a l a s s e t s and d e p o s i t s . Even i n 1929 commercial l oans e l i g i b l e f o r r e d i s c o u n t i n g a t the Federa l r e s e r v e banks comprised only 12.7% of t h e member banks ' t o t a l ea rn ing a s s e t s . At the p resen t t hey a re l e s s than 8%. Bankers cannot conf ine themselves t o such loans and s t i l l supply an adequate amount of depos i t cu r rency . In o the r words i f the bankers of t h i s country are t o perform t h e i r money supplying f u n c t i o n s s a t i s f a c t o r i l y they must be prepared t o i n c r e a s e t h e i r ea rn ing a s s e t s o the r than commercial l o a n s . I t i s t r u e t h a t t he banks have inc reased t h e i r ho ld ings of Government s e c u r i t i e s by approximately f i v e b i l l i o n d o l l a r s , however, even «srith t h i s i n -c rease t h e c o n t r a c t i o n of a l l loans and inves tments has been about J>18,000,000,000 s ince 1929. I should, however, l i k e t o see banks inc rease t h e i r ho ld ings of o the r inves tments , sound r e a l e s t a t e mortgage loans and l o c a l loans of good s e c u r i t y but wi th a m a t u r i t y much longer t h a n s i x months.


Z-9005

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I would not make the sugges t ion i f I thought t h a t i t would prove de t r imen ta l t o t h e i n t e r e s t s of the d e p o s i t o r s or s t o c k -ho lde r s of banks. I app rec i a t e thoroughly the harrowing n a t u r e of the bankers ' exper iences wi th f r o z e n a s s e t s i n the p a s t . I t i s p o s s i b l e , however, t h a t wrong l e s sons a re being drawn from our 1929 t o 1933 banking expe r i ences . S u p e r f i c i a l l y , t h e t r o u b l e may have appeared t o have been lack of s u f f i c i e n t l i q u i d i t y . But no banking system can be both l i q u i d enough t o pay of f any sub-s t a n t i a l amount of i t s depos i t s a t a moment's n o t i c e and a t t he same time serve the country by provid ing the amount of money necessary f o r bus ines s s t a b i l i t y . Fundamentally, t he r e a l t r o u b l e l ay i n the c i rcumstances t h a t gave r i s e to the need of g r e a t l i q u i d i t y . These c i rcumstances a re now happ i ly pas t and hence the need of g r ea t l i q u i d i t y i s obv ia ted . The insurance of bank d e p o s i t s i s designed t o p r o t e c t the banks from r u n s . Banks may lose d e p o s i t s t o o the r banks, but as a system they are going t o gain r a t h e r than lo se d e p o s i t s . We have the w i l l and, we b e l i e v e , possess the power t o prevent the recur rence of widespread l i q u i d a -t i o n and the co l l apse of va lues t h a t have c h a r a c t e r i z e d r e c e n t y e a r s .

I f we can get t he p r i v a t e c r e d i t system t o f u n c t i o n i n t h e f i e l d of mortgage l o a n s , we w i l l go a long way toward causing t h e p r i v a t e banking s t r u c t u r e t o occupy the p lace t h a t i t was designed t o occupy. I f t he banks f a i l t o do t h a t , then i t becomes i n e v i t a b l e t h a t the Government must cont inue i n the f i e l d of provid ing p r i v a t e c r e d i t as they have been doing i n the p a s t . I f t h i s tendency i s not s topped, i t w i l l only be a shor t time b e f o r e we have s o c i a l i z e d and n a t i o n a l i z e d the c r e d i t s t r u c t u r e of America. And t h i s i s a s i g n i f i -cant and dangerous t r e n d t h a t many bankers a re e n t i r e l y unaware o f . The a d m i n i s t r a t i o n cannot be blamed f o r t h a t development because the p o l i t i c a l p r e s su re and circumstances t h a t have developed have fo r ced t h e a d m i n i s t r a t i o n i n t o the c r e d i t f i e l d on an unprecedented s c a l e and i t becomes t h e duty of a l l of us t o t r y t o d i v e r t so f a r as we p o s s i b l y can i n t o p r i v a t e channels the c r e d i t f u n c t i o n s . With b e -tween $13,000,000,000 and $15,000,000,000 of t ime d e p o s i t s in t h e banks, t h e r e should be no h e s i t a n c y on t h e p a r t of t h e banks to e n t e r the mortgage f i e l d . E i t h e r t h a t should occur or time d e p o s i t s should be divorced from commercial d e p o s i t s so t h a t time d e p o s i t s can be used i n t h e f i e l d i n which they were designed t o be u s e d .

The Board a p p r e c i a t e s the time t h a t you have given t o come t o Washington t o d i s c u s s the problems p e r t a i n i n g t o u n d u s t r i a l loans and t h e i n t e r e s t t h a t you have shown and t h e coopera t ion t h a t you have g iven . The Board p ledges i t s support t o the I n d u s t r i a l Ad-v i so ry Committees i n t h e i r work.

Upon r e q u e s t from Mr. Ousley f o r a s ta tement of Governor

c c l e s ' remarks, t he Governor s a id t h a t he had no o b j e c t i o n t o such


- 6 -

a s ta tement be ing inc luded i n t h e s ta tement of t h i s meeting provided

i t i s t r e a t e d as c o n f i d e n t i a l by those p r e s e n t .

At the conclus ion of h i s s ta tement the Governor l e f t t he room

t o a t t end another meet ing.

Mr. O'Connor reviewed the s i t u a t i o n concerning n a t i o n a l banks,

g iv ing s t a t i s t i c s wi th regard t o the p rogress made i n connect ion wi th

the reopening of un l i censed banks fo l lowing the banking h o l i d a y , the

issuance of p r e f e r r e d s tock by n a t i o n a l banks, and the l i q u i d a t i o n of

depos i t s i n n a t i o n a l banks i n r e c e i v e r s h i p . He r e f e r r e d t o t h e s t a t e -

ment which has been made t h a t banks i n the United S t a t e s a re s u b j e c t

t o examination by as many as t h r e e supe rv i s ing agenc ies and s t a t e d t h a t

n a t i o n a l banks a re examined only by n a t i o n a l bank examiners, and t h a t

t h e r e i s no d u p l i c a t i o n i n examination by Federa l agenc ies of S t a t e

banks. In connect ion with the s ta tement t h a t banks a re not making loans

because of the c r i t i c a l a t t i t u d e of n a t i o n a l bank examiners, Mr. O'Connor

s t a t e d t h a t i n October, 1933, a l l n a t i o n a l bank examiners were i n s t r u c t e d

t o appra i se a s s e t s of banks on an i n t r i n s i c value b a s i s r a t h e r than on the

b a s i s of a d i s t r e s s e d market va lue , and t h a t an a n a l y s i s of the examina-

t i o n r e p o r t s r ece ived i n h i s o f f i c e showed t h a t of t h e t o t a l loans and

inves tments of n a t i o n a l banks only 3% had been c l a s s i f i e d as l o s s , 4% as

d o u b t f u l , and 27% as slow. He a l s o r e f e r r e d t o t h e i n s t r u c t i o n s i s sued

by h i s o f f i c e t o examiners t o make a s e p a r a t e . c l a s s i f i c a t i o n of i n d u s t r i a l

loans i n the examination r e p o r t s and t o c l a s s i f y such loans as l o s s e s

only when l o s s e s have a c t u a l l y been determined.


X-9065 460

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Following h i s s t a t emen t , Mr. O'Connor l e f t the mee t ing .

Mr. M i l l e r ' s s ta tement was s u b s t a n t i a l l y as f o l l o w s :

The Board had p l e n t y of evidence t h a t the p r e s su re of t h e de-p re s s ion had made very deep in roads i n t o t h e working c a p i t a l of i n d u s t r i a l concerns , even in those cases t h a t had enjoyed f o r yea r s be fo re t h e d e p r e s s i o n a high r a t i n g . That be ing so, i t appeared t h a t t h e r e might be an oppor tun i ty t o r e l i e v e the p re s su re of a s lender supply of working c a p i t a l upon the morale and psychology of b u s i n e s s through opening a source of supply f o r t h i s purpose through the Federa l r e s e r v e banks, and might i n time be expected t o show r e s u l t s i n a c c e l e r a t i n g bus iness recovery and i n d u s t r i a l p roduc t ion .

In o rder t h a t the problem should be p rope r ly conceived, i n -d u s t r i a l Advisory Committees were se t up t o f u n c t i o n i n connect ion with the Federa l r e s e r v e banks because t h e problem was viewed as a b roader , more d i f f i c u l t and more novel one than merely a banking problem, and one t h a t might r e q u i r e a judgment d i f f e r e n t i n many p a r t i c u l a r s from the judgment of even the s k i l l e d banke r s . I t i s

<• p r i m a r i l y a b u s i n e s s problem; a problem of re-awakening bus ines s through the e f f e c t i v e use of t h i s new i n s t r u m e n t a l i t y of c r e d i t and the judgment of a c t i v e bus iness men i s d e s i r a b l e t o broaden the approach t o t h e problem. The Federa l r e se rve banks have s e l e c t e d t h e members of t h e I n d u s t r i a l Advisory Committees t o p e r -form t h i s r a t h e r vague but n e v e r t h e l e s s tremendously impor tant t a s k .

Underlying the whole mat te r of i n d u s t r i a l c r e d i t through t h e Federa l r e s e r v e banks was the f e e l i n g t h a t i t involved a r i s k t o o l a r g e t o be under taken by i n d i v i d u a l banks no ma t t e r what t h e i r a t t i t u d e might be . I t was a r i s k genera l and s o c i a l i n c h a r a c t e r , a r i s k t h a t had t o be under taken by some agency t h a t could a f f o r d t o take the l o s s and could a f f o r d t o take a generous a t t i t u d e i n the a c t i v i t y because i f t he ven tu re succeeded the r e s u l t s would f a r outweigh the l o s s e s i n c u r r e d .

The r e s u l t s have been d i s appo in t i ng t o the count ry , and even to those who have been thoroughly sympathet ic with t h e Federa l Reserve System. They have been s u r p r i s e d t h a t t h e r e has not been more a l a c r i t y shown on the pa r t of bus ines s i n a v a i l i n g i t s e l f of t h i s new r e s o u r c e . One of the fundamental reasons f o r t h e small amount of l oans approved i s t h a t commercial and i n d u s t r i a l con-cerns have not been i n c l i n e d t o seek c r e d i t . The concerns t h a t are good c r e d i t r i s k s have not wanted to borrow, but have been as anxious t o keep out of debt as the banker i s t o keep h i s i n -s t i t u t i o n l i q u i d . But the problem of provid ing c r e d i t i s s t i l l


X*906#

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presen t and one of t he primary f u n c t i o n s of t h e I n d u s t r i a l Ad-v i s o r y Committees i s t o t r y t o induce a b e t t e r a t t i t u d e of mind on t he p a r t of banker and b u s i n e s s man and p a r t i c u l a r l y t o see what can be done t o b r i n g t he banker and t h e b u s i n e s s man t o -ge the r and t o c r e a t e an atmosphere conducive t o growth of a s p i r i t of e n t e r p r i s e . The committees w i l l f u n c t i o n b e s t when they make t he c o n t r i b u t i o n of optimism t o t he b u s i n e s s psychology of the coun t ry . That i s not e a s i l y done, but i f the committees can accomplish i t t hey w i l l j u s t i f y t h e i r ex i s t ence many t imes over and t h e time they have given t o the work w i l l be a very g r e a t s e r -v i c e t o the coun t ry .

The r e s u l t s may have been d i s appo in t i ng a l so f o r t h e r eason perhaps t h a t i t was not p o s s i b l e i n t h e c i rcumstances t o accom-p l i s h very much through the i n d u s t r i a l loan f a c i l i t y . But p o s s i -b ly more could be accomplished i f t h e r e were a more acu te p e r -cep t ion of t h e l a r g e r purpose behind the a c t i v i t y and what t h e p a r t i c u l a r r e s p o n s i b i l i t y at' t h e committees i s . These commit tees , perhaps more t h a n any o the r group in t h i s coun t ry , should he lp t o c r e a t e an atmosphere of optimism, because they have an o f f i c i a l s t a t u s , they have a r i g h t t o speak f o r b u s i n e s s America i n t h e present emergency. As they themselves develop i n d i v i d u a l -l y and c o l l e c t i v e l y an a t t i t u d e of conf idence i n t h e f u t u r e of the count ry , i t w i l l be an i n d i c a t i o n of what t h e a t t i t u d e of bus ines s should be i n handl ing the emergency. The problem i s a l a r g e r one t h a n t h a t of merely pass ing on l o a n s . The problem i s much l a r g e r . I t i s a problem of l e a d e r s h i p . What we need most i n the p re sen t emergency i s an a t t i t u d e of f a i t h i n t h e America of t he f u t u r e .

A f t e r h i s s ta tement Mr. M i l l e r l e f t the meet ing .

Mr. Hamlin s t a t e d t h a t he a p p r e c i a t e d t he d i f f i c u l t i e s con-

f r o n t i n g the I n d u s t r i a l Advisory Committees. He s a i d whi le t he com-

m i t t e e s could not recommend loans when worthy borrowers a r e not making

a p p l i c a t i o n s , t hey should go over the ground and be sure t h a t a l l such

borrowers a re acqua in ted wi th the i n d u s t r i a l loan a c t i v i t y . He added

t h a t he cons idered t he Advisory Committees as a kind of s p e c i a l j u r y

r e p r e s e n t i n g t h e pub l i c i n t e r e s t , and i n t h e i r d e l i b e r a t i o n s t h e y

should not be worr ied about the banking problems as t he banks would

apply t h e r e g u l a r banking t e s t s . The good t h a t the committees have


X-9065

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done cannot be measured because much t h a t they have accomplished

i s not a ma t t e r of r e c o r d .

Mr. Hamlin withdrew from t h e meeting a t t h i s p o i n t .

Mr. James expressed the thought t h a t perhaps some of the delay

i n making i n d u s t r i a l loans r e s u l t s from a too t e c h n i c a l c o n s i d e r a t i o n

of what the law in t ended , and t h a t i n h i s opinion t h e I n d u s t r i a l Ad-

v i so ry Committees and t h e Federa l r e se rve banks a re j u s t i f i e d i n con-

s i d e r i n g l a r g e l y the reasonab le soundness of the loan r a t h e r than

t e c h n i c a l i n t e r p r e t a t i o n s of the law.

Mr. Thomas s a i d t h a t s t a t i s t i c s as t o the amount of i n d u s t r i a l

loans made a re no f a i r measure of what has been accomplished by t h e

I n d u s t r i a l Advisory Committees, and t h a t t h e i r g r e a t e s t c o n t r i b u t i o n

i s the immeasurable i n f l u e n c e they have exe r t ed i n the bus ine s s wor ld .

He s t a t e d t h a t one g r e a t h indrance t o recovery i s the f e e l i n g of un-

c e r t a i n t y and f e a r as t o the f u t u r e , which a p p l i e s as much t o t h e

prudent borrower as t o the banker; t h a t when economic t r o u b l e s come

s e l f - i n t e r e s t prompts the i n d i v i d u a l t o safeguard himself by l i q u i d a -

t i o n which means d e f l a t i o n , and d e f l a t i o n means more l i q u i d a t i o n , and

thus we go on the downward s p i r a l ; and t h a t i n order t o b r e a k t h i s

descent and r eve r se i t s d i r e c t i o n , government c r e d i t has come t o t h e

r e s c u e . He a l s o added t h a t by making loans t o i n d u s t r y the I n d u s t r i a l

Advisory Committees and Federa l r e se rve banks not only a id product ion

but give courage t o o t h e r s , the borrower as we l l as t h e l e n d e r , and

t h a t , t h e r e f o r e , the committees should not be d iscouraged by what may


f 463 X*9065

- 1 0 -

seem d i s a p p o i n t i n g amounts, as t hey a re performing a va luab le s e r -

v ice and a re to be comnended f o r t h e i r devot ion and s e l f - s a c r i f i c e .

Mr. Szymczak s t a t e d t h a t m a t e r i a l had been prepared which

he would hand t o Mr. Creighton f o r use i n p repa r ing a s ta tement f o r

the p re s s should i t be decided t o i s sue such a s t a t emen t , He a l s o

sa id t h a t m a t e r i a l i s be ing prepared so t h a t a complete r e p o r t of

i n d u s t r i a l loans may be ready i n January of next year and, i n t h i s

connect ion , he r e f e r r e d t o the pamphlet on i n d u s t r i a l l o a n s prepared

by Mr. Creighton and d i s t r i b u t e d i n the F i r s t Federa l Reserve Di s -

t r i c t and s a i d t h a t t he o the r committees might use i t , or the m a t e r i a l

f o r a pamphlet now being prepared by the Board, i n the p r e p a r a t i o n of

a pamphlet f o r use i n t h e i r r e s p e c t i v e d i s t r i c t s .

Mr. Szymczak's s ta tement then continued along t h e fo l l owing

l i n e s :

The r e l e a s e t o the p r e s s and the appearance in t h e morning papers of the s o - c a l l e d Viner r e p o r t , which conta ined the sug-g e s t i o n t h a t t h e I n d u s t r i a l Advisory Committees might be e l i m i n -a ted and t h a t i t would be b e t t e r not t o have t h e Federa l r e s e r v e banks make i n d u s t r i a l l oans , was of course wi thout the approval of the Board which was not consu l ted as t o t h e date of the r e -l e a s e , nor was t h e Board asked t o approve or disapprove the con-t e n t of the r e p o r t .

One might t h i n k from a p re l iminary survey of the s i t u a t i o n t h a t a much l a r g e r t o t a l amount of i n d u s t r i a l loans would have been made by t h e Federa l r e s e r v e banks, but when t h e r e i s p e r -sonal con tac t wi th the type of a p p l i c a t i o n t h a t i s r ece ived a t t he Federa l r e s e r v e bank the i n d i v i d u a l g e t s an e n t i r e l y d i f -f e r e n t po in t of view. This i s an e n t i r e l y new f i e l d of endeavor, new t o the I n d u s t r i a l Advisory Committees, t o t h e Federa l r e s e r v e banks, and t o the country as a whole. C e r t a i n l y no one thought twenty yea r s ago t h a t t he Federa l r e se rve banks would be making t h i s kind of l o a n .


X-9065 ' 4 6 4

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The number of complaints r ece ived d i r e c t l y and i n d i r e c t l y by the Board f rom a p p l i c a n t s f o r loans because of t h e r e f u s a l of t h e a p p l i c a t i o n or d i s s a t i s f a c t i o n with the terms imposed, has been r e l a t i v e l y smal l , two such complaints being r ece ived i n J u l y , f o u r t e e n i n August, twen ty - th ree i n September, twelve i n October , twen ty-s ix i n November, and t h r e e i n December, or a t o t a l of e i g h t y .

The number of a p p l i c a t i o n s approved i n each d i s t r i c t i s not an i n d i c a t i o n of t h e work done by the advisory committees but of the c h a r a c t e r of t h e a p p l i c a t i o n s r e c e i v e d . Al l of t h e committees are doing sp lendid work and the Board a p p r e c i a t e s t h e i r e f f o r t s .

At t h e September meeting i t was po in ted out t h a t t h e ad-v i s o r y committee i s a s t a t u t o r y body. The purpose of c r e a t i n g t h i s committee was t o t u r n over to i t a l l a p p l i c a t i o n s r ece ived by the banks f o r c o n s i d e r a t i o n and recommendation t o the bank a f t e r ob ta in ing such f a c t s as a re neces sa ry . The commit tee ' s work has been of such importance t h a t Federa l r e s e r v e bank o f f i -c e r s i n many cases have seen f i t t o a t t end meetings of the comr-m i t t e e . The committees may want the advice of the bank, bu t f rom the s t andpo in t of the law which i s very c l e a r , the adv i sory com-m i t t e e s have the r e s p o n s i b i l i t y of making independent recommenda-t i o n s and t h e y , t h e r e f o r e , have t h e power t o d i r e c t t he employees engaged i n work f o r the committee no twi ths tand ing the f a c t t h a t t h e r e i s no power under the law t o provide a budget t o cover t h e expenses of persons working f o r the committee, and t h e s a l a r i e s of such persons a re paid by t h e Federa l r e s e r v e banks. I t should be made c l e a r a t a l l t imes , p a r t i c u l a r l y t o the a p p l i c a n t f o r a loan , t h a t t h e committee has not tu rned over t o the bank any of i t s f u n c t i o n s , but as a s t a t u t o r y body has considered t h e a p p l i -ca t ion and made i t s recommendation independen t ly . The f u n c t i o n of the bank i s t o ac t a f t e r i t r e c e i v e s the commit tee ' s recommenda-t i o n .

There i s a l so t h e thought t h a t perhaps each member of the com-m i t t e e should r e c e i v e compensation f o r h i s work. The Board has cons idered t h a t ma t t e r very c a r e f u l l y and i t has been s t u d i e d by the Federa l r e s e r v e banks, but the law i s p l a i n t h a t t he members s h a l l r e c e i v e no compensation, a l though i t p rov ides f o r the pay-ment of t h e expenses incur red by t h e members i n performing t h e i r work or a per diem allowance i n l i e u t h e r e o f . The sugges t ion has been made t h a t t he Board should have i n t e r p r e t e d t h e law d i f -f e r e n t l y , but a f t e r a very c a r e f u l s tudy of the ma t t e r i t r e l u c -t a n t l y f e l t compelled t o reach the dec i s ion t h a t has been reached and of which t h e committees have been adv ised . The work t h a t t h e members of the committees a re doing and t h e time they a re t a k i n g from t h e i r own bus ine s se s cannot be measured i n f e e s of $5.00 or


- 1 2 -

,'•.10.00 or even :)25.00, and the Board f e e l s tha t i f any reason-able f ee were t o be allowed i t could not s t a r t a t a point below )50.00. The work t h a t the committees are performing i s a s e r -v ice which only they can perform i n a time of emergency, and i f the Board f e e l s any disappointment i t i s not i n connect ion with the work of the committees, but i n the t o t a l amount of loans made.

