[Volume 23], July - December 1925 - FRASER - St. Louis Fed

1

x-1530

FEDERAL EFSSP.VE SCAHD JLO'QUNCEMENT 1 S K <U LY 3, l-S-25.

CHANGES B SJkTK 3«TF. j/SMSISSHIP:

Admitted to M rrfbarshd-n: Capital Surplus Total resources

DISTRICT NO. "5.

Glensi&6 Bpnk & Trust Co., Glenside, Penna. $125,000 $30,000 $870,596

DISTRICT NO. 7.

Columbia State Savings Bank, Chicago, 111. 200,000 25,000 2,313,OUl

Converted into National Bank:

Citizens State Bank, Commerce,.Tex&s 7~ 1-25

Taken over by Nonmember B-ink:

First State Bank of Ladonia, 7®?.crla, Texas 6-18-25 Gnarauty Bank & Trv-sCo., Or? ••.••• io.xas 6-20-25 First St&t? Bank, Saoinal, Tax&c 6-18-25

PERMISSION GRANTED TO EXERCISE TRUST V0WS.S:

Orac.gely.irg National Bank, Orarvrsc-irg, S. C. f ~ 2-25 First National LaFayetto> £&« . 7- 2-25 City iN&ticnel Rv;ik, Auburn, Ind. , 7~ 2-25 Mount S a m on National Bank & Iruet Co., Mt. Vernon, Ind. 7- 1-25

Date

6-^9-25

7- 2-25

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

2

x-1350

FEDERAL RESERVE BOARD ANNOUNCEMENT WEEK ENDED JULY IP, I925.

CHANGES IN STATE BANK MEMBERSHIP

Admitted, to Membership Capital Surplus Total Resources Date

DISTRICT NO. 3. North York State Bank,

North York, Pa. $1+0,000 $4,000 $ 2 5 3 M S 7-3-25

DISTRICT NO. 8 Federal Bank & Trust Company

Little Rock, Ark. 200,000 20,000 240,000 7- 9-25

Converted into National Bank

The Celine State Bank, Celim, Texas 7- 7-25

Voluntary Withdrawal

Bank of Fountain, Fountain, Mich. 7- 8-25

Change of Location and Title

Hudson Trust Company, West Hohoken, N. J. 7~ 3-25 to

Hudson Trust Company of Union City, N. J. (The Town of Union and West Hohoksn, New Jersey) (consolidated under the name of Union City, N.J)

PERMISSION GRANTED TO EXERCISE TRUST POWERS.

Merchants National Bank of Manchester, N.H. (Supplemental) 7- 9-25 First National Bank of Lewiston, Maine j- 7-25 Farmers National Bank of Reading, Pennsylvania, j~ 7-25


FEDERAL RESERVE BOARD ANNOUNCEMENT FOR THE WEEK ENDING JULY 17, 1925.

ADMITTED TO THE FEDERAL RESERVE SYSTEM

X~1530

Total DISTRICT NO. 6 Capital Surplus Resources Date

Bank of Wefcumpka, Watumpka, Alabama $25 >000 $15>000 $192,726 J—I3—25,

VOLUNTARY WITHDRAWALS

The Falls Banking Company, Kanyon State Bank,

Cuyahoga Falls, Ohio Kenyon, Minnesota

Security State Bank of Wanamingo, W&namingo, Minnesota La Crosse County Bank, Peoples State Bank,

West Salem, Wisconsin Whitehall, Wisconein

7-16-25 7-13-25 7--13-25 7-13-25 7-13-25

First Guaranty State Bank,

First State Bank

CHANGE OF NAME

Denton, Texas to the Denton, Texas 7-11-25

ASBORBED BY NON-MEMBER BANK

Commercial Guaranty State Bank, San Augustine, Texas

PERMISSION GRANTED TO EXERCISE TRUST POTHERS

The First National Bank,

The First National Bank,

Milton, Pennsylvania

Lake City, Florida


4

Total resources

FEDERAL RESERVE BOARD JU^OTKCEMENT FOE THE WEEK EMDED JULY 24, 1$25

CHANGES IN STATE BANK MEMBERSHIP:

Admitted to Membership:

Capital Surplus

DISTRICT HO. g.