During Mr. Szymczak's statement Governor Mart in of the Federa l

Reserve Bank of S t . Louis and Mr. Goldenweiser, D i rec to r of the Di-

v i s i o n of Research and S t a t i s t i c s of the Federal Reserve Board, e n t e r -

ed the room, and Mr. James l e f t the meeting,

Mr. 7/alden s t a t e d t h a t Mr. J . G. Holtzclaw, because of the

necess i ty of h i s being i n New York today, had reques ted Mr. George E.

Probes t , J r . , one of the o ther members of the I n d u s t r i a l Advisory

Committee f o r the F i f t h Federal Reserve D i s t r i c t , to a t t end t h i s meet-

ing; t h a t Mr. Probest had found i t necessary t o go t o P i t t s b u r g h , and

t h a t he (Mr. Walden) was a t t end ing the meeting at the reques t of the

o ther two members of the I n d u s t r i a l Advisory Committee r e s i d i n g i n

Richmond fo r the purpose of l i s t e n i n g to the d i s c u s s i o n .

Mr. Creighton expressed the app rec i a t i on of the r e p r e s e n t a t i v e s

of the I n d u s t r i a l Advisory Committees of the s ta tements made by the

Bombers of the Federa l Reserve Board.

He then presented a statement of the a c t i o n s taken by the c h a i r -

men and r e p r e s e n t a t i v e s of the I n d u s t r i a l Advisory Committees a t the

meeting yes terday evening. The t o p i c s discussed a t t h a t meeting and

the dec is ions reached are se t f o r t h below. Topics 1 and 2 were p re -

sented by Mr. Morris , t o p i c s 3 and 4 by Mr. Pouch, t o p i c s 5 and 6 by

Mr. Eps te in , t o p i c s 7 and 8 by Mr. Sanford, t o p i c s 9 and 10 by Mr. Ousley,


3CR«Q<5«

- 1 3 -

and t o p i c s 11 and 12 by Mr. But te rwor th ;

QUESTIONS

1 . what i s f e e l i n g i n r ega rd t o o p e r a t i o n of S e c t i o n 15b by t he Federa l Reserve banks,

(a) Among i n d u s t r i a l i s t s , whether p o t e n t i a l borrow-e r s or not?

(b) Among o t h e r b u s i n e s s l e a d e r s ?

(c) Among f i n a n c i a l i n s t i t u -t i o n s ?

ANSWERS

(a) Where they a r e acqua in t ed , or have a knowledge of the law, they a re f a v o r a b l e .

(b) Same answer as above.

(c) F i n a n c i a l i n s t i t u t i o n s which are acqua in ted with t h e law a re f a v o r a b l e ; our g r e a t duty i s t o acqua in t more wi th the r e a l p o s s i b i l i t i e s under the law.

2 . Need f o r working c a p i t a l f o r i n d u s t r y and commerce.

(a) Has exper ience i n d i c a t e d t h a t t h e r e was a substan-t i a l need not be ing met through u s u a l sources of c r e d i t ?

(b) I f such need now e x i s t s can i t be adequa te ly met under

the p re sen t Sec t ion 13b?

(a) Yes. While t h e need ap-p a r e n t l y i s not as g r e a t as a t f i r s t t hough t , t h e r e i s need and t h i s p r e s e n t law t a k e s ca re of i t , a l l of which i s suppor ted by the number of l oans t h a t have been made i n the shor t pe r iod we have been o p e r a t i n g .

(b) Yes. we f e e l t h a t p r a c t i c a l l y a l l worthy cases so f a r p r e -sen ted have been t aken care of e i t h e r d i r e c t l y or i n -d i r e c t l y and e x i s t i n g needs can be t aken ca re of i n t h e f u t u r e ,

3 . Assuming t h a t t h e r e w i l l be a con-t i n u i n g need f o r 13b advances or commitments,

(a) Wi l l a p p l i c a t i o n s f o r t h e most p a r t t ake the form of ;

( l ) A p p l i c a t i o n s f o r d i r e c t advances .

( 3a - l ) At t h e p re sen t t ime


4 6 7

-14-

QUE8TI0NS ANSWERS

(3a - l continued) most of the a p p l i c a t i o n s are f o r d i r e c t advances i n most of t he Federal Reserve D i s t r i c t s a l though the percentage v a r i e s cons ide r -ab ly .

(2) Appl ica t ions involving separa te advances by the Federa l Reserve bank and by f inanc ing i n s t i t u t i o n , or

(3a-2) There i s no genera l r u l e throughout the e n t i r e sys -tem. Appl ica t ions d i r e c t t o Federa l Reserve banks a re decreas ing and those t o the l o c a l banks are i n -c reas ing i n the m a j o r i t y of the d i s t r i c t s . Most mem-bers of the Committee f e e l t h a t a p p l i c a n t s should be encouraged t o make a p p l i c a -t i o n s through the l o c a l banks, which should be en-couraged as i t i s most ad-vantageous f o r the l o c a l banks.

(3) Appl ica t ions from f i -nancing i n s t i t u t i o n s fo r commitments cover-ing proposed advances.

(3a-3) i f f i n a n c i n g i n s t i t u t i o n s r e f e r s t o Fac tor and F i -nance Companies, t h e r e have been very few cases of t h i s k ind .

(b) Should the r a t e s charged by the Federa l Reserve banks be so f i x e d as to encourage a p p l i c a t i o n s under 1, 2 or 3 above?

Recognizing t h a t subsec t ion "a" of Sect ion 13b i s designed to meet emergency s i t u a t i o n s , should i t be a permanent p rov i s ion of law, and i f so, should i t be amended as regards :

(b) I t seemed t o be the consensus of opinion t h a t t h e present r a t e s were s a t i s f a c t o r y and should be cont inued, such r a t e s should encourage the

l o c a l banks to coopera te .


2£w9©65 -15-

OJLJESTIONS

(a) Requirement t h a t app l i can t be unable t o ob t a in r e q u i s i t e a s s i s t a n c e f rom usua l sources .

(b) Requirement t h a t loans be f o r work!ng c a p i t a l purposes .

(c) Requirement t h a t loans be made on a reasonable and sound b a s i s .

ANSWERS

The Committee f e e l s t h a t Sect ion 13b should be con-t inued i n i t s present form as long as the emergency e x i s t s and t h a t s u b d i v i s i o n s a , b , c and d be cont inued. Two Members be l i eved t h a t b_ might be broadened t o i n -clude p r o p r i e t a r y c a p i t a l .

(d) Requirement t h a t loans be con-f i n e d t o e s t a b l i s h e d bus inesses ,

5 . Should subsec t ion "b" of Sect ion 13b be a permanent p rov i s ion of law, and i f so , should i t be amended as r ega rds ;

(a) Author iza t ion of advances through f inanc ing i n s t i t u -t i o n s o ther than member banks.

(b) Amount of o b l i g a t i o n as t o l o s s s u s t a i n e d .

I t was the consensus of opinion t h a t subsec t ion "b" of Sec t ion 13b should be r e -t a i n e d and a , b and c be not changed in the law.

(c) Author iza t ion cf s epa ra t e loans by Federa l Reserve banks and by a f i nanc ing i n s t i t u t i o n on which repay-ments are made ,>ro r a t a .

6 , Would the making of loans f o r work-ing c a p i t a l purposes presumably have been conducted more e f f e c t i v e -l y i f In termedia te Cred i t Banks a f f i l i a t e d with the Federal Reserve banks had been s e t up f o r t h i s pur-pose as provided i n t he f i r s t b i l l proposed by the Federal Reserve Board? I f so , why?

7 . What has been experience as regards a p p l i c a t i o n s ?

6 . The Committee f e l t t h a t the answer t o t h i s ques t ion i s NO; the Chicago Chairman d i s s e n t -i n g .

(a) Extent t o which f e a r of r e -j e c t i o n and of poss ib le ad-verse e f f e c t upon a p p l i c a n t ' s

(a) I t i s not f e l t t h a t f e a r of r e j e c t i o n and adverse e f f e c t upon an a p p l i c a n t ' s c r e d i t has


; 469 X-9065

- 1 6 -

QUESTIOHS

c r e d i t s t and ing has d i s -couraged submission of a p p l i -c a t i o n s .

(b) Extent of and reasons f o r (b) withdrawal of a p p l i c a t i o n s .

(c) I s c h a r a c t e r of a p p l i c a t i o n s im- (c) proving? i s t h e p ropor t ion of a p p l i c a t i o n s f o r d i r e c t advances dec l i n ing?

(d) Has t h e r e been any subs tan - (d) t i a l number of complaints of a l ack of cour tesy on t h e pa r t of t h e Committee or of o f f i c i a l s or employees of Federa l Reserve banks?

(e) i s t h e r e any evidence t h a t (e) Federa l Reserve banks are r e -qu i r i ng an excess ive amount of c o l l a t e r a l t o secure loans?

( f ) I s t h e r e evidence of any o ther ( f ) ground f o r c r i t i c i s m of e i t h e r the committees or the banks?

8 . Assuming t h a t more p a r t i c i p a t i o n s by 8 . and commitments to f i n a n c i a l i n -s t i t u t i o n s a re d e s i r a b l e , what i s your recommendation as t o how t o bes t ob ta in the coopera t ion of f i -nanc ia l i n s t i t u t i o n s t o t h i s end?

ANSWERS

discouraged a p p l i c a t i o n s i n more t h a n a few i n s t a n c e s .

N e g l i g i b l e , and u s u a l l y f o r the r eason t h a t a p p l i c a n t has found t h a t funds would not be needed, or has ob ta ined funds from usua l banking sou rces .

Character of a p p l i c a t i o n s i s improving and v a r y i n g . The p r o p o r t i o n of a p p l i c a t i o n s f o r d i r e c t advances i s con-t i n u i n g i n va ry ing p r o p o r t i o n s .

We are not aware of any com-p l a i n t of l a c k of cour tesy on the pa r t of t h e Committee or o f f i c i a l s or employees of the F e d e r a l Reserve banks .

There i s no evidence t h a t F e d e r a l Reserve banks a re r e -q u i r i n g an excess ive amount of c o l l a t e r a l t o secure l o a n s . On the o the r hand, every e f f o r t i s being made t o make loans when the s e c u r i t y may be regarded as r e a s o n a b l e .

There i s no evidence of any o the r ground f o r c r i t i c i s m of e i t h e r the Committees or the Federa l Reserve banks .

I t i s t h e consensus of opinion t h a t more p a r t i c i p a t i o n s by and commitments t o f i n a n c i a l i n s t i -t u t i o n s a re d e s i r a b l e , and t h i s can be b e s t ob ta ined by d i r e c t con tac t wi th the a p p l i c a n t s and the banks . F u r t h e r t h a t t he presen t p u b l i c i t y be cont inued wi th in each d i s t r i c t and t h a t


-17-

X-9065 470

QUESTIONS ANSWERS

Has the Federal Reserve bank taken adequate measures t o b r ing t o t he a t t e n t i o n of f i n a n c i a l i n s t i t u t i o n s , and p a r t i c u l a r l y of member banks, the advantages t o them of a c t i v e l y seeking out commercial and indus-t r i a l e n t e r p r i s e s i n t h e i r t e r r i -t o ry i n need of a d d i t i o n a l working c a p i t a l and f u r n i s h i n g such c a p i t a l under the p r o t e c t i o n of a commit-ment from the Fede ra l Reserve bank?

T/hat, i n your exper ience , has been the most important s e rv i ce rendered indus t ry and commerce under Sec t ion 13b?

10.

t h i s be supplemented by p u b l i c i t y of a na t i ona l cha rac t e r and t h a t the a id of the Federal Reserve Board be s o l i c i t e d i n t h i s con-n e c t i o n .

I t i s the opinion t h a t t he Re-serve banks have made d i l i g e n t e f f o r t s t o acquaint a l l f inanc ing i n s t i t u t i o n s , p a r t i c u l a r l y member banks, with the advantages t o them of a c t i v e l y seeking out commercial and i n d u s t r i a l e n t e r -p r i s e s i n t h e i r t e r r i t o r y i n need of a d d i t i o n a l working c a p i t a l and f u r n i s h i n g such c a p i t a l by com-mitment from the Federa l Reserve banks. At the same time we sub-mit t h a t such e f f o r t s might wel l be i n t e n s i f i e d and we e s p e c i a l l y recommcnd t o the seve ra l Reserve banks t he a c t i o n of the New York Reserve Bank i n engaging the s e r -v ices of a p r a c t i c a l and wel l known banker f o r a per iod of severa l months (the banker to be wel l known i n the d i s t r i c t ) t o v i s i t banks and pe r sona l ly d i s -cuss with them and with borrowers i n a r r e a r s or i n temporary em-barrassment the wisdom of n e g o t i a t i n g loans under the terms of Sec t ion 13b.

i n our opinion t he most important s e rv i ce s rendered t o i ndus t ry and commerce under s e c t i o n 13b are (a) Accommodation t o i n d u s t r i a l and commercial e n t e r p r i s e s t h a t could not be obtained otherwise , (b) the s t i m u l a t i o n of c r e d i t confidence and accommodation t o i n d u s t r i a l and commercial e n t e r -p r i s e s by o the r banks, many of which have changed t h e i r c r e d i t p o l i c i e s s ince the admin i s t r a -t i o n of Section. 13b began, and (c) the enlightenment of many


471 X-9065

- 1 8 -

QUESTIONS ANSWERS

a p p l i c a n t s concerning t h e i r own a f f a i r s and p o s s i b i l i t i e s a f f o r d -ed by the exper t a n a l y s i s and ad-v ice of the Advisory committees and Federa l Reserve o f f i c e r s .

11. Has t he a d m i n i s t r a t i o n of Sec- 11. t i o n 13b t o da te had any e f f e c t not shown i n r e g u l a r r e p o r t s of Federal Reserve banks on the extens ion of c r e d i t through r egu l a r and usua l channels t o indus t ry and commerce by p r i -va te f i nanc ing i n s t i t u t i o n s ?

12. Recommendations, not covered e l s e - 12, where, on the sub jec t of the ad-m i n i s t r a t i o n of Sect ion 13b.

The f a v o r a b l e recommendation of loans by the seve ra l Federa l Re-serve banks has in f luenced many l o c a l banks t o take over loans , ex-tending c r e d i t where they would not have done so o therwise .

I t i s f e l t wise t o cont inue t h i s act as an emergency measure. i t w i l l not b r ing back p r o s p e r i t y , but i t w i l l be a m a t e r i a l help t o many who cannot secure necessary c a p i t a l f o r two t o f i v e y e a r s . This w i l l b r idge the gap where the c a p i t a l market should f u n c t i o n .

During the d i scuss ion of the t o p i c s , Mr. John N. Peyton, Chairman

and Federal Reserve Agent a t the Federal Reserve Bank of Minneapolis , and

Mr. Daiger of the Board 's s t a f f , jo ined t h e meet ing.

At the conclusion of the d i scuss ion the meeting adjourned with the

understanding t h a t the r e p r e s e n t a t i v e s of the I n d u s t r i a l Advisory Com-

m i t t e e s would meet again i n separa te sess ion t h i s a f t e r n o o n .




For immediate r e l e a s e December 26, 1934.

Governor Ecc les of t h e Federa l Reserve Board today i s s u e d the

fo l lowing s t a t e m e n t :

A misapprehension has a r i s e n w i th r e s p e c t to the scope of and

the a u t h o r i t y f o r t h e a c t i o n r e c e n t l y taken by t h e Fede ra l Reserve Board

l i m i t i n g a f t e r February 1, 1935, the maximum r a t e of i n t e r e s t t h a t may

be pa id on t ime and sav ings depos i t s by member banks to 3 -1 /3^ . The

misunders tanding appears to have a r i s e n because the s t a tement announ-

cing the Board ' s a c t i o n a l s o c a r r i e d wi th i t a r e f e r e n c e to t h e a c t i o n

taken by the Federa l Deposit Insurance Corpora t ion r educ ing the t ime

depos i t r a t e f o r i n s u r e d non-member banks and t r u s t companies t o

2-1/2fo.

The Board ' s s ta tement c a r r i e d t h i s r e f e r e n c e because t h e r e

was abundant reason f o r b e l i e v i n g t h a t bo th member banks and t h e i r

d e p o s i t o r s would be v i t a l l y concerned by t h e r a t e s of i n t e r e s t which

might be p a i d by competing non-member banks .

The a c t i o n t aken by the Federa l Reserve Board i n l i m i t i n g t h e

r a t e of i n t e r e s t tha t banks might pay on depos i t s was taken i n a c c o r -

dance wi th t h e p r o v i s i o n of t h e Banking Act of 1933 r e q u i r i n g t h e

Federa l Reserve Board from time to time to " l i m i t by r e g u l a t i o n t h e

r a t e of i n t e r e s t which may be p a i d by member banks on t ime d e p o s i t s . "

I t s r e c e n t a c t i o n , l i k e s i m i l a r a c t i o n t a k e n on August 29,

1933, r e l a t e d only to member banks. The Fede ra l Reserve Board has

never assumed t h a t i t had a u t h o r i t y t o r e g u l a t e the r a t e of i n t e r e s t


r 473 X-9067 '

—3—

pa id "by non-member "banks. I t c l e a r l y has no a u t h o r i t y to do so . Such

j u r i s d i c t i o n as t h e F e d e r a l G-overnment exe rc i se s over t h e non-member insured

"banks r e s t s wi th t h e Fede ra l Deposit Insurance Corpora t ion . On Decem-

ber 15 the Federa l Reserve Board was adv i sed t h a t t h e Board of

D i r ec to r s of t h e F e d e r a l Deposi t Insurance Corporat ion had reduced t h e

maximum time depos i t r a t e f o r i n su red non-member banks and t r u s t

companies to 3 -1 /2$ .

The a c t i o n of t h e Federa l Reserve Board i n r e d u c i n g i n t e r e s t

r a t e s f o r member banks and the a c t i o n o f t h e Federa l Deposi t Insurance

Corporat ion i n reduc ing the i n t e r e s t r a t e s fo r i n su red non-njember banks

were t aken s e p a r a t e l y , not j o i n t l y .

The r e c e n t a c t i o n of t h e Federa l Deposit Insurance Corpora t ion

was s i m i l a r i n c h a r a c t e r to t h e a c t i o n i t took on January 1 , 1934, when

i t i s s u e d a r e g u l a t i o n l i m i t i n g to 3$ the maximum r a t e of i n t e r e s t which

might be p a i d by any non-member bank whose d e p o s i t s were i n s u r e d by

t h a t Corpora t ion .

In t h e summer of 1934, i n view of the f a c t t h a t the t r e n d of

i n t e r e s t r a t e s had been s t e a d i l y downward, the Board under took a f u r -

t he r review of i n t e r e s t r a t e s i n accordance wi th t h e duty imposed upon

i t by the Banking Act of 1933. Before t a k i n g a c t i o n the Board communi-

ca ted wi th a l l t he F e d e r a l r e s e r v e banks i n order to have the b e n e f i t


X-9067

*•3""

of t h e i r views as to t h e a d v i s a b i l i t y of a f u r t h e r r e d a c t i o n of the

deposi t r a t e . The r e p l i e s rece ived from the r e se rve "banks were almost

unanimous to t he e f f e c t t ha t a r educ t ion of deposi t r a t e to 2 -1 /2$

would "be i n t h e p u b l i c i n t e r e s t . In view of t he se r e p l i e s and i t s

own independent a n a l y s i s and study of t h e s i t u a t i o n the Federa l

Reserve Board determined t h a t a f u r t h e r r educ t ion of l / 2 of lff> i n

the r a t e which might "be pa id "by member "banks on time depos i t s would

"be adv i sab l e .

I t i s worth no t ing i n t h i s connection t h a t t he maximum r a t e

on time depos i t s i n Canada a t the p r e sen t time i s 2 per cent and i n

England i t i s 1 /2 per cent i n London and 1 - 1 / 2 per cent i n the count ry .




X-9068

December 27, 1934

SUBJECT: Code Word Covering New I s sue of Treasury B i l l s .

Dear S i r :


Government s e c u r i t i e s between Federa l r e se rve banks , t he



This word should be i n s e r t e d i n the Fede ra l Reserve

Telegraph Code book, fo l lowing the supplemental code word

"NOXFUT" on page 172.

"NOXQUE" - Treasury B i l l s t o be dated January 2, 1955, and t o mature Ju ly 5, 1955

Vferv t r u l y your;

J . C. tJoel l , A s s i s t a n t S e c r e t a r y .



( 476 FEDERAL RESERVE BOARD

X-9069 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 DSCenibSI* 28, 1934. t h e f e d e r a l r e s e r v e b o a r d

SUBJECT: Expendi tures of Federa l Reserve Banks

Dear S i r :

The Board has reviewed the p o r t i o n of i t s c i r c u l a r l e t t e r of

October 20, 1932 (X-7276), which p e r t a i n s t o minor expend i tu res by

Federa l r e s e r v e banks f o r memorials, t e s t i m o n i a l s , f l o r a l o f f e r i n g s ,

and s i m i l a r purposes , and, s ince the r e s p o n s i b i l i t y f o r making ex -

p e n d i t u r e s of t h i s c h a r a c t e r r e s t s i n the f i r s t i n s t a n c e wi th the

management of each r e s e r v e bank, t h e Board b e l i e v e s t h a t t he board

of d i r e c t o r s or execut ive committee of each r e s e r v e bank should be

f r e e t o e x e r c i s e i t s d i s c r e t i o n : i n a u t h o r i z i n g such e x p e n d i t u r e s ,

a f t e r cons ide r ing t h e a d v i s a b i l i t y t he reo f i n eaeh case , wi thout t a k i n g

the m a t t e r up wi th t h e Board.

T h e r e f o r e , the Board h e r e a f t e r w i l l not r e q u i r e the submission

of such cases t o i t f o r approval , but w i l l r e l y upon i t s examiners

t o note such expend i tu res dur ing the course of t h e i r r e g u l a r examina-

t i o n s and t o inc lude the f a c t s i n t h e i r r e p o r t s . I f i n the review

of any such r e p o r t i t appears t h a t a p a r t i c u l a r expend i tu re i s

ques t i onab le , t he Board w i l l then t ake t h e ma t t e r up wi th t h e

p a r t i c u l a r bank eoncerned.

Very t r u l y your s , \

Chester M o r r i l l , S e c r e t a r y

TO GOVERNORS OF ALL FEDERAL RESERVE BANKS Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


X-9070 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 to


December 28,1934

Dear S i r :

There i s a t t ached he re to a copy of a s e l f -

exp lana tory l e t t e r which the Fede ra l Reserve Board has

addressed t o the Fede ra l Reserve Agent a t P h i l a d e l p h i a

i n r ega rd t o p e r m i t t i n g r e p r e s e n t a t i v e s of t h e F e d e r a l

Deposit Insurance Corpora t ion t o see examination r e p o r t s

of S t a t e member banks .


v % i Q j j x u h O m A ^ Chester M o r r i l l

Sec re t a ry

I n c l o s u r e

TO ALL FEDERAL RESERVE AGENTS EXCEPT THE FEDERAL RESERVE AGENT AT PHILADELPHIA


478

X-9070-a

December 28, 1934

Mr. Richard L» Aust in , Federa l Reserve Agent, Federa l Reserve Bank of P h i l a d e l p h i a , P h i l a d e l p h i a , Pennsylvania

Dear Mr. Aust in:

Receipt i s acknowledged of your l e t t e r of October 29,1934,

i n which you s t a t e t h a t you a n t i c i p a t e t h a t you w i l l r ece ive r e q u e s t s

from examiners of the Federa l Deposit Insurance Corporat ion f o r p e r -

mission to peruse r e p o r t s of examination of some of the s t a t e member

banks i n your d i s t r i c t . You reques t t o be advised whether you may

l a w f u l l y al low duly acc red i t ed r e p r e s e n t a t i v e s of the Federa l Deposit

Insurance Corporat ion t o see such examination r e p o r t s and, i f so , you

ask t h a t the Board au thor ize you t o make the r e p o r t s a v a i l a b l e to such

r e p r e s e n t a t i v e s .

As you know, s e c t i o n 9 of the Federa l Reserve Act provides

t h a t copies of the r e p o r t s of examination of S ta te member banks "may,

i n the d i s c r e t i o n of the Federa l Reserve Board, be f u r n i s h e d to the

S ta t e a u t h o r i t i e s having superv i s ion of such banks, t o o f f i c e r s ,

d i r e c t o r s , or r e c e i v e r s of such banks, and to any o ther proper p e r -

sons" . Sec t ion 12B(k) of t h a t Act provides t h a t t he Fede ra l Deposit

Insurance Corporat ion "with the consent of any Federa l r e s e rve bank

or of any board * * * may a v a i l i t s e l f of the use of in fo rma t ion ,

s e r v i c e s , and f a c i l i t i e s thereof i n car ry ing out the p rov i s ions of


479 X-9070—a

Mr. Richard L» Aust in - 2

t h i s s e c t i o n " .

Although the Federa l Reserve Board f e e l s t h a t i n fo rma t ion

concerning the cond i t ion of S ta t e member banks i s p r i m a r i l y intended

f o r the c o n f i d e n t i a l use of the Board and the Federa l r e se rve banks

and tha t extreme cau t ion should be exerc ised i n making any o ther use

of t h i s in fo rmat ion , i t i s the view of the Board t h a t the p rov i s ions

of law to which r e f e r e n c e has been made j u s t i f y i t i n pe rmi t t i ng r e -

p o r t s of examination of s t a t e member banks to be made a v a i l a b l e t o

the Federa l Deposit Insurance Corporat ion and i t s duly au thor ized

r e p r e s e n t a t i v e s f o r use i n the discharge of t h e i r o f f i c i a l du tues .

Consequently, t he Board consents t o your f u r n i s h i n g r e p o r t s of examina-

t i o n of S t a t e member banks t o examiners of the Federa l Deposit insurance

Corporat ion f o r t h e i r c o n f i d e n t i a l and o f f i c i a l use whenever you con-

s ide r i t d e s i r a b l e t o do s o . In any such case , i t i s assumed t h a t

a t t e n t i o n w i l l be c a l l e d to the f a c t t h a t the r e p o r t of examination i s

s o l e l y f o r the c o n f i d e n t i a l use of the examiner of the Federa l Deposit

Insurance Corporat ion and t h a t such o ther s t eps w i l l be taken as may

be necessary to p r o t e c t t he c o n f i d e n t i a l na ture of the in format ion

contained t h e r e i n .


(signed) Chester M o r r i l l

Chester M o r r i l l , Sec re t a ry .


480

X-9071


SECOND FEDERAL RESERVE DISTRICT

FEDERAL RESERVE BANK OF NEW YORK


v.illiam H. Pouch, Chairman P res iden t , Concrete S t e e l Company, New York, N,Y.

John A. Har t fo rd , Vice Chairman P res iden t , Great A t l a n t i c and P a c i f i c Tea Company, New York, N. Y»

John B« Clark Chairman, The Executive Committee, C/o The Spool Cotton Company,

350 F i f t h Avenue, New York, N. Y*

Alber t A. Hopeman A. W# Hopeman and Sons, Rochester , N. Y,

C» R» Palmer P re s iden t , C lue t t Peabody and Company, Troy, N. Y.

December 28, 1934


x - e o r a 4 8 1


WASHINGTON December 29, 1934

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 * f o t h e f e d e r a l r e s e r v e b o a r d

SUBJECT: Assessment f o r General Expenses of the Federa l Reserve Board, January 1 -June 30, 1935, and f o r Other Purposes•

Dear S i r s

In conf i rma t ion of my telegram, of December 29, 1934, t h e r e

i s a t t a c h e d a copy of a r e s o l u t i o n adopted by the Federa l Reserve

Board levying an assessment upon the va r ious Federa l r e s e r v e banks

i n an amount equal t o f i v e hundred s e v e n t y - s i x thousandths of one

per cent (•00576) of the t o t a l p a i d - i n c a p i t a l s tock and su rp lus

(Sec t ion 7 and Sec t ion 13b) of the Federal r e s e r v e ba iks as of

t he c lose of bus iness December 31, 1934, t o d e f r a y t h e e s t ima ted

expenses and s a l a r i e s of t he members and employes of the Board from

January 1 t o June 30, 1935, t o g e t h e r wi th $1,000,000 t o be a p p l i e d

upon the cos t of the purchase of a s i t e and the e r e c t i o n of a

b u i l d i n g f o r the Federa l Reserve Board*

The r e s o l u t i o n a l s o confirms the i n s t r u c t i o n s conta ined i n

t he t e l e g r a m wi th regard t o the manner i n which the payments on the

assessment s h a l l be depos i t ed with the Federa l Reserve Bank of

Richmond•


0 . E. Foulk, F i s c a l Agent

To Chairmen of a l l Federa l Reserve Banks Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

X-9072-a

RESOLUTION LEVYING ASSESSMENT.

1/HEREAS, Sec t ion 10 of the Federa l Reserve Act, as amended, con ta ins t h e f o l l o w i n g p r o v i s i o n s :

"The Federa l Reserve Board s h a l l have power t o l evy semiannual ly upon t h e Federa l r e se rve banks, i n p r o p o r t i o n t o t h e i r c a p i t a l s tock and s u r p l u s , an assessment s u f f i c i e n t t o pay i t s e s t ima ted expenses and t h e s a l a r i e s of i t s mem-bers and employees f o r t h e ha l f year succeeding the l e v y -ing of such assessment , t o g e t h e r wi th any d e f i c i t c a r r i e d forward from t h e preceding ha l f yea r , and such assessments may inc lude amounts s u f f i c i e n t t o provide f o r t h e a c q u i s i t i o n by the Board i n i t s own name of such s i t e or b u i l d i n g i n the D i s t r i c t of Columbia as i n i t s judgment alone s h a l l be neces sa ry f o r the purpose of provid ing s u i t a b l e and adequate q u a r t e r s f o r t h e performance of i t s f u n c t i o n s . A f t e r approving such p l ans , e s t i m a t e s , and s p e c i f i c a t i o n s as i t s h a l l have caused t o be p repared , t he Board may, no twi ths tand ing any o ther p rov i s i on of law, cause t o be cons t ruc t ed on the s i t e so acqui red by i t a b u i l d i n g s u i t a b l e and adequate i n i t s judgment f o r i t s purposes and proceed t o take all..-such s t eps as i t may deem neces -sary or a p p r o p r i a t e i n connect ion wi th t h e c o n s t r u c t i o n , equipment, and f u r n i s h i n g of such bui ld ing# The Board may ma in t a in , e n l a r g e , or remodel any b u i l d i n g so acqui red or c o n s t r u c t e d and s h a l l have so le con t ro l of such b u i l d i n g and space t h e r e i n #

** * * * * * * * * * * * * * * * * * * * * *

11 The Board s h a l l determine and p r e s c r i b e t h e manner i n which i t s o b l i g a t i o n s s h a l l be i ncu r r ed and i t s d i s -bursements and expenses allowed and pa id , and may leave on depos i t i n t h e Federa l r e se rve banks the proceeds of assessments l e v i e d upon them t o d e f r a y i t s e s t ima t ed expenses and the s a l a r i e s of i t s members and employes,* * * and funds der ived from such assessments s h a l l not be cons t rued t o be Government funds or app rop r i a t ed moneys •"


4 8 3

- 2 -

WHEREAS, f i f t y - e i g h t and one-half per cent of t h e a s s e s s -ment l e v i e d upon the Federa l r e se rve banks on June 27, 1934, ( the p o r t i o n of the assessment r e p r e s e n t i n g the amount -which, i n the judg-ment of t he Board, might have been needed during t h e s i x months por iod beginning J u l y 1, 1934, t o provide f o r the c o s t s , or p a r t t h e r e o f , of the a c q u i s i t i o n of a s i t e and e r e c t i o n of a b u i l d i n g the reon s u i t a b l e and adequate f o r t h e Board1s q u a r t e r s ) was not c a l l e d f o r payment by the Board dur ing t h e s i x months per iod beginning J u l y 1, 1934; and,

WHEREAS, i t appears from a c o n s i d e r a t i o n of t h e e s t ima ted expenses of t h e Federa l Reserve Board f o r t h e s i x months pe r iod beginning January 1, 1935 and of t h e amounts which i n t he judgment of t he Board may be needed dur ing such per iod t o provide f o r the c o s t s , or p a r t t h e r e o f , of t h e a c q u i s i t i o n of a s i t e and e r e c t i o n of a b u i l d i n g t h e r e -on s u i t a b l e and adequate f o r t he Board ' s q u a r t e r s , t h a t i t i s neces -sa ry t h a t a fund equal to f i v e hundred s e v e n t y - s i x thousandths of one per cent ( .00576) of the t o t a l p a i d - i n c a p i t a l s tock and su rp lus (Sec t ion 7 and Sec t ion 13b) of the Fede ra l r e s e r v e banks be c r e a t e d f o r such purposes , exc lus ive of the cos t of engraving and p r i n t i n g of Federa l r e s e r v e n o t e s ;

NOW, THEREFORE, BE IT RESOLVED BY 1LE FEDERAL RESERVE BOARD, That :

(1) There i s hereby l ev i ed upon the s eve ra l Fede ra l r e se rve banks an assessment i n an amount equal t o f i v e hundred s e v e n t y - s i x thousandths of one per cent (#00576) of the t o t a l p a i d - i n c a p i t a l and su rp lus (Sec t ion 7 and Sec t ion 13b) of each such bank a t t he c lose of bus iness December 31, 1934#

(2) Twenty-one per cent of such assessment s h a l l be pa id i n on January 2, 1935, twenty-one per cen t the reo f s h a l l be pa id i n on March 1, 1935, and the remainder ( f i f t y - e i g h t per c e n t ) s h a l l be pa id a t such t imes and i n such amounts as the Board may c a l l f o r t he pay-ment the reof dur ing such s i x months per iod beginning January 1, 1935#

(3) Every Federa l r e s e r v e bank excep t the Federal Reserve Bank of Richmond s h a l l pay such assessment by t r a n s f e r r i n g the amount the reof on t h e da tes as above provided through the Gold Se t t lement Fund t o t h e F e d e r a l Reserve Bank of Richmond f o r c r e d i t t o the account of t he Federal Reserve Board on t h e books of t h a t bank, wi th t e l e g r a p h i c advice t o Richmond of the purpose and amount of the c r e d i t , and the Federa l Reserve Bank of Richmond s h a l l pay i t s assessment by c r e d i t -ing the amount the reof on i t s books t o the Federa l Reserve Board on the da tes as above provided*



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


July 3, 1934. B-993.

SUBJECT: Member Bank Call Report for March 5, 193I+.

Dear Sir:

We are forwarding to you under separate cover

copies of the Board's Member Bank Call Report

ITo. 6l, showing the condition of l icensed member banks

on March 5> 193*+ • Please forward a copy to each

member bank in your d i s t r i c t that has expressed a de-

s i r e to receive copies of c a l l reports as i s sued .

Very truly yours

E. L. Smead, Chief , Divis ion of Bank Operations.

TO AIL FEDERAL RESERVE AGENTS*



FEDERAL RESERVE BOARD 1 ^

WASHINGTON July 5, I93U. B-995.

SUBJECT: Working Capital for Industry!

Dear S ir :

Section IJb, added to the Federal Reserve Act by the Act approved on

June 19 t 193î provides i n subsection (e) that in order to enable the Federal

Reserve banks to make the loans, discounts, advances, and purchases provided

for in such sec t ion , tho Secretary of the Treasury i s authorized to pay to

each Federal Reserve bank not to exceed such port ion of the sum of

$139,299,557 as may be represented by the par value of the holdings of each

Federal Reserve bank of Federal Deposit Insurance Corporation stock, and i t

i s understood that the Secretary of the Treasury w i l l make such payments to

the Federal Reserve banks from time to time as they make the loans, discounts ,

advances and purchases authorized by Section 13b. I t i s also provided that,

within the meaning of such sect ion , the sum so paid to each bank by the

Secretary of the Treasury sha l l become a part of the surplus fund of the

Federal Reserve bank,

In the weekly condition statement, however, the amount of surplus derived

from net earnings of the Federal Reserve banks w i l l be shown against the cap-

t ion "Surplus (Sect ion 7)". and the amount of surplus resu l t ing from payments

by the Secretary of the Treasury against the caption "Surplus (Sect ion 13b)".

The amount of loons, discounts, advances and purchases under Sect ion 13b of

the Federal Reserve Act w i l l be shown in the weekly condition statements of


- 2 -4 8 G

the Federal Reserve "banks against the capi t ion "Industrial advances",

immediately fo l lowing the item "Bi l l s bought in. open market".

Inasmuch as Sect ion 12B of the Federal Reserve Act provides that Class

B stock in the Federal Deposit Insurance Corporation held "by the Federal

Reserve "banks s h a l l not be e n t i t l e d to payment of dividends, and as payments

received from the Secretary of the Treasury to enable the Federal Reserve

banks to make indus tr ia l advances w i l l be included i n the Federal

Reserve banks' surplus accounts, the Board f e e l s that , beginning with July

1, 193^. the reserves s e t up at the time the Federal Reserve banks made

the ir f i n a l payment on the subscript ion to the stock of the Federal Deposit

Insurance Corporation should be considered as valuat ion reserves and deducted

from the book value of the stock i n s e l f . Accordingly, the item "Fed.Dep.Ins.

Corp. stock" w i l l be el iminated from the weekly condition statement of the

Federal Reserve banks, the amount of reserves s e t up on such stock w i l l be

el iminated from the item "Reserves (F. D. I . C. stock, s e l f insurance, e t c . ) " ,

and the l a t t e r caption w i l l be changed to read "Reserves for contingencies"•

You w i l l note from subsection (e ) of Sect ion 13b that before payments

are made to the Federal Reserve banks they must execute agreements to hold

the stock of the Federal Deposit Insurance Corporation unencumbered and to

pay to the United States a l l dividends, a l l payments on l i q u i d a t i o n , and a l l

other proceeds of such stock, f o r which dividends, payments and proceeds the

United S ta te s s h a l l be secured by sti.ch stock i t s e l f up to the t o t a l amount

paid to each Federal Reserve bank by the Secretary of the Treasury under

such sec t ion , and, that each Federal Reserve bank, i n addit ion, s h a l l agree

that in the event such dividends, payments and other proceeds i n any calendar

year do not aggregate two per centum of the t o t a l payments made by the


Secretary of the Treasury under such sect ion , i t w i l l pay to the United

States in such year such further amount, i f any, up to two per centum of the

said t o t a l payment as shal l be covered by the net earnings of the bank for

that year derived from the use of the sum so paid by the Secretary of the

Treasury. I t w i l l be necessary, therefore, for the Federal Reserve banks

to keep a l l income received from the use of the sum so paid by the Secretary

of the Treasury, and a l l expenses and l o s s e s incurred in connection therewith,

under Sect ion 13b of the Federal Reserve Act, separate and d i s t i n c t from the

other earnings, expenses and lo s se s of the bank, in order to determine what,

i f any, payments sha l l be made to the Secretary of the Treasury in the event

the dividends, payments and other proceeds of the Federal Deposit Insurance

Corporation stock do not aggregate i n any calendar year two per centum of

the to ta l payments made by the Secretary of the Treasury under Section 13b.

You w i l l be advised at a l a t e r date in regard to the manner in which the net

earnings of the Federal Reserve banks, derived from operations under Section

13b, are to be compiled and reported to the Federal Reserve Board and to the

Secretary of the Treasury.

On Form 3^ please report "Industrial advances", code TURK, fol lowing

item Federal Land Bank bonds; item "Surplus (Sect ion 13b)", code TALC, fo l low-

ing the item Surplus (Sect ion 7)? and "Industrial commitments11, code MEKTT, on

the reverse s ide of the form.

Very truly yours


TO ALL FEDERAL RESERVE CHAIRMEN* Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


WASHINGTON

ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD

July 5, 1934. B-996.

Dear S i r :

In view of the introduction of the now (193*0

s e r i e s s i l v e r c e r t i f i c a t e s , which may "be i s sued in denomina-

t ions up to and including $100, i t i s requested that, beg in-

ning with the month of July , reports on Form l60 showing

s i l v e r c e r t i f i c a t e s separately from other forms of United

Sta tes currency be submitted f o r the head o f f i c e and f o r

each "branch, i f any.

Very t r u l y y o m a # # » - y

E. L. Smead, Chief , Div i s ion of Bank Operations.

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


WASHINGTON


July 16, 193%, B-997.

SUBJECT: Net earnings on funds received from the Secretary of the Treasury under Sect ion 13b of the Federal Heserve Act,

Dear S ir :

The agreement recent ly entered into with the Secretary of the

Treasury, in accordance with the provis ions of subsect ion ( e ) of Sect ion

13b of the Federal Reserve Act, provides that your bank s h a l l pay to the

United Sta tes a l l dividends, a l l payments on l iqu ida t ion , and a l l other

proceeds of i t s stock in the Federal Deposit Insurance Corporation, for

which dividends, payments, and other proceeds the United S ta te s s h a l l be

secured by such stock i t s e l f up to the t o t a l amount paid to the bank by

the Secretary of the Treasury under Sect ion 13b; that in the event such

dividends, payments, and other proceeds i n any calendar year do not aggre-

gate 2 per centum of the t o t a l payment made by the Secretary of the Treasury

under Sect ion 13b, your bank w i l l pay to the United S ta te s in such year

such further amount, i f any, up to 2 per centum of sa id t o t a l payment as

s h a l l be covered by the net earnings of the bank for that year derived from

the use of the sum so paid by the Secretary of the Treasury; and that your

bank w i l l continue such payments u n t i l the f i n a l l iqu ida t ion of sa id s tock .

The agreement a l s o provides that a l l funds paid to your bank by the

Secretary of the Treasury and not invested in loans , discounts , advances or

purchases under Sect ion 13b of the Federal Reserve Act w i l l , insofar as Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

pract i cab le , be invested i n any other income producing investments law-

f u l for a Federal Reserve tank.

In order to carry out the provis ions of the Federal Reserve Act and

the agreement with the Secretary of the Treasury, i t w i l l be necessary

for your bank to keep such accounting records as w i l l enable i t to de ter -

mine the net earnings of the bank derived from the use of the funds paid

to the bank by the Secretary of the Treasury under Sect ion 13b. The net

earnings from such funds should be determined i n the fo l lowing manner:

From the t o t a l earnings derived from the use of the funds received

from the Secretary of the Treasury sha l l be deducted:

(1) Outside expenses ( i . e . , expenses other than o f f i c e expenses

and expenses of the advisory committee) incurred in connection with the

making or c o l l e c t i n g of s p e c i f i c loans , discounts , advances and purchases

out of such funds, except such expenses as are paid by the borrowers.

(2) Such percentage of expenses of the advisory committee, of

outside expenses not provided for in item 1, and of t o t a l o f f i c e expenses

of the u n i t handling loans , discounts , advances, purchases, and commit-

ments under Sect ion 13b as the average da i ly holdings of such loans ,

discounts , advances and purchases made out of funds received from the

Secretary of the Treasury bear to the t o t a l average da i ly holdings of

loans, d iscounts , advances, purchases and commitments made by such u n i t

under Sect ion 13b. Of f i ce expenses should comprise a l l expenses (other

than expenses of the advisory committee and outside expenses) in connec-

t ion with the making of loans, d iscounts , advances, purchases and commit-

ments under Sect ion 13b, including s a l a r i e s of employees and of o f f i c e r s

in d irec t charge of the uni t making such loans , d iscounts , advances, pur-

chases, and commitments and a f a i r charge f o r rent , l i g h t , heat , power, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

491 - 3 -

water, jani tor s erv ice , e levator and cleaning serv ice , repairs and a l t e r -

a t ions , and rental of furniture and equipment.

(3) Actual expense., of making the income producing investments

referred to at the end of paragraph 3 of the agreement with the Secretary

of the Treasury.