Citizens Bank, Festua, Mo. $35,000 $40,000 $454,909

Consolidation of State Members:

The Reliance Trust Co., Cleveland, Ohio, and the Commonwealth Banking & Trust Co., Cleveland, Ohio, have consolidated under the title of Ohio Trust Company.

State Bank of Jeffers, Security State Bank, Bank of Alamo,

Voluntary Withdrawals:

Jeffers, Minn. Noonan, N. Dak. Alamo, Tenn.

Date

7-20-25

6-30-25

7-22-25 7-21-25 7-20-25

PERMISSION GRANTED TO EXERCISE TRUST POWERS:

First National Bank, National Rockland Bank, Laconia National Bank, Manayunk National Bank, Lynchburg National Bank, Alexander National Bank, Consolidated National Bank, Farmers National Bank, Morgan County National Bank, Ontario National Bank,

Bath, Maine Boston, Mass. Laconia, N. H. Philadelphia, Penna. Lynchburg, Va. St. Petersburg, Fla. Dubuque, Iowa Clay, Ky. Fort Morgan, Colo. Ontario, Calif.

7-22-25 7-22-25 7-22-25 7-22-25 7-22-25 7-22-25 7-22-25 7-22-25 7-22-25 7-22-25


5

x-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT FOR THE WEEK ENDED JULY 31, 1925


Admitted to the System:

Total Capital Surplus resources Date

DISTRICT NO. 7.

Stunner State Bank, Stockland, 111. $50,000 $10,000 $244,795 7-29-25

DISTRICT NO. 11.

league State Bank, Teagae, Texas 60,000 12,000 220,015 7-29-25

Absorbed "by Nonmembar:

Security Bank & Trust Co., Helena, Ark. 7-25-25


Farmers & Merchants Bank, Athens, Ala. 7-27-25 Picaho State Bank, Picabo, Idaho 7-27-25


Second National Bank, Hamilton, Ohio 7-29-25 Guardian National Bank. Chicago, 111. 7-29-25 First National Bank, Riverside, 111. 7-29-25 Lodi National Bank, Lodi, Calif. 7-31-55


x-1530

FEDERAL BESERVE BOARD MT?roiBTOE?IF36E FOR TIIS iESE 1 3 3 AU3uS2 14,1325

CHANGES IN STATE PAZK jyTOERSHXP: Date

Admitted to Liemusrcbi-p:

N o n e .

Voluntary Withdrawal:

Polk County Bank, Balsam Lake, Wis. S-lU-25

Absorbed by Nonmamber:

Merchants & Planters State Bank, Winnsboro, Tex. 8- 4—25

Absorption of Nonmember:

The Farmers Stats Bank, Jamestown, Kans., a nonmember, has 7—20—25 been absorbed by TI1-3 Jamestown State Bank, James torn, Kans., a member.


Citizens National Bark, Jenkintown, Perma. S-lU-25 PaintsviHe National Bank,Paintaville, Ky. g-12-25 Harriman National Bank, Harriman, Tenn. 8—12—25


8

X-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT FOR THE WEEK ENDED AUGUST 21,1925

CHAISES IN STATE BANK MEMBERSHIP:

No changes *

PERMISSION GRANTED TO EXERCISE TRUST POWERS: •

N o n e .


FEDERAL RESERVE BOARD ANNOUNCEMENT FCR THE WEEK ENDED AUGUST 28, 1925

CHANGES IN STATE B A M MEMBERSHIP:


Capital Surplus

DISTRICT NO. 8.

The North Side Bank, St. Louis County, Mo. $25,000

Closed:

>,250

9

X-1530

Total resources 'Date

$31,250 8-26-25

Orrville Bank & Trust Co., Orrville, Ala. 8-27-25

Change of Title:

The Guaranty State Bank, Tahoka, Texas, has changed its title to The Security State Bank. 6-17-25


Hurlbut National Bank, Winsted, Conn. Peoples National Bank, Stamford, Conn. Northumberland National Bank, Northumberland, Pa. Union National Bank, Lewisburg, Pa. Market Street National Bank, Shamokin, Pa. Jefferson County National Bank, Brookville, Pa. First National Bank, Covington, Ky. Union National Bank, Richmond, Ind. American National Bank, Aurora, 111. First National Bank, Rockport, Ind.