(4 ) Losses on loans, discounts, advances and purchases made out

of the funds paid to your bank by the Secretary of the Treasury under Sec-

t ion 13b» charged off with the approval of the Federal Reserve Board, I f

expenses and l o s s e s charged o f f exceed income the excess thereof over i n -

come should be deducted from the amount received from the Secretary of the

Treasury as reported on the bank's dai ly balance sheet, item "Surplus

(Sect ion 13b)". Recoveries on l o s s e s previously charged o f f should be

credited to current net earnings on funds received from the Secretary of

the Treasury i f the l o s s e s to which the recoveries re la te were charged to

current net earnings. I f the l o s s e s to which the recoveries r e l a t e were

charged to "Surplus (Sect ion 13b)" the recoveries should be credited to

that account.

There i s inc losed herewith a supply of Fonn B-20 for your use i n

submitting an annual statement re la t ing to the employment of funds paid to

your bank by the Secretary of the Treasury under Section 13b of the Federal

Reserve Act. This statement should be transmitted in duplicate to the

Federal Reserve Board within 10 days from the end of the calendar year,

one copy of which, when approved by the Federal Reserve Board, w i l l be

del ivered to the Secretary of the Treasury.


492

- 4 -

The Board understands that the Treasury Department has i n course

of preparation regulat ions governing payments to the Federal Reserve

banks under Sect ion 13b of the Federal Reserve Act, and pending comple-

t ion of such regulat ions the Treasury Department has not passed upon the

ins truct ions contained herein or the accompanying form B-20.

Very truly yours,


Inclosures

TO AIL GOVERNORS*


if 493 FEDERAL RESERVE BOARD

WASHINGTON July 16, 1934.

B-998 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

SUBJECT: Monthly reports of earnings, expenses and l o s s e s on industr ia l advances.

Dear S ir

With reference to the Board's l e t t e r of th i s date in regard to the

method of determining net earnings on funds paid to your bank by the Secre-

tary of the Treasury under Section 13b of the Federal Reserve Act and the

annual statement on form B-20 to be submitted i n connection therewith, you

are a lso requested to submit monthly to the Federal Reserve Board reports

on forms B-18 and B-19, a supply of which i s inc losed .

I t w i l l be noted that forms B-18 and B-19, which cover income, expenses,

and l o s s e s , c a l l for separate f igures in regard to net earnings on loans, d i s -

counts, advances and purchases from funds received from the Secretary of the

Treasury under Section 13b and from the bank's own funds invested under that

Section and that outside expenses chargeable to a s p e c i f i c loan, discount,

advance or purchase are to be shown [email protected] other expenses.

Reports on forms B-18 and B-19 should be submitted promptly a f t e r the

end of each month and should include expenses incurred at the branches, i f

any, as well as at the head o f f i c e .

Very truly yours

Chester Morrill Secretary.

Inclosures .

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



J u l y 18, B-999

1934

Dear Sir:

On March 23. 193*+, Governor Black, In t e s t i f y i n g before the

Committee on Banking and Currency of the United States Senate, r e -

newed on behalf of the Federal Reserve Board the recommendation of

the Board for l e g i s l a t i o n es tabl i sh ing a system of member bank r e -

serve requirements based not only on the volume of deposits but a l so

on the i r turnover. This system of reserves was f i r s t recommended by

the Federal Reserve System Committee on Member Bank Reserves in 1931.

As you know, the Federal Reserve System Committee on Member Bank

Reserves submitted i t s recommendations a f t e r extended research and i n -

v e s t i g a t i o n . In the course of that inves t iga t ion i t was necessary to

estimate on the bas i s of ex i s t ing data what the required reserves of

a l l member banks as a whole would have been under the Committee's

plan had i t been in e f f e c t during e a r l i e r periods . I t has now been

decided to extend the scope of that inves t iga t ion somewhat i n an

e f f o r t to obtain information for individual banks and for groups of

banks regarding changes in reserves required under the committee's

proposal compared with changes in reserves required under the pre-

sent law. I t i s desired to determine with respect to such banks (a)

the extent to which required reserves under the proposed plan would


2 — 495

B - 9 9 9

f l u c t u a t e during d i f f e r e n t seasons of the year, compared with changes

i n present required reserves , (b) the extent to which required reserves

under the present and proposed plans f luc tua te with changes i n business

and credit condit ions , and (c) the extent to which the burden of r e -

serves would be increased, decreased, or s h i f t e d among banks by the

proposal .

In connection with t h i s study we should l i k e to have you e n l i s t

the cooperation of representat ive groups of member banks, as indicated

below, i n supplying the necessary data for determining what required

reserves would have been under the Board's proposal over a period ex-

tending back through 1928. I t would be very h e l p f u l a l so i f the

necessary data could be obtained for 1924 - 1927 f o r at l e a s t some of

the banks.

The groups of banks for which we should l i k e to obtain the data

are:

1 . Weekly f i g u r e s from member banks that now submit weekly

condit ion reports .

2 . Monthly f i gures from other banks in groups located i n or serv-

ing communities or regions whose chief economic a c t i v i t i e s may be

characterized by the production of s p e c i f i c commodities or by the

dominance of a par t i cu lar type of industry such a s :

a . Cotton growing b . Tobacco growing c . Wheat r a i s i n g d. Corn growing e . Livestock f . Dairying and poultry r a i s i n g g . Fruits and vegetables h . Mixed farming i . Lumbering and logging j . Oil producing


:* 496 - 3 - B-999

k . Coal mining 1 . Iron ore mining m. Other mineral producing n. Industrial and commercial

The data required for our purposes are indicated by the fo l l ow-

ing inclosures:

1 . Form 234 - For obtaining currently commencing with September 1934. monthly data from se lec ted banks other than those that now submit weekly condition reports .

2 . Form 235 - Tor obtaining monthly data for back periods from such banks.

3 . Form 235a- For obtaining weekly data for back periods from se lec ted reporting member banks.

4 . A statement explaining the forms.

5 . A suggested form of l e t t e r to be sent to the member banks whose cooperation i s to be s o l i c i t e d i n securing back f i g u r e s .

In the case of weekly reporting member banks i t i s proposed to

c o l l e c t the required current data in connection with a revised form

of weekly condition report about which you are being advised in a

separate l e t t e r .

I t would be desirable to have whatever back data may be obtain-

able on Forms 235 and 235a in your possess ion in time for you to com-

p l e t e the compilations on these forms for individual banks and groups

of banks by the end of October. The current data on Form 234 i t i s

contemplated should be co l l ec ted commencing with September 1934 and

thereaf ter u n t i l otherwise advised.

I t i s thought that i f the required data for prior periods can

be obtained for approximately 10 percent of the member banks i n each

d i s t r i c t , properly distr ibuted, such a sample w i l l make poss ib le a

sa t i s fac tory t e s t , representative of a l l member banks i n the d i s t r i c t . Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

- 4 - B-999

However, in s e l e c t i n g the "banks whose cooperation i s t o be e n l i s t e d

in the study, i t would be desirable to take only such banks as had been

l i c ensed by the end of June, 1933« and whose past records are known to

bo wel l kept , In order to avoid any b i a s i n s e l e c t i n g the banks i t

would be preferable , wherever pract i cab le , to include a l l representat ive

member banks i n s e l e c t e d economic areas , and to conf ine the l i s t of

banks from which back data are requested to banks which are a l so being

asked to supply current data.

Such data as are c o l l e c t e d should be transcribed at your bank to

Forms 236 and 236a, copies of which are a l so inc losed , the information

c a l l e d for i n columns 8 and 11 added and the ca lcu la t ions indicated on

these forms made, You w i l l be advised l a t e r i n what form to transmit

the data to the Board. I t i s e s s e n t i a l that the f i g u r e s of "daily

average required reserves during week (month) under present law" ca l l ed

for in column 8 and of "average borrowings from Federal Reserve bank

during week (month)" c a l l e d for in column 11 bo comparable with the f i g -

ures i n the other columns. Accordingly, spec ia l care should be taken

in the case of the f i gures for any bank that absorbed or merged with

one or more other banks during the period to insure that the f i g u r e s

supplied from the records of the Reserve bank represent the same bank-

ing u n i t s as do those furnished by the member bank.

I t w i l l be appreciated i f you w i l l furnish us , as soon as prac-

t i c a b l e , with a l i s t of the reporting member banks and other banks i n

your d i s t r i c t from which you propose to obtain back data, the banks to

be grouped i% the manner indicated on page 2 of t h i s l e t t e r . P lease

show in t h i s l i s t the t o t a l deposits of each such bank at the end of

1933 and the population of the c i t i e s in which the s e l e c t e d banks are Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

- 5 - b-999

located, and the rat ios of the aggregate deposits and population for

a l l s e l ec t ed banks and c i t i e s to the t o t a l s for your d i s t r i c t . The

l i s t w i l l be examined and you w i l l be advised whether we have any

suggestions to make in regard thereto .

A supply of the forms referred to herein w i l l be sent you in due

course.

Very truly yours,

hrjoiAZuLf


Incloeures .

TO ALL FEDERAL RESERVE AGENTS* Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Form 23U Federal Reserve Board June 1934

499

Report on Deposi ts , Debits , and Vault Cash for the month of . 193_«

(Name of bank) (City) (State) F.R.Dist .No.

Enter a l l f igures i n even dol lars—

omit cents

1 . Total deposits at end of month _____________________

2 . Deductions: Amounts due from member banks, items in process of c o l l e c t i o n , exchanges for c learing house, checks on loca l and outside banks, and other cash items payable on presentation in the United States , at end of month

2a. Net deposits at end of month ( 1 - 2 ) ____________________

Debits (Charges)during month to deposit accounts:

3 . Own c e r t i f i e d and o f f i c e r s ' checks paid ___________________

4 . Other debits to deposit accounts ___________________

5 . Cash in vault and i n trans i t to and from Federal Reserve Bank at end of month ___________________

6 . Debits to individual deposit accounts during month (comparable to weekly f igures reported to clearing house or other reporting agency) -

Signed (Cashier or Treasurer)

NOTE: Numbering on t h i s form i s same as on form 235 (b-999)


Form 235 Federal Reserve Board June 193^

Report on Deposits , Debits? and Vault Cash

(Name of tank) (City) (State )

I n t e r a l l f i gures in even do l lar s — omit cents

Year Total and deposi ts

month (end of month)

Deductions: Amounts due from member banks, items in process of c o l l e c t i o n , exchanges for c lear ing house, checks on other banks and other cash items payable on presentat ion in the United States

(end of month) 2

Debits {charges) to deposit accounts during tho month

Our c e r t i f i e d and o f f i c e r s '

checks pa id

Other deb i t s to deposit accounts

Cash i n vault and in t r a n s i t

to and from F. R. Bank

(end of month)

Debits to i n d i -vidual deposi t accounts during the month (compa-rable to weekly f i g u r e s reported to c l ear ing house or other report-ing agency)

6*

Ul ©

•For comparative purposes. Figures reported in column 4 w i l l , ^ of course, include debits to individual deposit accounts. (B-999)


Form 235a Federal Reserve Board June 1934

Report on Deposi ts , Debits , and Vault Cash

(Name of Bank) (City) (State)

Enter a l l f i g u r e s i n even do l lars — omit cents

Week end-ing Wednesday

( Indicate year, month, and

day of month)

Total depos i t s

(end of week)

Deductions: Amounts due from member banks, items in process of c o l l e c t i o n , exchanges for c lear ing house, checks on other banks and other cash items payable on presentat ion in the United Sta tes

(end of week) 2

Debits (charges)to depos i t accounts during the week

Our c e r t i f i e d and o f f i c e r s '

checks paid

Other deb i t s to depos i t accounts

Cash in vault and in t rans i t

to and from F . R. Bank

(end of week)

Debits to i n d i -vidual depos i t accounts during

the week (as reported to

c lear ing house)

6*

CR P

•For comparative purposes. Figures reported in column 4 w i l l , of course, include debits to individual deposit accounts. (B-999)


REQUIRED RESERVES UNDER PROPOSED LAW r 502 B-999

Summary of Federal Reserve Board1s Recommendati on to Congress

Required reserves

1 . 5# of average da i l y net deposi ts during a . Week i f i n Federal Reserve bank or branch c i t y , b . 4 weeks or month i f outside Federal Reserve bank or

branch c i t y .

p lus 50$ of average da i ly debi ts to deposit accounts during

a . Preceding g weeks, requirements to change weekly i f in Federal Reserve bank or branch c i t y ,

b . Preceding 8 weeks or 2 months, requirements to change every 4 weeks or month i f outside Federal Reserve bank or branch c i t y ,

2 . 15$ of average da i l y gross deposi ts i f t h i s amount i s l e s s than the sum of two amounts determined as in 1 above.

Reserve balances

1 , In Federal Reserve bank or branch c i t y * a . Balance with Federal Reserve bank, not l e s s than

/ 4 /5 of requirements, b . Cash i n vault and i n t r a n s i t to and from Federal

Reserve bank, up to 1/5 of requirements.

2 . Outside Federal Reserve bank or branch c i t y * a . Balance with Federal Reserve bank, not l e s s than

2 /5 of requirements. b . Cash i n vault and in t rans i t to and from Federal

Reserve bank, up to 3 /5 °f requirements.

Gross deposi ts

Total depos i t s as def ined in c a l l report .

Deductions from gross deposi ts A l l c o l l e c t e d balances due from member banks, items in process of c o l -

l e c t i o n , exchanges f o r c lear ing house, and checks on l o c a l and out-s ide banks and other cash items payable on presentat ion i n the United S t a t e s . Collected balances due from banks not members of the Federal Reserve System would not be deduct ib le . Deductions to be made from gross depos i t s , not from due to banks.

*See paragraph (h) of Committee's proposed amendment to Sect ion 1$.


b S F

Debits or charges to a l l deposit accounts included in gross depos i t s except debits re su l t ing from the payment of the bank's own c e r t i f i e d and cash ier ' s checks.

Form 235 ( 2 3 5 - a ) U

Although the Board's proposal c a l l s f or a reserve of 5$ against aver-age da i ly net depos i t s at the opening of bus iness , f or the purpose of th i s study i t i s be l i eved that an average of deposi ts at the beginning and at the c lo se of the month (week) 1 / w i l l be s u f f i c i e n t l y accurate to g ive an indicat ion of the extent to which the proposal would a f f e c t the reserve pos i t ions of indiv idual member banks. Form 235 (235-a)2/ , therefore, does not c a l l for average da i l y depos i t s .

Col. 2 . Col lected balance* due from banks not members of the Federal Reserve System should be excluded in column 2.

Col. ,-3» In t h i s column should be shown the aggregate amount of c er -t i f i e d . and c a s h i e r ' s or treasurer's checks cashed or paid during the month (week)ly— not the amount of such checks i s sued . The amount charged against depositors' accounts for c e r t i f i e d and c a s h i e r ' s or treasurer 's checks issued should be included in column 4 .

Col. 4 . In t h i s column should be shown the aggregate amount debited or charged during the month (week)]J to a l l deposit accounts, exc lus ive only of the amount of c e r t i f i e d and cash ier ' s or treasurer 's checks cashed or paid during the month (week)U, i . e . , deb i t s to accounts of ind iv idua l s , partnerships , corporations, domestic and fore ign banks, the United S ta te s and State , municipal and fore ign governments, including withdrawals from savings accounts, payments from trust accounts, and c e r t i f i c a t e s of deposit paid.

Col. 6 . This i s a memorandum item to be f i l l e d in only by banks that now report debi t s to individual accounts to the l o c a l c lear ing house, or other l o c a l agency, f o r transmission to the Federal Reserve bank. The amount of such debi ts to individual accounts, as shown in t h i s column, w i l l , of course, be included a l s o i n column 4 as a part of "other debits to deposit accounts".

Form 235 (235-a) 1/should be f i l l e d in by the member bank and returned 60 as to be in the posses s ion of the Federal Reserve bank not l a t e r than October 1, 1934.

Form 234&/

The items in t h i s form are ' i d e n t i c a l with the corresponding columns in Form 235•

l/*Omitd,E3511 and"tttonth"in l e t t e r s to weekly reporting member banks, and omit 11235-a" and "week" in l e t t e r s to other banks,

2/-Omit the paragraph r e l a t i n g to Form"234" In l e t t e r to weekly repon±in& member banks*

- 2 -

Total debi t s


i 504 B-999

Dear S ir ;

As stated on page 205 of the April 1934 i s sue of the Federal Reserve

B u l l e t i n , Governor Black of the Federal Reserve Board, in t e s t i f y i n g be-

fore the Committee on Banking and Currency of the United States Senate on

March 23, 1934, renewed the Board's recommendation for l e g i s l a t i o n estab-

l i s h i n g a system of member bank reserve requirements based not only on the

volume of deposi ts but a lso on the ir a c t i v i t y . This system of reserves

was f i r s t recommended by the Board to Congress in March'1932, the proposed

amendment to the Federal Reserve Act being printed on pages 215-216 of the

April 1932 i s sue of the Federal Reserve Bu l l e t in .

The recommendation for a change in the method of determining reserve

requirements was made a f t e r extended research and i n v e s t i g a t i o n by the

Federal Reserve System Committee on Member Bank Reserves, in the course of

which the required reserves , on the proposed b a s i s , were ca lculated for

each member bank indiv idual ly during one month (May 1931) and were e s t i -

mated for a l l member banks and for important groups of banks over a period

of time and compared with required reserves on the present b a s i s . The Fed-

eral Reserve Board would now, however, l i k e to make a study of present re-

quired reserves and of proposed required reserves for individual banks and

for a number of small groups of banks over a period of time, with the view

par t i cu lar ly of determining for these banks (a) the extent to which required

reserves under the proposed plan would f l u c t u a t e during d i f f e r e n t seasons of

the year, compared with present required reserves , and (b) the extent to which


— 2 —

B _ 9 9 p ^

required reserves under the present and proposed plans f l u c t u a t e with changes

in business condit ions .

In order that such a study may be made i t has been decided to ask for

the cooperation of a se l ec ted group of member banks from which i t i s desired

to obtain current data, as well as any corresponding back data that may be

ava i lab le , with respect to depos i t s , debi t s , e t c .

Your bank has been t e n t a t i v e l y se l ec ted as representat ive of banks

located in a (give the economic c l a s s i f i c a t i o n ) region, and i t w i l l be

great ly appreciated i f you w i l l cooperate with us in the study. For t h i s

purpose i t i s des ired that you furnish the data ca l l ed for in the inc losed

Form 335 (235a)^ as of the end of each month (week)^ for the period January

1924 to August 1934, or for any part thereof for which the data can be com-

p i l e d readi ly from your records, (and also that you report monthly begin-

ning with September 1934 the data cal led f o r by Form 234 u n t i l further

not ice — probably for a year) . After the compilations based on those

data have been completed at th i s bank, we sha l l be glad, i f you des i re , to

furn i sh you a copy of the part thereof r e l a t i n g to your bank. For your

further information, there i s inclosed a memorandum out l in ing the proposed

reserve requirements together with instruct ions for the preparation of

reports on Forms 234 and 235 (Form 235a)1.

I t w i l l be appreciated i f you w i l l kindly l e t us know whether you w i l l

be able to cooperate in compiling the data desired for back periods and, i f

1J Omit"235", "month", and "Forms 234 and 235" in l e t t e r s to report ing member banks, and omit "235a", "week", and "Form 235a" in l e t t e r s to other banks.

2/ Omit clause inclosed in parentheses in l e t t e r to reporting member banks.


X 506

3-999

— 3 —

so, how rnuch thereof can. be furnished and when the f i gures may "be expected,

( i n any event, v.e should l i k e to have you furnish us current monthly re -

ports on Form 234 u n t i l further not ice .

Very truly yours,

Federal Reserve Agent.

3/ Or.it from l e t t e r to reporting raercber banks.



WASHINGTON


July 18, 1934 B-1000

SUBJECT: Revis ion of Weekly Reporting Member Bank Report Form.

Dear Sir:

For some time i t has been evident that the s e l e c t e d items i n -

cluded in the weekly report of condition of member banks i n leading

c i t i e s are not as informative as they should be, p r i n c i p a l l y be -

cause loans are not c l a s s i f i e d as between open-market loans and

customer loans and because the deposit f i gures r e l a t e not to actual

depos i t s but to certa in spec ia l categories neces s i ta ted by the

present method of computing reserve requirements. In order to ob-

ta in data which w i l l enable the System to be t ter appraise the extent

and character of current changes in the condition of the weekly re -

port ing member banks, the form ( S t . 51a) used by them i n submitting

t h e i r reports has been rev i sed in accordance with the sample i n -

c lo sed . I t i s suggested that t h i s form be printed l o c a l l y , i n

accordance with the procedure heretofore followed, and that member

banks be requested to submit reports i n accordance therewith be-

ginning Wednesday, Septeiaber 5« 193%*

I t w i l l be noted that the revised form provides for a balanced

statement and a l so for cer ta in information regarding deb i t s to


— 2 -• 508

deposit accounts . The debit f i gures , a l s o the data on depos i t s ,

w i l l be used i n connection with tho study of the proposed change i n

member bank reserve requirements re ferred to in the Board's l e t t e r

of t h i s da te . I t i s not intended for the present to change the form

i n which the f i gures are published.

Very truly yours

~0>gesQjZv )rT\cnAi

Chester Morri l l Secretary.

Inclosures


i 509


WASHINGTON

leaser m l BeposiUry t f a u u , '

ADDRESS OFFICIAL CORRESPONDENCE TO B - l t i O l * THE FEDERAL RESERVE BOARD #

Dear Sir:

The minute* of the conmittee meeting on aecemtisg held in Chicago

on June 2? and June 28, câtain tfage 7) the following paragr#@#

"It was considered %y the deeedttee that s##y benefits had been derived from the facts replied on form ae retpeeted by federal leeerte Board »aad i t was their opinion that the federal reserve bank* <w*dd be requested to submit r##r%s eewwatiag f i scal Agency operations for the f irst half of on forme need for the laet half of 1933 with modifications recommended by the Committee,*

In accordance with the committee's suggestion we have prepared

the attached fonts on Wich 1$ is requeeted that the federal Besenre

Wmks report their ea#ewe# Wring the f irst telf ef 1934 in connec-

tion with their fiscal agency and depositary operations, these forms

are similar to the ones need for the last half ef 1$33 with certain

modifications recommended by the Committee

A email ###&y of # e forms is inclosed and we will be pleaaed

to furaieh additional oepiee "upon request.