8-26-25 8-25-25 8-25-25 8-25-25 8-25-25 8-26-25 8-25-25 8-26-25 8-26-25 8-25-25


FEDERAL RESERVE BOARD ANNOUNCEMENT FOR THE "WEEK ENDED SEPTEMBER -2X, 1925.

• CHANGES IN STATE BANK MEMBERSHIP:


None •


Bank of Safford, Safford, Arizona


First National Bank, Skoiehegan, Maine First National Bank, Chattanooga, Tenn.


±2

x-1530

FEDERAL HESEEVE BOARD ANNOUNCEMENT FOE THE WEEK ENDED SEPTEMBER 18, 192$.


Admitted to Membership: Total

Capital Surplus resources Date

DISTBICT NO. 2.

Clinton Trust Company, Newark, N. J. #+00,000 $200,000 $3,319,002 9-18-25

Absorption of Nonmember and Change of Title:

The Commercial State Bank, Constantine, Mich., a member, has taken over the First State Bank of Constantine, Mich,, a non-member, and has changed its title to First Commercial Savings Bank. $- 5-25


First National Bank, Tuckahoe, New York 9-17-25


13

x-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT FOB THE WEEK ENDED SEPTEMBER 25, 1^2$.

CHANGES IN STATE BANK MEMBERSHIP: Date


N o n e .

Closed:

Peoples Trust & Savings Bank, Perry, Iowa $-21-25

Taken over by Norraember Bank:

Bank of St. Helena, St. Helena, Calif. 9-19-25 (Taken over by Liberty Bank, San Francisco, Cal.)


Hillside National Bank, Hillside, N. J. 9-22-25 Cataract National Bank, Niagara Falls, N. Y. 9-23-25 National State Bank, Troy, N. Y. 9-22-25 First National Bank, Onoonto, Ala. 9-23-25 First National Bank, Wetumpka, Ala. 9-23-25 First National Bank, Cloverdale, Ind. 9-23-25 First National Bank in Columbus, Miss. $-18-25


14

x-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT FOR THE WEEK ENDED OCTOBER 2, 1925.




DISTRICT NO. 1.

Quinoy Trust Co., Quincy, Mass. $150,000 $38*000 $4,928,055 9—^9—25

DISTRICT NO. 7.

Utica State Savings Bank, Utica, Mich. 25,000 24,000 673,309 9-29-25


x-1530

15

FEDERAL RESERVE BOARD ANNOUNCEMENT FOR THE WEEK ENDED OCTOBER 9, I925.



N o n e .

Voluntary Liquidation:

Ladd & Tilt on Bank, Portland, Oregon.


The Manistique Bank, Manistique, Michigan.


Rumford National Bank, Union National Bank, Caledonia National Bank, Baxter National Bank, Oyatermen's National Bank,Sayville, N. Y. Peoples National Bank, Farmville, Va. Brady National Bank, " Brady, Texas. City National Bank, Galveston,Texas.

Rumford, Maine. Lowell, Mass. Danville, Vt. Rut land, Vt.

Date

9- 2-25

10- 8-25

10- 5-25 10- 5-25 10- 5-25 10- 9-25 10- 8-25 10- 5-25 10- 5-25

10-5-25


16

X-1530

FEDERAL RESERVE BOAED .AMOUNCEMENT FOE TEE WEEK ENDED OCTOBER 16, 1925.

CHMTC-E3 IK STATE BANK MEMBERSHIP:



DISTRICT NO.

Liberty Trust Company, A1lentown, Pa. $300,000 $175,000 $1,615,795 10-1]-25

Reopened:

Orrville Bank & Trust Co.-, Orrville, Ala. 10-10-25

Merger:

The National Union Bank of Boston, Mass., has merged with the State Street Trust Company, Boston, Mass., a member.