Very truly youra,

C^/ J. B. Van foeeen+Aest. Chief* Division of Bank Operations,

I n c l o e o r e s .

TO ALX, OOVIIB©** Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


WASHINGTON


July 25, 1934. B-1002. '

Dear S ir :

For your information and for v e r i f i c a t i o n , there are inc losed the

fo l lowing l i s t s of bank c los ings f o r your d i s t r i c t , based on reports

received from your bank, and, in the case of nat ional banks, from the

Comptroller of the Currency's o f f i c e : .

1 . Banks suspended, January 1 to March 15, 1933*

2 . Licensed banks suspended, placed i n l i q u i d a t i o n , or placed on a r e s t r i c t e d b a s i s , March 16, 1933. to June 30, I93U.

3 . Ron-l icensed banks placed in l iqu idat ion or r e -ce iversh ip , March 16, 1933 to June 30, 193^*

In the case of the banks included in the second l i s t , i t w i l l be

appreciated i f you w i l l ascer ta in and inform us which of the banks c losed

on accdunt of f i n a n c i a l d i f f i c u l t i e s , which were placed on a r e s t r i c t e d

b a s i s , and which were placed in voluntary l i q u i d a t i o n .

In l i e u of information on c losed banks now being telegraphed

under codes SAVE, SBHV and SIMM, p l ease wire currently h e r e a f t e r ,

against the code words shown below, the name and l o c a t i o n of each

l i censed bank which terminates ex is tence as such and/or discont inues

banking operations:


- 2 - B-1002.

Code

SUPP — Suspended a l l banking operations on account of f i n a n c i a l d i f f i c u l t i e s .

REVE — License revoked and/or placed on a r e s t r i c t e d b a s i s on account of f i n a n c i a l d i f f i c u l t i e s .

LIKK — Placed i n voluntary l iqu ida t ion .

VERT — Converted into or succeeded by another bank. Give f i r s t the name of the bank terminating ex i s t ence , then code word VERT, and then the name of the successor bank.

SOBB — Absorbed by or consol idated or combined with another bank. Give f i r s t the name of the bank terminating e x i s t e n c e , then code word SOBB, and then the name of the absorbing or continuing bank.

If use of the appropriate code word does not adequately describe

the circumstances of c l o s i n g in any instance , p lease ind icate any

spec ia l circumstances in connection with the bank's c lo s ing of which

you may be advised.

Very truly yours,

S J , R, Van Fossen, A s s t . Chief , D iv i s ion of Bank Operations.


- 512 FEDERAL RESERVE BOARD

WASHINGTON


July 25, 193^. B-1003.

SUBJECT: Beport of Commltmonts Under Sect ion 13b.

Dear Sir:

In order that the Board may have i n i t s f i l e s data with regard

to commitments made by your bank under Sect ion 13b of the Federal

Reserve Act , i t i s requested that a statement be submitted in the

case of each such commitment showing the fo l lowing information:

1 . Name of prospect ive borrower,

2 , Name of f inancing i n s t i t u t i o n i f commitment i s to a

f inanc ing i n s t i t u t i o n .

3* I f commitment i s to a f inancing i n s t i t u t i o n , the pro-

port ion of l o s s on the prospect ive transact ion to be

assumed by the f inancing i n s t i t u t i o n .

4 . Amount of commitment.

5 . Period covered by commitment,

6 . Maturity of proposed transact ions .

7 . Commitment f e e or charge (Bate and amount),

8 . General descr ipt ion of proposed secur i ty , including

names iof any prospect ive indorsers .


513 2 -

I t i s requested that the statements referred to above be numbered

s e r i a l l y , and that a t the end of each month a l i s t of outstanding i n -

d u s t r i a l advances and commitments under Sect ion 13b be furnished show-

ing the fo l lowing:

Name of borrower or prospect ive borrower,

Name of f inancing i n s t i t u t i o n i f transaction i s with a

f inancing i n s t i t u t i o n .

Amounts of outstanding advances.

Amounts of outstanding commitments.

Very truly yours

Chester Morri l l , Secretary,

TO ALL GOVERNORS*


X : 5 i 4 FEDERAL RESERVE BOARD

WASHINGTON


July 25, 1934. B-1004.

SUBJECT: Daily Schedules of Industr ia l Advances Under Sect ion 13b.

Dear S i r :

In order that the Board may have s u f f i c i e n t data with regard

to the loans , d iscounts , advances and purchases made by your bank

under Sect ion 13b of the Federal Reserve Act from funds paid to your

bank by 'the Secretary of the Treasury under subsect ion ( e ) of that

s e c t i o n and out of the bank's own funds, i t i s requested that i n the

da i l y schedules furnished the Board such transact ions be reported

separately and that the fo l lowing information be shown with respect to

each such transaction:

1 . Name of borrower.

2 . Name of f inancing i n s t i t u t i o n i f transact ion i s with

a f inancing i n s t i t u t i o n .

3 . If transaction i s with a f inancing i n s t i t u t i o n , the

proportion of l o s s thereon assumed by the f inancing

i n s t i t u t i o n .


515

- 2 -

*+. Amount of transact ion.

5 . Net proceeds, i f taken on a discount b a s i s .

6 . M a t u r i t y .

T.k Kate, and whether discount or i n t e r e s t .

8 . General descr ipt ion of s e c u r i t y .

9 . Indorsers on ob l iga t ions acquired.

P lease show under remarks column or otherwise any addi t ional

data necessary to give the Board adequate information regarding each

transact ion .

Very truly yours,


TO ALL GOVEBUOBS*



WASHINGTON


July 26, I93U B-1005

Dear S ir :

In order that the Board and the Treasury may have a v a i l a b l e

s t a t i s t i c a l data on the amount of new loans made by member banks during

the present year and on the amount of loans paid or wri t ten o f f , i t

w i l l be appreciated i f you w i l l obtain from every l i c e n s e d member bank

in operation on June 30 , 193^» a, report i n accordance with the attached

form, which i t i s suggested be printed l o c a l l y . P lease advise member

banks to prepare the report i n dupl icate and to send the or ig ina l to you,

re ta in ing the dupl icate i n the ir f i l e s .

I t i s fur ther requested that the reports be tabulated at your

bank so as to obtain t o t a l s , corresponding t o the f i g u r e s reported by

each bank, for the fo l l owing groups of (a) National banks and (b) State

bank members:

1 . Central Reserve c i t y banks, 2 . Reserve c i ty banks in each reserve c i t y , 3 . Country banks i n each s ta te or part of s t a t e .

Only the summaries need be forwarded t o the Board for the present ,

the reports of the indiv idual member banks t o be reta ined a t your bank

u n t i l such time as they may be c a l l e d for by the Board.

I f there should be any delay i n the rece ip t of the reports of

some of the smaller member banks, p lease furnish the Board with prel iminaiy


** 2

summaries, to be fo l lowed with f i n a l summaries when a l l of the reports

have been rece ived and tabulated.

Very truly yours,

-Hbfosfcju h 0 < 7 w j e f

Chester Morr i l l , Secretary .

TO ALL TBDBBAL HBSBRVB A&BNTS*


Form B~1005a Federal Reserve Board

c Ju ly , 1934

I 518

REPORT OF KEW LOA2IS MADE AMD OF LOANS PAID OR WRITTEN OFF, EXCLUSIVE OF LOANS TO OTHER BANKS AND TO BROKERS AND DEALERS IN SECURITIES, OF ACCEPTANCES

OF OTHER BANKS AND OF 0OMMERCIAL PAPER BOUGHT IN OPEN MARKET

(Include only loans reported against items 5~ca 6--a, 6~b, 7 and 8 of Schedule E i n the c a l l condit ion report)

(I In thousands ol * dollars)

Month Outstanding at beginning of monthZ&

New loans made (k

Loans paid off including

curtaiDments/c

Loans written

off

Outstanding at end of monthZ&

193 W a n .

Feb.

Mar,

Apr.

May

June

a / The amount outstanding at the beginning of January should agree with the t o t a l reported against items 5~ c» 6-a , 6-b, 7 and 8 of Schedule E i n the bank's c a l l condit ion report f o r Dec. 30, 1933» and the amount outstanding at the end of June should agree with the t o t a l reported against items $ - c , 6-a* 6-b , 7 and 8 of Schedule E i n the bank's c a l l condition report f o r June 30, 193&.

b / Do not include renewals made by the execution of new n o t e s .

c / I f a loan i s cur ta i l ed through the execution of a new note for a l e s s e r amount than the old note, include i n t h i s column only the amount of the curtai lment.

Z (Name of member bank) (City) (S ta te ) (F .R .Dis t .

number)

Signed. (Cashier or Treasurer)



WASHINGTON


July 30, 1934. B-1006.

SUBJECT: Audit of Reserve Stock of Incomplete Federal Reserve Notes and Federal Reserve Bank Botes .

Dear S ir :

For your information there i s inc losed a copy of the r e c a p i t -

u l a t i o n s of an audit of the stock of incomplete Federal Reserve

notes and Federal reserve bank notes he ld a t the Bureau of Engrav-

ing and Pr int ing as of c l o s e of "business June 30, 193^» forwarded

to the Secretary of the Treasury "by Mr. M. R, Loafman, Chief ,

Div i s ion of Publ ic Debt Accounts and Audit .

In h i s l e t t e r forwarding the report of the audit to the

Secretary of the Treasury, Mr. Loafman s ta ted that; "The audit

extended from June 28 to July 11, 193^» i n c l u s i v e , and cons i s ted

of a p i e c e count of the en t i re stock of faces of both c l a s s e s and

a package count of the uniform backs a l l oca ted to Federal reserve

n o t e s . In view of the f a c t that a recent p i ece count has been

made by t h i s o f f i c e of the ent i re stock of each denomination of

uniform backs on hand in the Bureau, a package count and inspec-


w 2 —

t ion of the uniform backs a l located to Federal reserve notes was

deemed s u f f i c i e n t a t th i s time. The to ta l sheets of Federal reserve

notes, f a c e s and "backs, were found to be i n excess of the required

r e se rve of 4 ,250,000 sheets , as authorized in the l e t t e r of the

Governor of the Federal Reserve Board to the Under Secretary of the

Treasury dated December 2 , 1939•"

Very truly yours,

J . R. Van Fossen, Ass i s tant Chief, Divis ion of Bank Operations.

Inclosures .

TO ALL FEDERAL RESERVE AGENTS*



WASHINGTON

A D D R E S S OFFICIAL 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 August 6, 193^

B-1007.

Dear Sir:

There i s inc losed for your information a

copy of a memorandum recent ly prepared in the

Board's Div i s ion of Bank Operations with regard

to branch banking in the United S t a t e s . A copy

of t h i s memorandum i s a l s o being furnished to

the governor of your bank.

Very truly yours

Chester Morril l Secretary.

Inclosures

TO ALL FEDERAL RESERVE AGENTS* (Copy for Governors of a l l Federal Reserve Banks)




August 3 , 1934. B-100S.

SUBJECT: Preliminary c l a s s i f i c a t i o n of loans , investments, and depos i t s of member "banks as of June 30, 193^*

Dear Sir:

There i s inc losed for your information and conf ident ia l

u s e , a copy of a memorandum and statement prepared for the

Board with respect to changes in loans , investments and

depos i t s of member banks between March 5 and June 30, 193^«

and during the year ended June JO, 193^» "based upon a par-

t i a l preliminary tabulat ion of the June 3® member bank c a l l

report s .

Very truly yours,

J . R. Van Fossen, A s s t . Chief , D iv i s ion of Bank Operations.

Inc losure .

TO AH GOVERNORS AMD FEDERAL RESERVE AGENTS* Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


WASHINGTON

A D D R E S S OFFICIAL 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 August 1 , 1934.

B-1009.

SUBJECT: Daily condensed condit ion report of Federal Reserve "banks.

Dear Sir:

Under separate cover we are forwarding today a supply

of rev ised Form B - l , "Condensed statement of condit ion of Federal

Reserve bank", for use in wiring condit ion f i gures of your bank

to the Federal Reserve Board.

I t i s requested that code words MIRE, LUST, MA.ZE, MAJST

and MOSS, which have heretofore been included on Form B - l , be

telegraphed i n the future as of Wednesdays only, covering

transact ions f o r the week ending Wednesdays as fo l l ows :

Hew loans made during week under Sect ion 10(b) .

Payments during week of loans made under Sect ion 10 (b ) .

Renewals during week of Sect ion 10(b) loans .

B i l l s discounted during week for ind iv idua l s , p a r t -nerships and corporations under Sect ion 13.

Payments during week of b i l l s discounted for ind iv iduals , partnerships and corporations under Sect ion 13.

Very tru ly yours,

0 / ( (7^ j / J . R. Van Fossen, A s s t . Chief ,

Div i s ion of Bank Operations.

MIRE

MIST

MAZE

MART

. MOSS

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

i 524 FEDERAL RESERVE BOARD

WASHINGTON


August 25, 193^• B-1010.

SUBJECT: Condition of l i censed member banks.

Dear Sir:

There i s inc losed , for use pending the p r i n t i n g

of Member Bank Call Report No. 62, a statement showing

the a s s e t s and l i a b i l i t i e s and a c l a s s i f i c a t i o n of loans ,

investments, and depos i t s on June J O , 193^» of a l l

l i c ensed member banks, together with corresponding data

by Federal Reserve d i s t r i c t s and by c l a s s e s of banks.

Very truly yours,

i: > •/ y . 7 /I

E. L. Smead, Chief, Div i s ion of Bank Operations

Inclosure

TO ALL GOVERNORS AND F. R, AGENTS Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

i 525 FEDERAL RESERVE BOARD

WASHINGTON


August 18, 1934 B—1011

10 THE MEMBER BANK ADDRESSED:

Sirs:

The Government of the Union of Soviet S o c i a l i s t Republics, at

the time of i t s recognit ion "by the United States , assigned t o our

Government various c l a s s e s of a s se t s and claims of the State of Russia.

In order to carry out cer ta in undertakings made at t h i s time by the

United States Government, the Secretary of the Treasury has requested

the Federal Reserve Board to obtain from s ta te "bank and trust company

members of the Federal Reserve System in the larger c i t i e s t h e . i n -

formation c a l l e d for in the attached questionnaire.

You are accordingly requested to f i l l out and execute t h i s

questionnaire and to return one copy to the Federal Reserve Board at

your e a r l i e s t opportunity. Your cooperation in furnish ing the des ired

information promptly w i l l be great ly appreciated.

An addressed envelope, requiring no postage, i s inc lo sed for your

reply.



Inclosures


Please answer "yes" or "no" i n the squares opposite each question and^C) return one copy of t h i s form to the agency from which you w i l l r ece ive i t .

(1) (2) (3) Do you at the present time have, or have you at any time s ince No-vember 7, 1917, had a cash de-p o s i t on your books to the cred i t o f :

Do.you at pre-sent hold, or have you at any time s ince Nov-ember 7, 1917, held, any tang-ible a r t i c l e f o r account or on behalf o f :

Are you a t the present ,or have you been a t any time s i n c e November 7, 1917, the ass ignee of or the possessor of a l e g a l or equitable i n t e r e s t in any chose i n ac t ion in which a l e g a l or equitable in-t e r e s t was at any t ine s ince November 7, 1917, possessed or claimed by:

( a ) The Imperial Government b f Russia, or the Provis ion-a l Government of Russia?

(b) The Government of the ynion of Soviet S o c i a l i s t Republics?

( c ) The Government of Admi-r a l Kolchak; the Provis ional Government of the Northern Regions; the Al l -Russian Government at Omsk; the Pro-v i s i o n a l Government of Auto-nomous Siberia; the Govern-ment of General Horvat; the Government of General Semenov; or any other organ-i z a t i o n purporting to exer-c i s e governmental power i n Russ ia during the C i v i l War i n that country during the years 1917-1920, inc lus ive?

(d) Any corporation, company, a s s o c i a t i o n or partnership at the time t h i s information i s furnished or at any pre-v ious time organized under the laws of any of the governments described under the headings ( a ) , (b ) , or ( c ) , above?

(Name of Bank) (Ci ty ) (State)

(Signed) Date {President or Cashier ) /


• 527 FEDERAL RESERVE BOARD

WASHINGTON


September 1, 193^ B-1012

Dear Sir:

In order that the Board may be kept currently informed as to

the a c t i v i t i e s of your bank with regard to applications r or indus-

tr ial advances or for commitments to make industrial advances, i t

will be appreciated i f you will submit to the Board reports as of

close of business each Wednesday on Forms B-22 and B-22a, a supply

of which i s inclosed.

In addition to the information required to be shorn on BD-4

schedules covering industrial advances and commitments, outlined

in the So&rd's lettersB-l003 and B-1004 of J u l y 25, please show in

the case of each advance and each commitment the character of

business of the borrower and the gross business receipts of the

borrower during each of the past f ive years. Please also furnish

the Board with corresponding data covering loans and commitments

for which schedules have already been sent to the Board.

It wi l l also be appreciated if you wil l furnish the Board a

statement showing the following information as of close of business

Wednesday, September 5, for each advance (as distinguished from

commitment) which has been approved by your bank but under which no


2 -£ 538

disbursements have been made: ( l ) Name and location of borrower,

(2) character of business, (3) amount to be advanced by Federal Re-

serve tank, (4) whether the advance i s to be made direct or through a

financing institution, (5) gross business receipts during each of past

f ive years, It i s further requested thet yon submit a report as of

each Wednesday thereafter showing similar information for each advance

approved during the week but on which no disbursements have been made.

In order that the Board may be more ful ly advised as to the

effect which the ac t iv i t i e s of the Federal Reserve banks under Section

13b are having on the general credit situation, i t wil l be appreciated

i f you will write the Board a le t ter as of each Wednesday night giving

such detai ls as are available regarding each industrial loan or com-

mitment made by financing institutions that would probably not hpve

been made had the Reserve banks no authority to make industrial loans.

Kindly also include in this l e t ter such additional information as you

have been in the habit of sending the Board on Saturdays in response

to the Board's telegram Trans 2044 of July 21.

The Board would appreciate receiving the reports and information

called for above on the Monday morning following the Wednesday report

date.

Very truly yours,

ho Chester Morrill,

Secretary.

Inclosures

TO ALL F. B. AGENTS* Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


A D D R E S S OFFICIAL C O R R E S P O N D E N C E T O T H E FEDERAL R E S E R V E B O A R D September 13, 193*+

B-1013

Dear Sir:

In the Board's l e t t e r B-999 of July IS, in connection

with the investigation pertaining to member bank reserve re-

quirements, i t was stated that you would be advised in what

form to transmit to the Board the data col lected and compiled

on the subject. There i s attached hereto a memorandum out-

l ining the procedure to be followed in that connection.

Very truly yours,

E. L. Smead, Chief, Division of Bank Operations.

TO ALL FEDERAL RESERVE AGENTS Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

J 530 DATA OH FORMS 236 AND 2 3 6 a TO BE COMPILED AT THE FEDERAL RESERVE BAMS IE ACCORDANCE WITH FEDERAL RESERVE BOARD'S LETTER B-999 OF JULY 18, 1934

1. Preparation of work sheets, Forms 236 and 236a. for individual banks.

(a) The name and location of hank, d is tr ic t number, class of bank, and

economic c lass i f icat ion should be shown in the space provided for the pur-

pose, The class of bank, according to i t s reserve status, should be in-

dicated by sytiibols as follows:

Symbol Class of bank

CR Central Reserve city bank

FR Reserve city bank in a Federal Reserve bank or branch city

FC Country bank in a Federal Reserve bank or branch city

R Reserve c i t y bank o u t s i d e a Fed-e r a l Reserve bank or branch c i t y

C Country bank o u t s i d e a Federa l Reserve bank or branch city

The economic c lass i f icat ion should be that given in the let ter sub-

mitting the l i s t of selected banks to the Board.

(b) The figures in the following columns of forms 236 and 236a are

to be copied directly from the banks' reports on Forms 235 and 235a:

Figures reported on To be entered on Forms 236 Forms 215 and 235a and 236a

Column 1 Column 1

Column 4 Column 4

Column 5 Column 7

Column 6 Column 12

(c) The excess of the figures shown in column 1 over those in

column 2, of forms 235 and 235a, should be entered in column 2 of forns

B-1013a Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2>b and 23ba, r e s p e c t i v e l y . ,<

(d) Columns 8 and 11 should be entered from the records of the Federal

Reserve tank. Column 8 should be computed in the manner indicated in the

Board's telegram Trans 206$ of September 7» 193^ • Column 11 should be com-

puted by dividing the aggregate of the daily figures of borrowings (figures

preceding Sundays and holidays to be repeated) by the number of calendar days

in the week or month.

(e) Columns 3» 5» 6, 9 and 10 should then be calculated fr'om the figures

entered in the other columns, in accordance with the instructions contained in

in the captions and footnotes.

( f ) Annual daily averages should be computed for columns 1, 2, 4, 7* 9» 10

and 11 and en te red fo l l owing the monthly or weekly f i g u r e s f o r each y e a r . On

form 236a, the annual d a i l y average should a l so be computed f o r column 12. In

the case of columns 4 and 12 the daily average debits should be obtained by f o r

dividing the aggregate for the 12 months, or/52 or 53 weeks, by the number of

calendar days. In the case of columns 1, 2, %, 9> 10 and 11 the daily average

should be obtained by dividing the sum of the monthly or weekly figures by the

number of months or weeks.

(g) If i t appears , upon i n s p e c t i o n of the completed work shee t f o r any

bank, t h a t the f i g u r e s shown i n column 10 may exceed 15 p e r c e n t of t o t a l d e p o s i t s

as shown i n column 1, then the re should be shown i n the a v a i l a b l e space p reced ing

column 1, a f i g u r e r e p r e s e n t i n g 15 pe r cen t of t o t a l d e p o s i t s , the maximum p o s s i b l e

r e q u i r e d r e s e r v e on the proposed b a s i s . In the case of such banks t h i s maximum

should be used in any c o n s o l i d a t i o n s t h a t may be made i n l i e u of f i g u r e s shown

in column 10.

2 . Conso l ida t ions of work s h e e t s . Form 236.

The completed work s h e e t s f o r i n d i v i d u a l banks should f i r s t be

so r t ed according to economic c l a s s i f i c a t i o n , e . g . , co t ton growing, t o -

bacco growing, e t c . , and then, i f the re i s more than one c l a s s of banks

( e . g . , r e se rve c i t y banks and country banks) i n a given economic

B-1013b Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

532 class i f icat ion, according to the class of bank within such economic group.

The monthly figures shown in columns 1, 2, 4, 9» 10 and 11 should then be

consolidated for each economic group (or for each class of banks in such

economic group), i . e . , totals for each month should be obtained correspond-

ing to the figures shown in columns 1, 2, 4, 9» 10 and 11 on the work

sheets for the individual banks. Annual averages should also be shown on

the consolidated sheets for these s ix columns.

If a bank's reserve status was changed at any time during the period

covered by the compilation on Form 236, that fact should be indicated on

i t s work sheet and an appropriate note should be appended to the consoli-

dated sheet in which the bank i s included. For the purpose of consolida-

tions the bank should be classed according to i t s current reserve status.

It i s not essential for the study that every bank be included in the

consolidated total sheets for i t s economic group throughout the period

covered by the study, inasmuch as comparisons wi l l be made chiefly between

reserves of the group of banks on the present basis and on the proposed

bas is . Every total sheet should be accompanied with a memorandum showing

just what banks are included therein and the period for which they are in-

cluded, or i f convenient this information may be shown on the face or the

reverse side of the sheets themselves.

3. Consolidation of work sheets. Form 236a.

The procedure should be the same as in connection with the consolida-

tions of work sheets form 236, except that the work sheets of the individual

banks on form 236a should be sorted according to classes of banks in each

c i ty , and a consolidation should be made of the figures in columns 1, 2, 4,

9, 10, 11 and 12 for each class of bank in each c i ty .

B-1013C Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The compilations for ind.ivid.xial banks on Forms 236 and 2 3 6 a should,

be sent to the Board., together with the requested, consolidations, as soon

as the figures for a number of the groups have been consolidated, i . e . ,

without waiting for the completion of the entire job. In transmitting

the data any observations bearing on the problem that may have been made

in the course of compilation of the data should be brought to the Board's

attention. In order to avoid correspondence a l l compilations should be

carefully checked and the results scrutinized before the data arc trans-

mitted to the Board.

B-1013d Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


WASHINGTON September 14, 193^

B-10l4. A D D R E S S OFFICIAL C O R R E S P O N D E N C E T O T H E FEDERAL R E S E R V E B O A R D

SUBJECT: Charge for printing Federal Reserve notes during the f i s c a l year ending June 30, 1935.

Dear Sir:

Under date of September 8, the Bureau of Engraving

and Printing advised the Federal Reserve Board that, e f f e c -

tive July 1, 193^. the charge for printing Federal Reserve

notes during the f i s c a l year ending June 30, 1935 w a s in-

creased from $82.50 to $86.00 per thousand sheets; the in-

crease "being due to a 10 per cent pay restoration, to the

adoption of a 40-hour week for printers, pressmen and others,

and to higher material prices.

Very truly yours,

Chester Morrill Secretary.

$0 GOVERNORS OF ALL FEDERAL RESERVE BA11KS


\

V FEDERAL RESERVE BOARD WASHINGTON

A D D R E S S OFFICIAL C O R R E S P O N D E N C E T O T H E FEDERAL R E S E R V E B O A R D September 1$, 193*+

B-1016.

SUBJECT: Industrial Advances and Commitments.

Dear Sir:

There i s inclosed for your information a tabular statement

showing for each Federal Reserve bank a summary of applications

for industrial advances under Section IJb of the Federal Reserve

Act to September 12, 19 3 " • The statement shows for each Federal

Reserve d i s tr i c t the number and amount of applications, approvals,

commitments, advances and rejections. There i s also inclosed

a summary of rejected applications according to reasons for re-

jection* The figures were compiled from reports received from

the Federal Reserve banks on Forms B-22 and B-22a. A copy of

the statement i s being furnished the Governor.

Very truly yours


Inclosure

TO ALL FEDERAL RESERVE AGEFTS.




September 21, 1934 B-1017

Dear Sir:

Referring to the next to l a s t paragraph of our let ter

of May 7, 1934 (B-9S1), regarding reimbursement for extra-

ordinary expenses incurred by Federal Reserve banks during

and immediately after the banking holiday, there are enclosed,

for your information, a copy of a l e t ter dated September 17,

1934, addressed to Governor Schaller at Chicago, and a copy

of his reply thereto dated September 19.

Very truly yours,

E. L. Srnead, Chief, Division of Bank Operations,

Enclosures

TO ALL GOVERNORS


V

c j 3 _ E _ r 5 0 7

FKDERfil RESERV3 BA1K OF CHICAGO

September 19, 1934

Office of the Governor

Mr. E. L.Smead, Chief Division of Bank Operations Federal Reserve Board Washington, D. C.

Dear Mr. Smead:

This wil l acknowledge receipt of your l e t t er of September 17 regarding reimbursement by the Treasury Department in the amount of $61,285.37 for extraordinary expenses incurred during and im-mediately following the banking holiday.

It i s noted that you have requested the detai l regarding the nature of the expenses for which reimbursement was received, and also with respect to the items aggregating $63.81 which were rejected.

The amount for which reimbursement was received covered telegraphic expense in making available to banking institutions in this d i s tr ic t proclamations, orders, regulations, and interpre-tations thereof; also, notif ications to banks in this d i s tr ic t re-garding the licensing of benks. The amount rejected consisted of errors in computing rates, messages sent by Western Union which should have been sent by Postal Telegraph, and charges which were not supported by copies of original messages. The telegraph com-panies have since reimbursed us for the amount disallowed.

For your further information, we have from time to tine submitted claims for reimbursement covering printing and mailing costs in connection with circulars sent to banking inst i tutions in this d i s t r i c t , regarding the banking holiday, regulations issued subsequently, and for transportation charges paid by this bank on shipments of gold coin and gold cert i f i cates received in accordance with the Executive Orders, which for the most part have been paid or have been administratively approved for payment.

Your cooperation in effecting these settlements i s very much appreciated.

Very truly yours,

G

(Signed) Geo. J. Schaller

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

C O P Y 538



September 17, 193^

Mr. G. J. Schaller, Governor, Federal Reserve Bank of Chicago, Chicago, 111.

Dear Governor Schaller:

We have been informally advised by the Treasury Department

that yourbank has recently been reimbursed in the amount Of

$61,285.37 for extraordinary expenses incurred during and immediately

after the banking holiday. We are also informed that the Comptroller

General disallowed or suspended payment on items tota l l ing $63.81.

In order that we may be in a position to advise the Federal Reserve

banks of the action taken by the Comptroller General on vouchers

covering banking holiday expenses in accordance with the next to last

paragraph of Board's l e t ter 3-981 of May 7, 193^, i t wil l be appre-

ciated i f you will advise us in detail regarding the nature of the

expenses for which reimbursement was received and el so with respect

to the items disallowed.

Very truly yours,

(Signed) E. L. Smead

E» L. Smead, Chief, Division of Bank Operations.




September 27. 193^» B-1020.

SUBJECT: Member Bank Call Report for June 30, 193^»

Dear Sir:

We are forwarding to you • under separate cover

copies of the Board's Member Bank Call Report

No, 62, showing the condition of licensed member banks

on June 30, 193^• Please forward a copy to each

member bank in your d i s tr ic t that has expressed a de-

s ire to receive copies of ca l l reports as issued.

Very truly yours,

E» L. Smead, Cnief, Division of Bank Operations.

TO AIL FEDERAL RESERVE AGENTS



540


September 2% 193^ 3-813

SUBJECT: Funct ional Expenses, F i r s t Ha l f , 1934

Dear S i r :

There a re enclosed herewi th cop ies

of the conso l ida ted Funct ional Expense Exh ib i t

f o r the ha l f year ending June 30, 193^. A copy

of the e x h i b i t i s a l so being mailed to the

Governor of the bank.


E, L. Smead, Ch ie f , Div i s ion of Bank Opera t ions

Enclosure

LETTER TO CHAIRMAN OF EACH FEDERAL RESERVE BAM



WASHINGTON


October 3» 193*+ B- 1022

Dear S i r :

In accordance with a recommendation made by the representatives

of the Industrial Advisory Committees at their conference in Wash-

ington on Thursday, September 27, there i s inclosed a summary

statement showing the number and amount of applications received

for industrial advances under Section l3"b of the Federal Reserve

Act and the number and amount of such applications approved, re-

jected and s t i l l under consideration.

Your name has been placed on our ma i l i ng l i s t to r e c e i v e

copies of t h i s s ta tement r e g u l a r l y each week as i s s u e d .


•y^y\JZ

E. L. Smeaa, Chief , Div i s ion of Bank Opera t ions .

Inclosure

TO EACH MEMBER OF EACH INDUSTRIAL ADVISORY COMMITTEE



WASHINGTON


October 10, 1934 B-1023

Dear Sir:

Referring to the las t paragraph of our le t ter of May 7. 1934

(B-981), regarding reimbursement for extraordinary expenses incurred by

Federal Reserve banks during and immediately after the banking holiday,

at the last Governors' Conference Mr. James read en extract from a par-

agraph relating thereto contained in the "Emergency Appropriation Act,

f i sca l year 1935". approved June 19, 1934, and you were advised that a

copy of this paragraph would be furnished you at a later date. The

paragraph referred to reads as follows:

"Expenses, Emergency Banking Act of 1933. Gold Reserve Act of 1934, and Silver Purchase Act of 1934: For any pur-pose in connection with the carrying out of the provisions of any Executive orders and proclamations regarding the bank holiday, any regulations issued thereunder, and the provisions of the Emergency Banking Act, approved March 9. 1933 (48 Stat. 1), the Gold Reserve Act of 1934, approved January 30, 1934 (Public, Numbered 87, Seventy-third Congress), and section 3653 of the Revised Statutes, including costs of transportation, insurance, and protection of srold coin, gold bullion, and gold cert i f icates transferred to Federal Reserve banks and branches, United States mints and assay of f ices , end the Treasury, after March 9.1933? losses sustained by Federal Reserve banks due to abrasion of gold coin, and reimbursement to Federal Reserve banks and branches for expenses incurred by them in carrying out instructions issued by the Secretary of the Treasury after March 4, 1933; and to cover any deficiency in the accounts of


— 2 —

548

the Treasurer of the United States, including interest, as authorized by the Act of March 26, 193*+ (Bublic, Numbered 129, Seventy-third Congress), arising out of the arrangement approved by the President on July 27, 1933; for any purpose in connection with carrying out the Silver Purchase Act of 1934, f i sca l year 1935, $4,500,000, to be expended under the direction and in the discretion of the President and to be immediately avai1able."

The Treasury Department has informally asked that requests of

Federal Reserve banks for reimbursement for losses sustained by them due

to abrasion of gold coin received during and after the banking holiday

show the following information: ( l ) face value of coins, (2) value allowed

by mint, (3) date shipped to mint, (4) Treasurer's transfer advice number,

and (5) statement certifying to period during which coin was received.

Very truly yours

E. L. Suead, Chief, Division of Bank Operations.

LETTER TO ALL 0V3RN0R3




October 12, 193^ • 3-1024.

Dear Sir:

On October 9 we mailed to the Chairman and Governor

of each Federal Reserve bank and to each member of the Indus-

tr ial Advisory committees a copy of a statement showing, for

the period up to October 3» the number of applications for

industrial advances under Section ljb of the Federal Reserve

Act and the number and amount of such applications approved,

rejected and s t i l l under consideration.

There are now inclosed 12 additional copies of the

statement and i t i s suggested that a copy be furnished each

director of your bank. This number of extra copies wil l be

forwarded to you regularly each week hereafter.

Very truly yours,

S. L. Smead, Chief, Division of Bank Operations.

Inclosures.

TO ALL FEDERAL RESERVE CHA.IRHEN EXCEPT RICHMOND




October 23, 193^ B-1025

SUBJECT: Call Condition Reports of State Bank Members and their A f f i l i a t e s

Dear Sir:

There have been forwarded to you today under separate cover the

indicated number of copies of the f ive forms and schedules attached

hereto, for the use of State bank members and their a f f i l i a t e s in sub-

mitting reports as of the next cal l date:

Number of copies Form

Form 105, Report of condition of State bank member.

Schedule "0", Loans and advances to a f f i l i a t e s and irvAstmmnts in and loans secured by obligations of a f f i l i a t e s .

Form 220; Report of a f f i l i a t e or holding company a f f i l i a t e .

Form 220a, Publisher's copy of report of a f f i l i a t e or holding company a f f i l i a t e .

Form 220b, Instructions for preparation of reports of a f f i l i a t e s and holding company a f f i l i a t e s .

Kindly mail to each State bank member that has not been formally

placed in liquidation or receivership or possession of which has not

been taken by a conservator or other State o f f i c i a l 3 copies of Form


- 2 - ; 546 105 and Schedule "0" and an appropriate number of Forms 220, 220-a" acid

220-b, based on the number required at the time of the l a s t c a l l for

reports , with the request that the forms and the accompanying schedule

be held pending a c a l l for reports thereon. Member banks should be

ins tructed to submit the reports in duplicate , both the or ig ina l and

dupl icate copies to be signed and f u l l y executed. The o r i g i n a l s of

the reports should be retained for the f i l e s of your bank and the

copies forwarded to the Federal Reserve Board.

A number of changes have been made i n Form 105, a l l of which a r e

b e l i e v e d to be s e l f - e x p l a n a t o r y . However, i t i s sugges ted t h a t , i n

t r a n s m i t t i n g t h e forms to S t a t e bank members, you c a l l t h e i r a t t e n t i o n

to the fo l lowing :

Item 3 of A s s e t s has been amended to read "United S t a t e s Govern-

ment o b l i g a t i o n s , d i r e c t and /or f u l l y gua ran t eed" . As i n d i c a t e d by

Schedule F, t he i tem should inc lude not only the d i r e c t o b l i g a t i o n s of

t h e United S t a t e s Government h e r e t o f o r e r e p o r t e d as Uni ted S t a t e s

Government s e c u r i t i e s , but a l s o o b l i g a t i o n s of t h e Recons t ruc t i on F in -

ance Corporat ion, the Federa l Farm Mortgage Corpora t ion , and the Home

Owners Loan Corporat ion, guaranteed by the Uni ted S t a t e s Government as

to bo th i n t e r e s t and p r i n c i p a l . Home Owners Loan Corporat ion 4 percent

bonds, which a r e guaranteed by the United S t a t e s Government as t o i n -

t e r e s t only, should be inc luded in Asset i tem 4 and shown a g a i n s t i tem

1 - a of Schedule G.

L i a b i l i t y i tem 23, "Obl iga t ions on i n d u s t r i a l advances t r a n s f e r r e d

to Federa l Reserve bank", has been added, a g a i n s t which S t a t e bank mem-

b e r s should r e p o r t t h e i r l i a b i l i t i e s on i n d u s t r i a l advances d iscounted


: 517, - 3 -

with or sold to the Federal Reserve bank under the provisions of Sec-

tion 13b of the Federal Reserve Act, as amended June 19, 193*+. De-

tai led instructions regarding the reporting of such l i a b i l i t i e s were

contained in the Board's le t ter X-80U6 of October 6, 1 9 3 w h i c h you

were requested to send to a l l State bank members.

Liability item 29, "Dividends declared but not yet payable, and

amounts set aside for dividends not declared and for accrued interest

on capital notes and debentures", has been added, against which should

be reported: (1) Dividends declared on or before the date of the call

report but not payable until after such date, which have heretofore

been required to be included in "Other l i a b i l i t i e s " ; and (2) Amounts

that have been set aside from undivided profits for dividends not yst

declared either on preferred or common stock and/or for accrued in-

terest on capital notes and debentures.

Item 6 of Schedule S has been amended so as to provide that loans

described in Section 50^b of the National Housing Act should not be

classed as real estate loans for the purpose of condition reports on

Form 105. Such loans should be included in "All other loans", item 8

of Schedule E. The pertinent provision of Section 505b of the National

Housing Act reads as follows:

"Loans made to finance the construction of residential or farm buildings and having maturities of not to exceed s ix months, whether or not secured by a mortgage or similar l i en on the real estate upon which the residential or farm building i s being constructed, shall not be considered as loans secured by real estate within the meaning of this section but shall be classed as ordinary commercial loans".

The item "Deposits the payment of which has been deferred beyond

the time originally contemplated, either by agreement with depositors


- 4 - a 548 or otherwise", which appeared in Schedule L of the last condition re-

port, has been eliminated. Any such deposits held by a State bank

member should be included in the aporcoriate item of Schedule J , K

or L, depending on their character and maturity on the date of the

condition report.

It i s requested that as promptly as practicable after the issue

of the call you inform the Board, with respect to each State whose

capital city l i e s in your d i s tr i c t , whether or not State authorities

issued a call for condition reports as of the same date as the cal l

issued by the Board, and, i f not, the date of the nearest cal l thereto

issued by the State authorities. In case reports submitted in response

to such calls were not required to be published, information i s re-

quested as to the nearest date when publication of such reports was

required.

If you are sat i s f i ed that additional time i s needed for the pre-

paration of the report of any a f f i l i a t e , you are authorized on behalf

of the Federal Reserve Board to grant an extension of not to exceed

20 days, in addition to the original period of 10 days from the receipt

by the member bank of the cal l for the report. Please furnish the

Board with a copy of each le t ter granting an extension of time.

Very truly yours,


Inclosures.

TO ALL F3DERAL HESERVE AGENTS Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis



October 3°, 1934 B-1027

SUBJECT: Weekly report of 13b loans and commitments.

Dear Sir:

In view qf the changes that have been made in Forms B-22

and B-22a covering weekly resorts of industrial advances and

commitments and of the d i f f i c u l t i e s experienced in making out

these reports, i t has been thought desirable to revise the forms

and a supply thereof, as revised, i s inclosed.

There i s also inclosed a memorandum in explanation of

certain items for your guidance in preparing the re-ports.

The revised forms should be used in submitting reoorts

beginning November 7. 1934.

Very truly yours,


Inclosures

TO ALL AGENTS


; 550 EXPLANATION OF CERT AIM ITEMS 03 FORMS B-22 AH) B-22a, WEEKLY REPORTS

OF INDUSTRIAL ADVA1MCES AMD COMMITMENTS MD APPLICATIONS THEREFOR

The following paragraphs relate to certain items, the captions of

which i t i s thought possibly need some explanation in order to insure the

compilation of reports on a uniform basis "by al l Federal Reserve banks.

FORM B-22

Item 1. Applications received by Industrial Advisory Committee.

All written applications received either on a preliminary or f inal form

should be reported against this item whether or not formally presented to

the Industrial Advisory Committee.

Item 3-b. Reductions in amounts applied for before f inal action

by Industrial Advisory Committee. This item should represent reductions

in amounts applied for made at the instance of, or with the consent of,

the applicants.

Item 5. Action on applications by Industrial Advisory Committee.

If an application i s recommended for approval by the Industrial Advisory

Committee in an amount l e s s than that applied for, the amount of the

advance recommended should be reported in item 5~£ or 5-b and the remainder

of the amount applied for in item 5-c unless the amount applied for was

reduced at the request of, or with the consent of, the applicant. Item 5-d

should include any applications received but not yet formally presented to

the Industrial Advisory Committee as well as applications actually received

by the Committee on which no recommendations hnve yet been made.

B-1027a


2 - 551

An application recommended for approval with conditions should he

reported agcinst item 5-b, "Conditional tprrovc-l recommended", and the

amount of such application should not be taken out of item $-b in sub-

sequent reports, whether or not the conditions ere accepted by the applicant,

unless the application i s referred back to the Committee for reconsideration

and i t changes i t s recommendation.

If a rejected application i s resubmitted in the original amount and

the Committee changes i t s former action, item 5-c should he reduced and a

corresponding increase made in item 5-a or 5~b.

If a rejected application i s resubmitted in a reduced amount and the

Committee changes i t s former action, item 5-c should he reduced by the

amount of the previous rejection, the reduction in the amount applied for

should be reported against item 3~b, and the amount of the resubmitted

application should be reported in item or 5-b.

Item 8-b. Reductions in amounts applied for before f inal action

by Federal Reserve bank. This item should represent reductions in amounts

applied for, after action by the Industrial Advisory Committee, made at

the instance of, or with the consent of, the applicants.

Item 10-a. Applications approved. This item should include al l

advances and commitments approved by the Federal Reserve bank without con-

ditions or with conditions agreed to by the applicant either before or

after approval by the Federal Reserve bank.

B-1027a


i 552 - 3 -

Item 10-b . Cond i t iona l ly approved. Any a p p l i c a t i o n approved

"by the Federal Reserve bank s u b j e c t to the acceptance of c e r t a i n con-

d i t i o n s by the app l i c an t should be included i n t h i s i tem, u n l e s s and

u n t i l the p r e s c r i b e d cond i t i ons have been accepted , when the a p p l i c a t i o n

should be t r a n s f e r r e d from i tem 10-b to item 10-a .

If an a p p l i c a t i o n r epo r t ed aga ins t t h i s cap t ion i s resubmi t ted

in a reduced amount and i s then approved wi thout c o n d i t i o n s , i tem 10-b

should be reduced by the amount p rev ious ly inc luded t h e r e i n , i tem 10-a

should be inc reased by the amount of the rpprovod amended a p p l i c a t i o n ,

and the amount of th$ r educ t i on should be inc luded i n i tem 8 - b .

Any c o n d i t i o n a l l y approved a p p l i c a t i o n which i s under con-

s i d e r a t i o n by the a p p l i c a n t should be shown in the memorandum item

MConditional approvals under cons ide ra t i on by appl ican t 1 1 . Any con-

d i t i o n a l l y approved a p p l i c a t i o n wi th r e spec t to which the a p p l i c a n t

has express ly i n d i c a t e d t h a t the cond i t ions a re not a ccep t ab l e , or

where f a i l u r e on h i s p a r t to accept cond i t ions w i th in a r easonab le

time war ran ts the assumption t h a t they w i l l not be accepted, should

be r epo r t ed in memorandum item "Condit ional approvals , nonacceptance

i n d i c a t e d " .