Closed:

Bank of Bowyrsville, Bowersvilla, Ga. 10- 9-25 Farmers & Merchants State Bank, Eureka, Mont. 10-15-25


Farmers & Merchants State Bank, Hocla, S. Dak. 10-13-25

Absorbed by Hcnmsmber:

The Security State Bank, Buhl, Idaho, has been ab-sorbed by the Buhl State Bank, Buhl, Idaho, a nonmember. 10- 5-25


x-153'o

FEDERAL RESERVE BOARD ANKOUNCiSMEN1] FOR THE WEEK ENDED OCTOBER 23,

Date CHANGES IN STATE BKHK MEMBERSHIP:


N o n e .

Closed:

Big Stone City State Bank, Big Stone City, S. Dak. 10-2}-2^


Farmers Bank & Trust Co., Georgetown, Ky. 10-17-25 Continental Trust Co., Washington, D. C. 10-17-25


First National Bank, Ramsey, N. J. 10-23-25 First National Bank, Media, Pa. 10-23-25 Aurora National Bank, Aurora, 111. 10-23-25 First National Bank, Van Bur en, Ark. 10-2J-25 First National Bank, Fordyce, Ark. (Supplemental) IO-23-25 Bellinghazn National Bank, Ballingham, Wash. " IO-23—25


X-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT FOR THE WEEK ENDED OCTOBER 30, 1925.


Admitted to Membership*

N o n e *


Bank of Morehead City, Morehead City, N. C*, 10-23-25 The Corydon State Bank, Corydon, Indiana, 10-24-25

Absorbed by Member Bank.

The Commercial Bank of Athens, Athens* Georgia, has been obsorbed by The Citizens and Southern Bank of Savannah, Savannah, Georgia. 10-27^25.


N o n e .


19

X-1530 FEDERAL EESEHVE BOARD AMOUNCEMENT

FOR THE WEEK ENDED NOVEMBER 6, I925.

CHANGES IN STATE BAKE MEMBERSHIP: Date

Admitted to Membershiip:

N o n e .

Absorption of National Bank:

The Harvard Trust Co., Cambridge .> Mass.; has absorbed the Manufacturers National Bank, Cambridge, Mass. $-28—2$


Long Branch Banking Co., Long Branch, N. J. ' 11- 4-25

Absorbed by Nonrnember:

Farmers State Bank, Huntsville, Ala. , a member, has been absorbed by Tennessee Valley Bank, Decatur, Ala., 11- 2-25 a nonmember.


Bank of Commerce, Tampa, Florida. 11- 2-25


National White River Bank, Bethel, Vt. 11- 4-25


20

x-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT FOR THE WEEK EMBED NOVEMBER 13, 1$25.

CHANGES IN STATE BANK MEMBERSHIP: Pat;

N o n e .


Perth Amboy National Bank, Perth Amboy, N. J. First National Bank, Tenafly, N. J. First National Bank, Connersvilie, Ind. First National Bank, Marion, Ind.

11-10-25 11-10-25 11-10-25 11-10-25


21

x-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT FOR THE WEEK ENDED NOVEMBER 20, 1525.

CHANGES IN STATE BANK MEMBERSHIP: Dist. No. Date

Admitted, to Member ship:

None.


11 Liberty State Bank, Liberty, Texas. 11-16-25

Consolidated with State Member:

11 Farmers & Merchants State Bank, Maypearl, Texas, has consolidated with Citizens State Bank, Maypearl, Texas, a member. 11-16-25


1 Springvale National Bank, 7 Toy National Bank, 2 Liberty National Bank, 2 First National Bank,

Springvale, Maine. 11-20-25 Sioux City, Iowa. 11-20-25 New York, N. Y. (Sup.) 11-17-25 Ossining, N. Y. 11-17-25


FEDERAL EESLBVS BOARD ANNOUNCEMENT FOR THE WaEK ENDED NOVEMBER 27- 1925

CHANGES IN STATE M MEMBERSHIP! Dist, No.

X-1530

Admitted, to Membership:

None.


Volusia County Bank & Trust Co. , Deland, .Fla,.

Date

11- 21 25

Closed:

Sac County State Bank, Sac City, Iowa II-2.I-25


1 New Hampshire National Bank, Portsmouth, N. H. 11-24-25 4 Old National-City Bank, Lima, Ohio 11-17-25 7 Citizens National Bank, Stevens Point, Wis. 11-24-25


23

x-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT FOR THE WEEK ENDED DECEMBER 4, 1925.