Item 10-c . Re j ec t ed . If a r e j e c t e d a p p l i c a t i o n i s resubmit ted in

the o r i g i n a l amount and the Federa l Reserve brnk changes i t s former a c t i o n ,

B-1027a


- 4 - 553

i t e n 10-c should be reduced, and a corresponding inc rease made in i tem 10-a

or 10-b.

If a r e j e c t e d a p p l i c a t i o n i s resubmit ted in a reduced amount and the

Federa l Reserve bank changes i t s former a c t i o n , i tem 10-c should be reduced

by the amount of the prev ious r e j e c t i o n , the r educ t ion i n the amount app l i ed

f o r should be r epo r t ed a g a i n s t i t e ^ 8-b , and the amount of the resubmit ted

a p p l i c a t i o n should be repor ted aga ins t i tem 10-a or 10-b.

FORM B-22a

Item 1 - a . Total a p p l i c a t i o n s approved (Commitments'). Amounts r e -

por t ed in column 1 should r e p r e s e n t t o t e l a p p l i c a t i o n s approved, even

though the commitments have not been executed, end. shovld i nc lude p a r t i c i -

p a t i o n s , i f any, by f i n a n c i n g i n s t i t u t i o n s . Amounts r e p o r t e d i n column 2

should r e p r e s e n t commitments to make advances d i r e c t to borrowers , exc lus ive

of commitments under which a f i n a n c i n g i n s t i t u t i o n i s to advance a p o r t i o n

of the requ i red f u n d s . Amounts repor ted in column 3 should r e p r e s e n t (a)

commitments to f i n a n c i n g i n s t i t u t i o n s and (b) commitments to borrowers where

f i n a n c i n g i n s t i t u t i o n s a l s o make commitments under which advances made by

the Federal Reserve banks and the f i n a n c i n g i n s t i t u t i o n s a r e to be con-

s ide red as s i n g l e advances and repayments made pro r a t a . The amount, i f

any, which a f i n a n c i n g i n s t i t u t i o n i s to f u r n i s h in connect ion wi th a

commitment should be r epor t ed i n column 4 and the p o r t i o n of an advance

under a commitment to a f i n a n c i n g i n s t i t u t i o n on which the f i n a n c i n g i n -

s t i t u t i o n o b l i g a t e s i t s e l f f o r any l o s s sus t a ined should be r epor t ed in

column 5.

Item 2 - a , Total a p p l i c a t i o n s approved (Advances). Amounts r epor t ed

in column 1 should r e p r e s e n t t o t a l advances approved i n c l u d i n g p a r t i c i -

B-1027& Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

-5 - £ 554

pations, if any, "by financing institutions. Amounts reported, in colurrn 2

should represent total approvals of advances direct to borrowers, exclusive

of those made or to be made in participation with one or more financing in-

st i tut ions. Amounts reported in column 3 should represent (a) approved

advances to financing institutions &.id (b) errroved advances, direct to

borrowers, in connection with which a financing institution i s to furnish,

or has furnished, a portion of the needed funds. The amount, i f say, of

the participation of financing institutions in advances direct tc borrowers

snould be reported in column 4, ena the portion of approved advances to

financing institutions on which such financing institutions oblisr-te

themselves for any loss sustained thereon should be reported in column 5.

The above i n s t r u c t i o n s supersede a l l i n s t r u c t i o n s p r e v i o u s l y i s s u e d .

FEDERAL RESERVE BOARD DIVISION OF BANK OPERATIONS

OCTOBER 30, 1934

B-1027* Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


WASHINGTON


October 31,• 193^ B-1028

Dear Sir:

With further reference to our l e t t er of May 7, 1934 (B-981),

regarding reimbursement for extraordinary expenses incurred by

Federal Reserve banks during and immediately after the banking

holiday, there i s inclosed, for your information, copy of a le t ter

dated October 29, 1934, received from Mr. J. M. Rice, Assistant

Deputy Governor, Federal Reserve Bank of New York, relating to

reimbursement of expenses incident to obtaining, analyzing, and

reporting data, relative to foreign exchange transactions in

accordance with the President's Executive Orders.

Very truly yours,


Inclosure

TO ALL GOVERNORS EXCEPT NEW YORK


4 556

C O P Y

FEDERAL BES3RV3 BAl-T OF NEW YORK

October 29, 1934

Attention of Mr. E. L. Sroead. Chief. Division of Bank Operations

S i r s :

We have today received from the United States Treasury

payment of $49,244.20, representing reimbursement for expenses

incurred by us in connection with Foreign Exchange Control

for the period from March 6, 1933 to January 31, 193*+.

This payment covers salaries of employees assigned to

our Foreign Exchange Control unit, end al l other out-of-pocket

expenses incurred by us in connection with this work.

R e s p e c t f u l l y ,

(Signed) J. M. Rice J. M. Rice,

Assistant Deputy Governor

Federal Reserve Board,

Washington, D. C.

B-1028a


FEDERAL RESERVE BOARD 557,

WASHINGTON


November 10, 193*+ B-1030

SUBJECT: F u n c t i o n a l Expense 'Reports

Dear S i r :

The minutes of the committee meet ing on accoun t ing held, a t the

F e d e r a l Reserve Bank of Chicago on June 27 and. 28, 193^. c o n t a i n the

f o l l o w i n g r e s o l u t i o n which was adopted by the Committee:

" I t was moved by Mr. Fleming and seconded by Mr. G-ilmore t h a t a Committee be appo in ted f o r the purpose of r e v i s i n g t h e f u n c t i o n a l expense r e p o r t Form E so t h a t i t w i l l shoF the u n i t co s t f o r a l l s e r v i c e s f o r which a h a n d l i n g charge might be found n e c e s s a r y , and a l s o t h a t i t should b e . r e v i s e d so a s to p rov ide an a c c u r a t e comparison of a l l o t h e r c o s t s of F e d e r a l Reserve bank o p e r a t i o n s . "

While no formal committee was appo in t ed , Mr. Myrick of the D iv i s ion

of Bank Opera t ions has p r epa red , w i th the a s s i s t a n c e of Mess r s . Ea rha r t

and Mangels of the Fede ra l Reserve Bank of San F r a n c i s c o , a t e n t a t i v e r e -

v i s i o n of the f u n c t i o n a l , expense r e p o r t , Form E, i n accordance w i th the

above quoted r e s o l u t i o n , and of the Manual of I n s t r u c t i o n s govern ing i t s

p r e p a r a t i o n . A copy of the r e v i s e d Form end Manual and of an exp lana to ry

memorandum p repa red by Mr. Myrick i s i n c l o s e d . Mr. Walden, C o n t r o l l e r ,

F e d e r a l Reserve Bank of Richmond, has reviewed the r e v i s e d Form and Manual

of I n s t r u c t i o n s ana has made a number of s u g g e s t i o n s i n r e g a r d t h e r e t o .


f 558 - 2 -

His sugges t ions and. o the r s winch have "been made a re s e t f o r t h "below

f o r your c o n s i d e r a t i o n a long wi th the Manual and Form E as r e v i s e d .

(1) That the f u n c t i o n a l expense r e p o r t s "be r e v i s e d a long the l i n e s

i n d i c a t e d i n the proposed i n s t r u c t i o n s so as to provide f o r o b t a i n i n g

u n i t c o s t s f o r a l l s e r v i c e s f o r which a s e rv i ce charge may "be found nec-

e s s a r y , "but t h a t t he ac tua l r e d i s t r i b u t i o n of c e r t a i n genera l expenses

to such expense u n i t s be d e f e r r e d u n t i l such time as i t appears t ha t the

l e v y i n g of s e r v i c e charges i s imminent.

(2) That p r o v i s i o n be made i n the p r o v i s i o n of Space f u n c t i o n f o r

i n c l u d i n g d e p r e c i a t i o n charges on bank b u i l d i n g s and on f i x e d machinery

and equipment. If t h i s sugges t ion i s adopted, the amount of d e p r e c i a t i o n

charges would no t be included in cu r r en t expenses on Form 96 but would be

shown a t the bottom of page 1 e.n Form S f o r reconci lement pu rposes .

(3) That a p ropo r t i on of the expenses of the P r o v i s i o n of Space

f u n c t i o n , i n c l u d i n g d e p r e c i a t i o n charges on bank b u i l d i n g s and on f i x e d

machinery and equipment, be r e d i s t r i b u t e d to those f u n c t i o n s and expense

u n i t s f o r which more accu ra t e cos t f i g u r e s are to be obta ined i f s e rv ice

charges a re to be i n s t i t u t e d i n s t e a d of showing the f a i r r e n t a l va lue of

the space occupied by such u n i t s as a memorandum i tem. I f t h i s change

i s to be made, the Manual might provide t h a t the p r o v i s i o n of space

expenses chargeable to a given f u n c t i o n or expense u n i t should r ep re sen t

the same p ropo r t i on of the t o t a l cos t of the p r o v i s i o n of Space f u n c t i o n

as t h e number of square f e e t of ope ra t ing or o f f i c e and v a u l t f l o o r

space occupied by such f u n c t i o n or expense u n i t r e p r e s e n t s of the t o t a l

number of square f e e t of such space i n the bank. The term " v a u l t f l o o r '

B-1030


3 559

space" as here used i s in tended to comprise the t o t a l f l o o r space i n s ide

the v a u l t i n c l u d i n g tha t occupied by vau l t compartments or c h e s t s .

(4) That p r e s e n t i n s t r u c t i o n s r e l a t i n g to expenses i n c u r r e d in

c o l l e c t i n g paper of closed "banks "be not changed as recommended in the

minutes (page 9) of the committee meeting on account ing, he ld i n Chicago

on June 2~J and 28, 193^.

(5) That the Manual of I n s t r u c t i o n s be changed on page 42 so as

to provide f o r the r e d i s t r i b u t i o n of p r o t e c t i o n expense o n l y i n the case

cf guards who have r egu la r assignments to the f u n c t i o n s and expense u n i t s

shown thereon.

(6) That the second paragraph under "Stock of supp l i e s " f u n c t i o n

on page 48 of the Manual be changed so as to provide t ha t the cos t of the

s u p p l i e s purchased f o r d i r e c t d e l i v e r y to another u n i t may be charged

d i r e c t l y to t ha t u n i t .

(7) That p r o v i s i o n be made f o r charging obso le te forms to the

expense u n i t s f o r which they were o r i g i n a l l y purchased as o therwise the

cos t of obso le te forms would remain i n the s tock r e c o r d s .

(8) That the Manual of I n s t r u c t i o n s be changed on page 24 so as

to provide f o r the complete d i s t r i b u t i o n of Retirement System expenses

to the var ious expense u n i t s and f u n c t i o n s of the bank.

(9) That i n s t e a d of showing the es t imated expense of misce l laneous

a c t i v i t i e s ( c a f e t e r i a expense, medical expense, e t c . ) as a memorandum at

the end of c e r t a i n f i s c a l agency u n i t s , the cos t of such misce l laneous

a c t i v i t i e s be shown as an a d d i t i o n to the cost charged d i r e c t l y to such

u n i t s in the manner i l l u s t r a t e d below f o r U. S. Government I s s u e s , page

20 of Form E. B-1030


4 - 560

TOTAL, U.S.GOVEBNMSNT ISSUES (Ex-c lu s ive of c o s t of o the r a c t i v i t i e s snown below)

ADD

Cost of o ther a c t i v i t i e s #

Prov is ion of space Prov i s ion of personnel Othi r ( s p e c i f y on r eve r se s ide )

TO?AX COST OF U.S.GO VERMEL ISSUES

*Sum of i tems narked, wi th an a s t e r i s k should be shown as "TOTAL COST OF U.S.UCVEKHbStiT ISSUES"

ffAny expenses of "o ther a c t i v i t i e s " which a re re imbursable should be charged d i r e c t to the app rop r i a t e u n i t of the "F i s ca l Agency, Custodianship , and Depos i ta ry" f u n c t i o n end l i s t e d on the r e v e r s e s i d e .

The above supplementary i tems would not , of course , be inc luded in the

r e c a p i t u l a t i o n of expenses of page 1 of Form 5 . In a l l o c a t i n g expenses to

these items the method proposed to be followed i s t h a t i n d i c a t e d in the

Manual f o r a l l o c a t i n g s i m i l a r expenses to c e r t a i n u n i t s f o r which a s e r v i c e

charge may be found necessa ry . I f the above sugges t ion i s adopted a number

of changes w i l l , of course, be necessary i n the Manual of I n s t r u c t i o n s .

Cer ta in changes a re a l s o suggested i n the d a t a c a l l e d f o r on space

occupied by the f i s c a l agency f u n c t i o n as i n d i c a t e d below;

MEMORANDA - BAM IMG HOUSE SPACE UTILIZED

O f f i c e space r e g u l a r l y ass igned; Number of sq . f t . F a i r r e n t a l va lue f o r six-month per iod a t

$ pe r sq . f t . per annum $ Reimbursement rece ived f o r six-month per iod $

Aver. Number Reimburs- Exp. not O f f i - Employ- ab le Reim-ce r s ees Expense bursab le

* *

*

B-1030 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

- 5 -561

MSMORAKDA - BAiSKHJG HOUSE SPACE UTILIZED (Cont 'd )

Vault space r e g u l a r l y ass igned; Cubic f t . con t en t s of compartments F a i r r e n t a l va lue f o r six-month per iod a t

$ pe r cu. f t . per annum $ Reimbursement r ece ived f o r six-month per iod $

I t w i l l be apprec ia t ed i f you w i l l be good enough to have the t e n -

t a t i v e r e v i s i o n of the Manual and Form E and the above sugges t ions r e -

viewed end f u r n i s h the Board with your recommendations i n r e c a r d the re to

and wi th r e s p e c t to any o the r changes you would l i k e to have made in the

Manual and Form E. I t i s hoped t h a t i t w i l l be p o s s i b l e to have the

Manual pnd Form E p r i n t e d s h o r t l y a f t e r the f i r s t of the year end, accord-

ing ly , i t w i l l be apprec i a t ed i f your reply to t h i s l e t t e r i s mailed to

the Board as soon as p r a c t i c a b l e .


E. L. 8mead, Ch ie f , Div i s ion of Bank Opera t ions .


TO ALL GOVERNORS B-1030


k.. FEDERAL RESERVE BOARD

WASHINGTON


November 10, 1934 B-1031

SUBJECT: Forms f o r use dxiring 1935.

Dear S i r :

I t w i l l be apprec i a t ed i f you w i l l advise the Board the number of

cop ies of the forms l i s t e d below tha t w i l l be r equ i red by your bank

( i n c l u d i n g branches , i f any) d u r i n g the ca lendar year 1935:

Form T i t l e

34 Dai ly ba lance s h e e t . (P lease s t a t e the number r e q u i r e d f o r the head o f f i c e raid each branch s e p a r a t e l y , end i n d i c a t e any spec i a l punching t h a t may be d e s i r e d ) .

F .R .A. -5 Federa l Reserve no tes - Daily s ta tement of Federa l Reserve Agent.

F .R .A. -6 Federa l Reserve Bank no tes - Daily s ta tement of Federa l Reserve Agent.

38 C l a s s i f i c a t i o n of d i scounted and purchased b i l l s he ld a t the end of the month.

44 Monthly r epo r t of Federa l Reserve no tes showing the number of each denomination and aggregate amount r ece ived , issued to bank, and r e tu rned to the Comptrol ler of the Currency.

95 Monthly r e p o r t of ea rn ings ,

96, Monthly r e p o r t of c u r r e n t expenses.

l6o Monthly r e p o r t of r e c e i p t s end payments of ppt>er cur rency .


563

- 2 - B-1031

Form T i t l e

19^ Monthly r epo r t of Federal Reserve no te s rece ived and i s sued ; a l so s tock on hand at "beginning and end of month.

•E Semiannual f u n c t i o n a l expense r e p o r t .

P lease show s e p a r a t e l y the number of copies of each form,

except forms 3^ end F.R.A.-6, r equ i red i f r e v i s e d and the number i f

not r e v i s e d .


J . R. V>n Fossen, A s s i s t a n t Chief , D iv i s ion of Bank Opera t ions .





December 7, 193*+ B-1032

SUBJECT: 1935 Budget f o r S t a t i s t i c a l and. A n a l y t i c a l Work

Dear S i r :

I n accordance w i t h your usua l p r a c t i c e , a s t a t emen t

of the "budget f o r t h e S t a t i s t i c a l and A n a l y t i c a l f u n c t i o n

of your bank ( i n c l u d i n g branches , i f any ) , f o r the c a l e n -

d a r yea r 1935 should be forwarded to the Federa l Reserve

Board es soon a f t e r J e n u r r y 1 as p r a c t i c a b l e . The budget

should be p repa red i n accordance w i th t h e a t t a c h e d fo rm.


Ches t e r M o r r i l l , S e c r e t a r y .

I n c l o s u r e



565 B-l'032n

FEDERAL RESERVE BAH OF ( I n c l u d i n g branches)

Proposed "budget f o r the S t a t i s t i c a l and Ana ly t i ca l f u n c t i o n ( a s de f ined i n the Manual of I n s t r u c t i o n s cover ing f u n c t i o n a l expense r e p o r t s , Form E)

(All f i g u r e s to be shown to the nea re s t d o l l a r , cen t s omi t ted)

BUDGET EXPENSES BUDGET f o r d u r i n g f o r

-1211. 1934' 1935 ADMINISTRATION:

S a l a r i e s - o f f i c e r s S a l a r i e s - employees Trave l ing expenses P r i n t i n g , s t a t i o n e r y and o the r supp l ies Telephone and t e l e g r a p h All o ther*

TOTAL

STATISTICAL: S a l a r i e s - employees Trave l ing expenses P r i n t i n g , s t a t i o n e r y and o ther supp l ies Telephone and t e l e g r a p h Postage All o ther*

TOTAL

MONTHLY LETTER: P r i n t i n g and s t a t i o n e r y Postage

TOTAL

LIBRARY: S a l a r i e s - employees Trave l ing expenses P r i n t i n g , s t a t i o n e r y and o the r suppl ies Telephone and t e l e g r a p h News se rv ice - s u b s c r i p t i o n s to

p e r i o d i c a l s , e t c . Books All o ther*

TOTAL

GRAND TOTAL MEMORANDA

Number of cop ies of monthly l e t t e r -printed, December 193^

Rece ip t s from monthly l e t t e r s so ld : Year 193^ $ Do not de-Est imated, Year 1935 $

• C l a s s i f y , i f i n excess of $100. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis



December 7, 193^ B-1033

SUBJECT: Summary Statement of Federal Reserve Bank Personnel.

Dear Sir:

In accordance with the usual prac t i ce , p lease furn i sh

the Board with a summery statement showing the number and s a l a r i e s

of o f f i c e r s and employees of your bank ( inc luding "branches, i f

any) as of December 31# 193^* and January 1, 1935, made out i n

accordance with the attached form. The f i g u r e s f o r December 31,

1934, which should not include any 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 become e f f e c t i v e on

January 1, 1935, w i l l be published in the Board1 s 193*+ annual

report . The f i g u r e s for January 1, 1935, should represent the

number and annual sa lar i e s of o f f i c e r s and employees a f t e r a l l

ch&nges e f f e c t i v e as of January 1 have been made.

Very truly yours,


Inclosure

L3TTZR TO ALL CHAIRMEN Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

567,

NUMBER AMD SALARIES OF OFFICERS Al© EMPLOYEES OF THE FEDERAL RESERVE SAHK OF (INCLUjISS BRANCHES)

Dec. 31. 1914 Jph. 1. 1935

Annual s a l a r y of -

Chairman and Federa l Reserve Agent $ lj>

Governor $ $

Other o f f i c e r s :

Number

Annual s a l a r i e s $ $

Employees, both permanent and temporary, (except those whose s a l a r i e s a re

reimbursed to bf-nk):

Number


Employees, bo th permanent and temporary, whofee s a l a r i e s a re reimbursed to bf-nk:

Number


3-1033a



WASHINGTON


December %, 193*+ B-1034

SUBJECT: 1935 Budget f o r Federal Reserve Bank

Dear S i r :

I t w i l l be app rec i a t ed i f you w i l l forward to the Board, as

soon a f t e r January 1 as p r a c t i c a b l e , a s ta tement of t h e budget approved

f o r the head o f f i c e and each of i t s branches, i f any, f o r t h e ca lender

yea r 1935 with s e p a r a t e f i g u r e s f o r the f i r s t hp l f end the second ha l f

of the y e a r . I f any ma te r i a l changes are subsequent ly mr-de i n t h e

budget f o r the second h a l f of t h e year the Board should be advised of

such changes on or about J u l y 1, 1935.

The budget s ta tement as submitted to the Boprd should be prepared

in accordance wi th the sample form a t tached end should show t o t a l s f o r

each sepa ra t e u n i t (depar tment , d i v i s i o n , s e c t i o n o r expense u n i t ) f o r

which s epa ra t e f i g u r e s a re shown i n the budget approved by t h e bank ' s

budget committee.

Very truly yours


I n c l o s u r e

TO CHAIRMEN OF THE SEDERAL RESERVE BAMS Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis


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 December 7» 193*+

B-1035

SUBJECT: S a l a r i e s of o f f i c e r s of Federa l Reserve Banks

Dear S i r :

In accerdance with the usua l p r a c t i c e , a s ta tement showing

the 1935 s a l a r y provided "by your Board of D i r e c t o r s a t i t s f i r s t

meeting in January f o r each o f f i c e r of your bank and branches , i f

any, sub j ec t to the approval of the Federa l Reserve Board, should

be forwarded to the Board as e a r l y in January as p r a c t i c a b l e .

P l e a s e l i s t the o f f i c e r s and t h e i r s a l a r i e s i n the manner i n d i -

ca ted in the a t t a c h e d form. In case the b a n k ' s counsel i s not an

o f f i c e r of the bank h i s annual r e t a i n e r f e e and any a d d i t i o n a l

compensation f o r c l e rk h i r e should be shown s e p a r a t e l y .