CHANGES IN STATE BANK MEMBERSHIP: Pist. Date No.

Admitted, to Membership: Total

Capital Surplus resources

3 Montgomery Trust Co., Norristown, Pa. $500,000 $250,000 $6,613,687 11-30-25


7 Paw Paw Savings Bank, PawPaw, Mich. 11-28-25

Consolidated with State Member:

12 Iron Commercial & Savings Bank, Cedar City, Utah (Consolidated with Bank of Southern Utah, Cedar City, Utah, a member) 11-23-25


7 National Bank of Ionia, Ionia, Mich. 11-30-25


24

x-1530

FEDERAL RESERVE BOARD AltfNOUNCEMENT FOR THE WEEK tiHDED DECEMBER 11, I925.

CHANGES IN STATE BANK MEMBERSHIP: Dist. Date No. Admitted to Membership:

Total Capital Surplus resources

2 Manufacturers & Traders Bank, Buffalo, N. Y. $2,000,000 $1,500,000 $61,935 A89 11-27-25 (Succeeded Manufactuarers & Traders National Bank)

Closed:

7 Commercial State Bank, Britt, Iowa 12- 7-25


2 National Bank of Stamford, 6 First National B^nk, 7 First National Bunk,

12 American National Bank,

Stamford, N. Y. Clo,rksvi lie, Tenn. Quincy, Mich. Sun Bernardino, Cu,lif.

12- 8-25 12- 8-25 12- 8-23 12- 8-25

#


25

x-1530

FEDERAL RESERVE BOARD ANNOUNCEMENT FOB THE WEEK ENDED DECEMBER 18, 192$.

CHANGES- IN STATE BAKTK MEMBERSHIP: Dist. No. Date

Admitted, to Membership: Total

Capital Surplus resources

7 La Grange Trust & Sav-ings Bank, La Grange,111. $100,000 $25,000 $1,985,682 12-16-25

Merger:

2 The Fidelity Trust Co., Buffalo, N. Y., and the Manufacturers and Traders Bank,.Buffalo, N. Y., both members, have merged under the title of Manufacturers and Traders Trust Co. 12-15-25

Insolvent:

11 First State Bank, Mt. Calm, Texas 11-18-25 (Assets sold to a nonmember bank)

PERMISSION GRANTED TO EXERCISE TRUST POWERS;

3 National Bank of West Grove, West Grove, Penna. 12-17-25 7 Irving Park National Bank, Chicago, 111. 12-17-25 7 Security National Bank-, Eockford, 111. 12-17-25


26

X-153C

FEDERAL RESERVE BOARD AMOUKCEMENT FOR THE iSEBK E^DuD DECEMBER 23, 1^25.

Dist. No. Data

Admitted to Membership:.

Alone.

Converted to National Bu,nk:

1 Massachusetts Trust Company, Boston, Mass. 12-1^-25

Withdra'vn:

11 The Farmers Sta.e Bank, Garvin, Okla. 12-21-25

Change of Title:.

11 The Fanners Guaranty State Bank; North Zulch, Texas, has changed its titla to Guaranty Bond State Bank.

Absorption of Nonine-urn,-,! .

The Wood & Huston Bank, Marshall, Ho., a member bank, has absorbed the Ban A. of Mt. Leonard, Mt. Leonard, Mo., a nonmembar. 11-27-25

PERMISSION GRAINED TO EliERCISE TRUST FOYERS:

Massachusetts National BanK, Boston, Md,ss. lcf-1^-25


x-1530

FEDERAL RESERVE BOARD AMOIINCEMENT FOR THE WEEK ENDED DECEMBER 1925 •

CHANGES IN STATE BANK MEMBERSHIP: •

Admitted to Membership: No. . ' Total 2 American Trust Co.., §jjj2P P-.s EatjS

New Yorkj N. Y, $4,000,000 $2,250,000 $53,055,044 12-31-25

4 Peoples-Coxritnsrcial Bank, Belief or. taine, 0 . 125 ,000 2 5 , 0 0 0 1,379,728 12-28-25

7 First Trust & Savings Bank, Hammond., Ind. 125,000 90,000 3,780,320 12-31-25

Closed:

9 Valley County Bank, Hinsdale, Mont. 12-28-25 9 fatate Bank of Nashua, Nashua, Mont. 12—28—25


2 Railway National Bank, Railway, N. J. 12-29-25 2 De J aware National Bank, Delhi, N, Y. 12—29—25 7 Illinois National Bank, Springfield, 111. 12-36-25 7 First National Bank, Monroe, Mich. 12-29-25 12 First National Bank in Berkeley, Cal. 12—3O-25


28

FEDERAL RESERVE BOARD

WASHINGTON

ADDRESS OFFICIAL CORRESPONDENCE TO 4373 THE FEDERAL RESERVE BOARD

July 2, 1925.

C SUBJECT: Eligibility of Officer of Insurance Company for Election as Class 3 Director.

Dear Sir:

The Federal Reserve Board has recently been requested to rule

on the question whether a person whose sole occupation is that of an of-

ficer of a life insurance company is eligible for election as a Class

B director of a Federal reserve bank. After a careful consideration of

this question* the Board reached the conclusion that such a person is

not eligible for election as a Class B director; because (a) he is not

actively engaged in 11 commerce, agriculture, or some other industrial

pursuit" within the meaning of that language as used in the Federal

Reserve Act and (b) it is contrary to the policy of Congress for a per-

son so closely identified with the financial interests to be permitted

to serve as a Class B director of a Federal reserve bank.

The decided cases show clearly that the business of insurance

companies is not regarded as "commerce" by the courts (Hooper v, Cali-

fornia, 155 U. S . 648)* and obviously it is not "agriculture", A person

whose sole occupation is that of being an officer of an insurance company,

therefore, is not engaged in such a business as will render him eligible

for election as a Class B director unless it can be said that the insur-

ance business comes within the general term; "some other industrial

pursuit".


Pago 2. 29

X-4373

It appears from the dictionary definitions that the terms"in-

dustry" and "industrial" are susceptible of two meanings: (1) a broad

meaning which includes substantially all forms of business enterprises,

and (<5) a more restricted meaning which applies only to manufacturing,

mining and similar enterprises which have for their object the produc-

tion of material tangible values. The insurance business probably would

come within the term "other industrial pursuit" if that term is to be

construed in its broadest possible sense; but it would not come within

the meaning of that term if the word "industrial" is to be given its

more limited meaning.

It is necessary, therefore, to go beyond the bare language

of the Act and endeavor to ascertain from every possible source the

real intention of Congress. It is a fundamental rale of statutory

construction that, where the language of a statute is susceptible of

more than one interpretation, the intended meaning must be sought by

the aid of all pertinent and admissible considerations*

Section 4 of the Federal Reserve Act provides that a Class B

director shall be actively engaged in "commerce, agriculture, or some

other industrial pursuit" and also provides that no Class B director

"shall be an officer, director or employee of any bank". It is clear,

therefore, that Congress intended that Class B directors should be busi-

ness men, and should not be bankers or closely identified with the bank-

ing business.

It may be said that the three classes of directors of Federal

reserve banks are representative of:


Pago 3. X-4373

30

(A) The "banks (or the principal lendirg class of the public);

(B) Business (or the principal borrowing class of the public); and.

(C) The Government or the general public.

Is the insurance business one of the classes of business which

Congress had in mind when it used the language "commerce, agriculture or

some other industrial pursuit"? This question may be clarified somewhat

by asking another question: What is the fundamental distinction, from the

standpoint of the Federal Reserve Act, between business men who are repre-

sented on the boards of directors of Federal reserve banks by Class B di-

rectors and bankers who are represented by Class A directors? The answer

would seem to be that bankers are lenders whereas business men are bor-

rowers .

Considering the insurance business in this light, it seems clear

that it must fall on the same side of the line as banking, becau.se insur-

ance companies (as distinguished from insurance agents and brokers) do not

as a rule borrow money but have large funds for investment purposes and

constitute an important factor on the lending side of the money market.

This phase of their business is very closely analogous to that of invest-

ment banking.