I n c l e s u r e

TO CHAIRMAN OF EACH FEDERAL RESERVE BANK


ftlt 570

SALARIES OF OFFICERS OF THE FEDERAL RESERVE BASK OF

AMD ITS BRANCHES* IF ANY, FOR THE YEAR 1935 AS PROVIDED BY THE

BOARD OF DIRECTORS SUBJECT TO APPROVAL BY THE FEDERAL RESERVE BOARD

Name T i t l e

Departments or funct ions super-

vised (Form A c l a s s i f 1 c a t ion)

Annual Salary

Dec. 31, 1934

1935, for approval of F.R.Board

Total , o f f i c e r s

B-1035a




December 7, 1934 B-1036

SUBJECT: S a l a r i e s of employees of Federa l Reserve Banks

Deer S i r :

P lease f u r n i s h the Board as ea r ly i n January es p r a c t i c a b l e

a s ta tement showing the name of each employee of your "bank and i t s

branches ( i f any) on January 1, 1935, end the s a l a r y pa id to each

as of January 1, 193^ end January 1, 1935. The l i s t should be p r e -

pared i n accordance with the sample form, B-1036a, a t t ached in

o rde r to f a c i l i t a t e checking wi th the approved personnel c l a s s i f i c a -

t i o n p lan f o r your bank on f i l e with the Federa l Reserve Board.

I t i s a l so reques ted t hp t a summary s ta tement showing the

number of employees as of January 1, 193^> and as of January 1, 1935.

and sa lp ry changes s ince January 1, 193%, by s a l a r y groups be sub-

mi t t ed in accordance wi th a t t a ched sample form, B-1036b.

As in the p a s t the schedules should cover e l l employees on

the bpnk 's p a y r o l l i nc lud ing those whose sa l ; r i e s are reimbursed to

the bank in whole or in p a r t .


I n c l o s u r e s Chester M o r r i l l ,

S e c r e t a r y .

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

572 EMPLOYEES OF THE FEDERAL RESERVE BAivE OF AND ITS

BRANCHES ( IF AMY) OH JANUARY 1, 1935

C l a s s i f i - Sa la ry range

Sa la ry on Jan . 1 Name of employee • c a t i o n

symbol T i t l e of job

Sa la ry range 1934* 1935

NOTE: Employees should be l i s t e d by f u n c t i o n s or depar tments and the p o s i t i o n s or .jobs arranged in the same order as they appear in the -personnel c l a s s i f i c a -t ion -plan. Form A. on f i l e wi th the Federa l Reserve Board. The t o t a l number of employees i n c l u d i n g employees whose s a l a r i e s a re reimbursed to the bank in whole or in p a r t and the t o t a l s a l a r i e s paid should be shown f o r each f u n c t i o n or depar tment . Ext ra he lp or temporary employees should be l i s t e d wi th the r e g u l a r employees of the bank and d e s i g n a t e d by the l e t t e r "T" a f t e r the c l a s s i f i c a t i o n symbol. In case of employees on a. p e r diem or hour ly b a s i s , t he es t imated t o t a l annual compensation should a l s o be shown.

*If h i r e d dur ing 1934, p l e a s e show the i n i t i a l s a l a r y . B-1036a Digitized for FRASER

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

t . , ' / -u 1 . ' / * f

SALARIES OF EL5PL0YE5S OF FEDERAL RESERVE BAH OF (INCLUDING BRANCHES) ON JANUARY 1, 1935 AND SALARY CHANGES SINCE JANUARY 1, 1934

S a l a r i e s under

$1500

S a l a r i e s S a l a r i e s S a l a r i e s S a l a r i e s under

$1500

from $1500

from $2500

of $4000 and To ta l

S a l a r i e s under

$1500 to $2499 t o &3A99 over

Number of employees: 1 . On r o l l on January 1, 193^ 2 . On r o l l on January 1, 1935 3 . Removed(a) f rom r o l l i n 193^ 4 . Added(Td) to r o l l du r ing 1934

S a l a r i e s : 5 . Tota l on Janua ry 1, 193*+ 6 . To ta l on January 1, 1935 7 . Average on January 1, 1934 8 . Average on January 1, 1935

Sa la ry c h a n g e s ( c ) : 9 . S a l a r i e s i n c r e a s e d -

a . Number of employees b . Aggregate i n c r e a s e c . S a l a r i e s on January 1 , 1935

10 . S a l a r i e s reduced -a . Number of employees b . Aggregate r e d u c t i o n c . S a l a r i e s on Januerv 1, 1935

11. S a l a r i es unchanged a . Number of employees b . S a l a r i e s on January 1, 1935

(a ) E x c l u s i v e of pe r sons subsequent ly r e s t o r e d to r o l l . (b) E x c l u s i v e of pe rsons subsequent ly removed from r o l l . (c ) Of employees on r o l l on January 1 of 1934 %rtd 1935. The t o t a l of i tems 9 a i 10a, end 11a should (

equal i tem 2 l e s s i t em 4 .

B- l 0 3 6 ^ 5 r w

4* >



WASHINGTON


November 27, 1934 B-1037

Dear S i r :

In connect ion wi th the Board ' s l e t t e r of October 31. 193^.

X-9004, regard ing the p a r t i c i p a t i o n of a l l Federa l Reserve banks

in the o p e r a t i o n of the Havana Agency, the a t t a ched statement

showing the earn ings and expenses of the Havana Agency of the

Federa l Reserve Bank of A t l an t a may be of i n t e r e s t to yon. As

you know, dur ing the p e r i o d from September 1, 1923 to December

31, 1926, the Federal Reserve Bank of Boston a l so opera ted an

agency a t Havana, Tota l expenses of tha t Agency du r ing the

per iod amounted to $55,509.82 and t o t a l ea rn ings to $229,759.78.



I nc lo su re

TO THE CHAIRMEN OF ALL FEDERAL RESERVE BAMS

(NO COPY TO GOVERNOR OR EXTRA COPIES TO BANKS)




November 24, 193^ B - 1038

SUBJECT: Federa l Reserve Banlc Balance Shee t , Form 34, for use during 3-935 •

Dear S i r :

There i s i nc losed , f o r your in fo rmat ion , an

un ru l ed proof copy of the 1935 e d i t i o n of the d a i l y

ba l ance s h e e t , Form 34. Your bank ' s supply of the

form f o r use dur ing 1935 w i l l be forwarded to you

by r e g i s t e r e d mai l a s soon as r ece ived from the

p r i n t e r .


S . L. Smead, Chief , D iv i s ion of Bank Opera t ions

I n c l o s u r e .

TO ALL G0VEEU0BS (Mo copy to Agent or ex t r a copies to banks)




November 28, 193^ B-1039.

SUBJECT: P re l imina ry c l a s s i f i c a t i o n of loans and inves tments of member banks as of October 17, 193^*

Dear S i r :

There i s i n c l o s e d f o r your in fo rmat ion and c o n f i d e n t i a l

use a copy of a s ta tement p repared f o r the Board g iv ing a

p r e l i m i n a r y c l a s s i f i c a t i o n of loans and inves tments of

member banks on October 1%, 193^» "based upon d a t a submit ted

by the Fede ra l Reserve a g e n t s , i n comparison with cor respond-

ing f i g u r e s f o r June JO, 193^» a n (^ October 25, 1933*


E. L. Smead, Chie f , D iv i s ion of Bank Opera t ions

I n c l o s u r e

TO ALL GOVERNORS AND FEDERAL RESERVE AGENTS Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE BOARD 337, WASHINGTON


November 28, 193^ B - I O 4 O

SUBJECT: Net e a rn ings under S e c t i o n 13b

Dear S i r :

Reference i s made to t h e B o a r d ' s l e t t e r s B - 9 9 7 and 3 - 9 9 8 of J u l y l 6 ,

1934, r e l a t i n g to n e t ea rn ings on i n d u s t r i a l advances and r e p o r t s thereof

to be submit ted to t he Federa l Reserve Board.

Paragraph numbered 6 on page 9 of the r e g u l a t i o n s i s sued by the

S e c r e t a r y of the Treasury pursuan t to subsec t ion (e) of Sec t ion 13b of

the Fede ra l Reserve Act, as amended, which were i n c l o s e d wi th t h e Board1 s

l e t t e r X-8034 of October 3» 193^, r eads as f o l l o w s :

"The amounts of a l l payments to be made to the Uni ted S t a t e s by the Reserve Bank pursuant to the p r o -v i s i o n s of s u b s e c t i o n ( e ) of Sec t ion 13b of t he Federa l Reserve Act s h a l l be computed i n the manner p r e s c r i b e d by the Federa l Reserve Board in agreement w i th the S e c r e t a r y , There s h a l l be such an apport ionment i n de t e rmin ing the net ea rn ings of the Reserve Bank f o r a ca l enda r y e a r de r ived from the use of the sum pa id by the Sec re t a ry to the Reserve Bank under Sec t ion 13b, as the Federa l Reserve Board and the S e c r e t a r y s h a l l deem j u s t and f a i r . "

You w i l l no te f rom the above quoted pa ragraph t h a t the amounts of a l l

payments to be made to the Uni ted S t a t e s under t h e p r o v i s i o n s of subsec t ion


X - 2 B - I O I § 7 8

(e ) of Section 13b are to be computed in the manner p r e s c r i b e d by the

Federa l Reserve Board in agreement with the Sec re t a ry of the Treasury .

Pending such agreement, i t i s reques ted tha t r e p o r t s of ne t ea rn ings

on i n d u s t r i a l advances and commitments be f u r n i s h e d the Boprd c u r r e n t l y

each month, in d u p l i c a t e , on Form B-23, one copy of which w i l l be

d e l i v e r e d to the Treasury Department. A copy of Forn> 3-23 i s a t t ached ,

and a supply i s be ing mailed you under s epa ra t e cover .

Reports on Forms 3-18, 3-19 end 3-20, i nc losed wi th the Board ' s

l e t t e r s of Ju ly l 6 , may be d i scon t inued . Expenses r epor t ed on Form 3-23

should include an equ i t ab l e p ropo r t i on of the expenses of t h e p rov i s ion

of space f u n c t i o n , r e n t a l of f u r n i t u r e end equipment (whether owned by

Federa l Reserve bank or r en ted from ou t s ide agenc i e s ) , r e t i r e m e n t system

c o n t r i b u t i o n s a t t he f u l l r a t e , and a l l o the r expenses i n c u r r e d in con-

n e c t i o n Kith the making of i n d u s t r i a l advances and commitments under

Sec t ion 13b, except such expenses as are paid by the a p p l i c a n t s f o r l oens .

I t i s r eques ted t h a t , i n a d d i t i o n to r e r o r t s on Form B-23, ea rn-

ings on i n d u s t r i a l advances, and on commitments to make such advances,

be r epo r t ed as s e p a r a t e i tems on Form 95 fo l lowing i tems 2 and 6, r e spec -

t i v e l y , and t h a t a l l expenses incur red in connect ion wi th i n d u s t r i a l

advances and commitments under Sec t ion 13b, o the r than those pa id by

a p p l i c a n t s f o r advances, be included in the a p p r o p r i a t e expense i tems on

Form 96. Expenses or per diem allowances paid members of the I n d u s t r i a l

Advisory Committee should be r epor t ed fo l lowing i tem 7 on Form 96.

<

V Very t r u l y yours ,

I n c l o s u r e Chester M o r r i l l , S e c r e t a r y .




December 7» 193^ B-1041

SUBJECT: Organiza t ion Che r t s .

Dear S i r :

R e f e r r i n g to the Board ' s l e t t e r B-620 of December

23: 1931. i n case the o r g a n i z a t i o n c h e r t s f o r your bank

and f o r each of i t s "branches, i f any, l a s t f u rn i shed

the Board do not r e f l e c t the s i t u a t i o n as of January 1,

1935, i t w i l l be apprec i a t ed i f you w i l l k ind ly f u r n i s h

the Board wi th two copies of r ev i sed c h a r t s showing a s

of t ha t d a t e the name and t i t l e of each o f f i c e r and the

departments or f u n c t i o n s superv i sed .


Chester Mor r i l l S e c r e t a r y .

TO .ALL CHAIRMEN"



WASHINGTON


December 12, 193^• B-1042.

Dear Sir:

In order to provide captions for preferred stock and

for capi ta l notes or debentures sold to the Reconstruction

Finance Corporation and to f a c i l i t a t e the checking of

appl icat ions for addit ional Federal Reserve bank stock,

Form 56, Applicat ion for Additional Stock, has been rev ised

in accordance with the copy attached hereto , and a supply

of the revised form has been forwarded to you under separate

cover. I t i s suggested that a l l future appl icat ions for

addi t ional Federal Reserve bank stock be submitted on the

rev i sed form.

Very truly yours,

S. R. Carpenter Ass i s tant Secretary.

Inc losure .

TO ALL FEDERAL RESERVE AG-EFTS



WASHINGTON


December l 4 , 1934 B-1043

SUBJECT: F i sca l Agency and Depositary-Expenses

Dear Sir:

There i s inclosed, f o r your information, a fo lder con-

ta in ing photos ta t i c copies of the f i s c a l agency, custodianship

and depositary expense statements f o r the s i x months ended

June 30, 1934 submitted in response to the Board's l e t t e r of

July 21, 1934, B-1001. Statements showing system f i gures

f o r each of the various operations shown in the exh ib i t s and

a summary thereef are a lso inclosed in the f o l d e r .

Very truly yours

E. 1 . Smead, Chief, Div i s ion of Bank Operations.

Inclosure

TO ALL GOVERNORS



WASHINGTON


December 20, 193^ B-1044

Dear S i r :

The Board i s in r e c e i p t of a, l e t t e r from a Federa l Reserve bank s t a t -

ing t h a t i t has an a p p l i c a t i o n to open a c l e a r i n g account f o r a nonmember

"bank not e l i g i b l e , under p r e s e n t p o l i c i e s , f o r membership in the Federal

Reserve System. I t appears t h a t in t h i s p a r t i c u l a r case the nonmember

bank d e s i r e s to ob ta in c l e a r i n g p r i v i l e g e s at the Federa l Reserve Bank f o r

the purpose of avoid ing exchange and c o l l e c t i o n charges now made by i t s

c i t y cor respondent .

In t h i s connect ion, the Board notes from the balance shee t of your

bank tha t i t shows an amount aga ins t the i tem "Nonmembers - clearing-

account" i n the depos i t block and, accord ing ly , the Board w i l l a p p r e c i a t e

r e c e i v i n g a s ta tement showing the name of each nonmember bank which main-

t a i n s a c l e a r i n g account wi th your bank, the average amount of the account

in November 193^» the gene ra l ex ten t to which the account i s used., and the

da te on, and c i rcumstances under which, i t was opened. The Board w i l l a l so

a p p r e c i a t e r e c e i v i n g a f u l l s ta tement of the p o l i c y fo l lowed by your bank,

and the reasons t h e r e f o r , in accep t ing or r e f u s i n g to accep t c l e a r i n g

accounts from nonmember banks .

Very t r u l y yours .


TO ALL CHAIRMEN EXCEPT CHICAGO WITH COPY TO MR. STEVENS



WASHINGTON


December 21, 193^« B-1046.

SUBJECT: Earnings and Dividends reports of State Bank Members, Form 10J.

Dear S i r :

There have "been forwarded to you today under separate

cover copies of Form 10/ to be used by State bank members

in submitting the ir reports of earnings and dividends for the s i x

months ending December J>1, 193^•

In the examination of the reports on Form 107, i t i s sug-

gested that par t i cu lar a t tent ion be paid to the reconcilement of

the cap i ta l accounts as shown against items l4 to 17 with the

corresponding items as shown in condition reports on Form IO5.

Very truly yours,






December 26, 193^« B-ioUy.

SUBJECT: Cal l Condit ion Reports of S t a t e Bank Members and t h e i r a f f i l i a t e s .

Dear S i r :

There have been forwarded to you today under s e p a r a t e cover the ind i -

ca ted number of copies of the seven forms a t t a c h e d h e r e t o , f o r the use of

S t a t e bank members and t h e i r a f f i l i a t e s i n submi t t i ng r e p o r t s as of the

next c a l l d a t e :

Number of cop ies Form

Form IO5, Report of cond i t ion of S t a t e bank member.

Form IO5—0 (Schedule "0")i Loams and advances to a f f i l i a t e s and investments i n and loans secured by o b l i g a t i o n s of a f f i l i a t e s .

Form 220, Report of a f f i l i a t e or ho ld ing company a f f i l i a t e .

Form 220a, p u b l i s h e r ' s copy of r e p o r t of a f f i l i a t e or ho ld ing company a f f i l i a t e .

Form 220b, I n s t r u c t i o n s f o r p r e p a r a t i o n of r e p o r t s of a f f i l i a t e s and ho ld ing company a f f i l i a t e s .

Form B~3 ( A g r i c u l t u r e ) , Farm l o a n s .

Form 2034 (Federa l Housing A d m i n i s t r a t i o n ) , Loans on r e a l e s t a t e o the r than farm l a n d .


P l e a s e ho ld the "blank forms a t your bank pending r e c e i p t of t e l e -

graphic advice from the Board g iv ing the da te on which the forms should

reach the S t a t e bank members. Upon r e c e i p t of such t e l e g r a p h i c adv ice

k ind ly mai l to each S t a t e bank member t h a t has no t been f o r m a l l y p l aced

i n l i q u i d a t i o n or r e c e i v e r s h i p or pos se s s ion of which has not been taken

by a conse rva to r or o t h e r S t a t e o f f i c i a l 3 copies of Form 105, 2 copies

each of Form B-3 ( A g r i c u l t u r e ) and Form 2034 (Fede ra l Housing Admin i s t r a -

t i o n ) , and an a p p r o p r i a t e number of Forms 105-b, 220, 220-a and 220-b

based on the number r e q u i r e d a t the t i n e of the l a s t c a l l f o r r e p o r t s ,

wi th the r eques t t h a t the forms be h e l d pending a c a l l f o r r e p o r t s t he r eon .

Member banks should be i n s t r u c t e d to submit a l l of the r e p o r t s i n

d u p l i c a t e , bo th the o r i g i n a l and d u p l i c a t e copies to be s igned and f u l l y

executed , wi th the except ion of the r e p o r t s on Form B-3 ( A g r i c u l t u r e ) and

Form 2034 (Federa l Housing A d m i n i s t r a t i o n ) , of which only the o r i g i n a l

should be submit ted by the b a r k . The r e p o r t s on Forms B-3 and 2034

should be t r a n s m i t t e d to the Federa l Reserve Board, and t h e o r i g i n a l s of

the o the r r e p o r t s should be r e t a i n e d f o r the f i l e s of your bank and the

copies forwarded to the Board.

In t r a n s m i t t i n g the b lank forms to S t a t e bank members p l e a s e adv ise

them t h a t the d a t a c a l l e d f o r on Form B-3 ( A g r i c u l t u r e ) and Form 2034

(Federa l Housing Admin i s t r a t i on ) a r e r e q u i r e d f o r s p e c i f i c purposes a t

t h i s time and t h a t they w i l l not be asked f o r r e g u l a r l y as a p a r t of the

c a l l r epo r t „ Upon r e c e i p t a t your bank the r e p o r t s on Forms B-3 and

2034 should be checked a g a i n s t the cond i t ion r e p o r t Form 105 i n s o f a r as

t h e d a t a cor respond .

P l e a s e f u r n i s h the Board with a copy of the l e t t e r t r a n s m i t t i n g the


586 - 3 -

form^ to S t a t e bank members and a l i s t of the S t a t e bank members on which

the c a l l i s made.

I t i s r eques t ed tha t as promptly as p r a c t i c a b l e a f t e r the i s s u e of

the c a l l you inform the Board, wi th r e s p e c t to each S t a t e whose c a p i t a l c i t y

l i e s i n your d i s t r i c t , whether o r not S t a t e a u t h o r i t i e s i s s u e d a c a l l f o r

cond i t i on r e p o r t s as of the same da te as the c a l l i s s u e d by the Board, and,

i f n o t , the d a t e of the n e a r e s t c a l l t h e r e t o i s s u e d by the S t a t e . au thor i -

t i e s , In case r e p o r t s submit ted i n response to such c a l l s were n o t r e -

quired to be p u b l i s h e d , i n fo rma t ion i s r eques ted as to the n e a r e s t d a t e

when p u b l i c a t i o n of such r e p o r t s was r e q u i r e d .

I f you a r e s a t i s f i e d t h a t a d d i t i o n a l time i s needed f o r the p r e p a r a -

t ion of the r e p o r t of any a f f i l i a t e , you a r e a u t h o r i z e d on behal f of the

Fede ra l Reserve Board to g r a n t an ex tens ion of no t to exceed 20 days , i n

a d d i t i o n to the o r i g i n a l p e r i o d of 10 days from the r e c e i p t by the member

bank of the c a l l f o r the r e p o r t . P l e a s e f u r n i s h the Board wi th a copy of

each l e t t e r g r a n t i n g an ex tens ion of t ime .

In accordance wi th the u s u a l p r a c t i c e , p l e a s e have compiled from the

next c a l l r e p o r t s (of bo th n a t i o n a l and S t a t e bank members) and mai led or

wired i n time to r each the Board wi th in 3 weeks of the da te on which the

c a l l i s made, i f p r a c t i c a b l e , a s ta tement showing the amount of ( l ) eacli

c l a s s of l o a n s and d i s c o u n t s as shown a g a i n s t i tems 1 to S of Schedule E,

(2) t o t a l d i r e c t o b l i g a t i o n s of Uni ted S t a t e s Government, s u b - t o t a l of

i tem one i n Schedule P, (3) t o t a l o b l i g a t i o n s guaran teed by Uni ted S t a t e s

Government a s to i n t e r e s t and p r i n c i p a l , s u b - t o t a l of i tem two i n Schedule

F, and (4) t o t a l o t h e r bonds, s tocks and s e c u r i t i e s , a s shown a g a i n s t

Asset i tem f o u r ( t o t a l of Schedule G). Separa te f i g u r e s should be


s Y 587

- u -

f u r n i s h e d f o r c e n t r a l r e s e r v e c i t y member banks, r e s e r v e c i t y member

banks , and country member banks .


* h r ) oixuj?


%

I n c l o s u r e .

*

TO ALL FEDERAL RESERVE AG3MTS.


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