The Board feels, therefore, that it is contrary to the gen-

eral policy of Congress for officers of insurance companies to serve as

Class B directors, not only because they are not borrowers and, therefore,

not the class of business men which Congress presumably had in mind, but

also because they are lenders and are closely analogous to bankers who

are expressly forbidden to be Class B directors.


X-4373

31

The language of the Act also indicates that it was the intention

of Congress that Class B directors should represent not only the borrow-

ing public hut that particular class of the borrowing public whose bor-

rowings give rise to paper which is eligible to rediscount. They are ex-

pressly required to be actively engaged in "commerce, agriculture, or

some other industrial pursuit," and this language is very similar to

that used in the principal definition of eligible paper;

"Notes, drafts, and bills of exchange issued or drawn for agricultural, industrial, or commercial pur-poses, or the proceeds of which have been used, or are to be used for such purposes," (Section 13)

It is probable that this close similarity in the two sections

was not accidental, but on the contrary was the result of intention and

design. Congress probably intended that the board of directors of a Fed-

eral reserve bank should include in its membership men v;ho are familiar

with the kinds of business from which paper eligible for rediscount with

Federal reserve banks would arise. The policy of such an intention is

obvious.

Under the established construction of the law regarding the

eligibility of notes, drafts and bills for rediscount, it is hardly

possible that the business of insurance companies (as distinguished

from that of insurance agents or brokers) could give rise to paper el-

igible for rediscount at Federal reserve banks. It seems reasonable

to conclude, therefore, that Congress did not have that business in

mind when it used the phrase "some other industrial pursuit" in Sec-

tion 4, but intended to use that language in the more restricted


•32

X-4373

sense which, includes only manufacturing, mining and similar enter-

prises which have for their object the production of material tangible

values.

For those reasons, the Board reached the conclusion that a

person whose sole occupation is that of officer of an insurance com-

pany is not eligible for election as a Class B director of a Federal

reserve bank. This does not mean that all officers of insurance com-

panies are ineligible for election as directors of Federal reserve

banks; because many of them are bank directors and, therefore, are

eligible for election as Class A directors, which would seem to be

the class to which they properly belong.

Very truly yours,

D. B. Crissinger, Governor.

TO ALL FEDERAL RESERVE AGENTS EXCEPT BOSTON.


33 X-4375

C O P Y

June 12, 1925.

Federal Reserve Bank, Atlanta, Georgia.

Dear Sirs:

The Comptroller of the Currency upon my request has given me his position in regard to the respective rights, title and authority of the Comptroller of the Currency and of the Federal Reserve Bank of Atlanta, concerning the Bills Payable which the Georgia National Bank of Athens, rediscounted with the Federal Reserve Bank, and the Bills Payable which it hypothecated with the Federal Reserve Bank, and the disposition of the collateral that was pledged to secure both the bills receivable upon these two accounts.

The Comptroller of the Currency holds that the Georgia National Bank has a contingent interest in both classes of Bills Payable which the Receiver must protect, and that the collateral pledged to secure the Bills Receivable upon both accounts cannot be disposed of without the consent of the Comptroller of the Currency and an order of the United States District Judge for this district.

The Comptroller is further of the opinion that none of the redis-counted notes, or those hypothecated to the Federal Reserve Bank can be compounded without the consent of the Comptroller and the Court as above stated.

Thus, that in no case of sale of collateral pledged to secure notes rediscounted to you or hypothecated to you, can the collateral be disposed of without the consent of the Comptroller and the Court.

The opinion of the Comptroller of the Currency in this matter was brought about by my assenting to the sale by you of the 75 bales of cotton held to secure notes of the Georgia Farms, and the 43 bales of cotton held to secure the notes of Mr. S. C. Branch, which had been trans-ferred to you by the Georgia National Bank of Athens.

I understood from Mr. Tutwiler of the Federal Reserve Bank, that your position was that the rediscounted notes belonged to you absolutely, and you could do as you pleased with them without consulting the Comptroller, and that you also had a right to collect the notes hypothe-cated to secure the indebtedness of the Georgia National Bank to you, and for this purpose you had the right to sell the collateral pledged to both these lines of notes.

There seems to be a conflict of opinion as to the rights of the Comptroller and of the rights of the Federal Reserve Bank in this matter which may produce delays and confusion in the future.


34 X4375

— 2 -

I would like to know whether you concur with the Comptroller of the Currency, and if you do not, I suggest that it will "be test for the controversy to be settled one way or the other to prevent any embarrass-ment in the collection of the debts and the disposition of the collateral.

I will of course insist upon the views of the Comptroller of the Currency in regard to these matters until I am instructed otherwise.

Respectfully,

(Sgd) jno. K: Shields, Receiver.

JKS;W


35 X-4375a

C O P Y

June 29, 1925,

To The Honorable The Comptroller of the Currency of the United States, Washington, D. C.

Dear Sir:

The Receiver of the Georgia National Bank of Athens, Georgia, recently transmitted to the Federal Reserve Bank of Atlanta (of which we are general counsel) the opinion of your office with respect to the right of the Federal Heserve Bank of Atlanta to deal with (a) collat-erals securing payment of bills and notes rediscounted by the National Bank with the Reserve Bank, and (b) collaterals securing the payment of bills and notes hypothecated with the Reserve Bank to secure both the direct obligations and the rediscounts of the National Bank.

As we understand the letter of the Receiver, the position taken by your office is that the Reserve Bank cannot take any action with respcct to any such collateral (except to collect the same) unless there-unto authorized both by the Comptroller of the Currency and the United States Court for this District.

If the purport of the ruling of your office be as stated, the Federal Reserve Bank of Atlanta respectfully dissents therefrom. In order that the situation may be cleared up. if possible, we are talcing the liberty of transmitting, at the request and on behalf of the Federal Reserve Bank of Atlanta, our opinion, as its counsel, as to the law on these questions with particular reference to the dealings between the Reserve Bank and the Georgia National Bank,

It is our information that the National Bank was indebted to the Reserve Bank at the time of its suspension on both rediscounts and direct notes. To secure both classes of paper there had been deposited collat-eral; the usual form of collateral "note having been used in connection with the deposit of collateral to secure the direct obligations, and a specific contract covering the pledge of additional collateral having been employed in connection with the deposit of collaterals to secure the payment of rediscounts. Some of the rediscounted items were also secured by collateral, and some of the notes pledged as collateral for both classes of obligations of the National Bank were also secured by collat-eral.

It is with respect to the collaterals securing the discounts and the hypothecated notes and bills that the instant questions have arisen.

We understand that the opinion which was transmitted to the Reserve Bank by the Receiver as above stated was given as the result of the sale by the Reserve Bank, with the assent of the Receiver, of certain cotton which had been pledged as security for the payment of a note which had been rediscounted with the Reserve Bank by the National Bank.


X-4-375a 36 - 2 -

Wo recognize that it is true generally that collateral securi-ties in which the Georgia National Dank has an interest, legal or equitable, should not he compounded or compromised without the approval of your office. This is true for the reason that the trust of the Receiver has an interest in all such collaterals. We respectfully submit, however, that it does not follow that the Reserve Bank, as the complete legal owner of the rediscounts and as the holder of the pledged notes, could not exercise rights arising respectively there-under, including the orderly sale of the securities made pursuant to law or under the torrr.s and provisions of particular notes. In other words, if, for example, the Reserve Bank should hold a note secured by cotton, either as a rediscount or as collateral, it could, in our opinion, as the owner or holder of such note, sell the cotton just as readily as could the Georgia National Dank, its innediate endorser. This right, we think, would certainly obtain with respect to the redis-counts, and we see no reason why it should not apply with respect to notes pledged or hypothecated with the He serve Sank. The sale of such commodities by the Reserve Bank as the owner or holder of the secured note, would be different from the compounding, compromise or settlement of the note at less than face value.

With regard to rediscounts, whether secured or unsecured, we arc of the opinion that ordinarily the Reserve 23ank could compound, com-promise or settle the same as between itself and the respective makers of the notes, without first obtaining the approval of your office. Any such compromise or settlement would, however, release the endorsing bank from any liability on its endorsement, and it follows that the Reserve Bank could not make a settlement with the maker of a rediscount * and thereafter hold the National Bank for any deficit, or satisfy any such deficit out of the "additional collateral."

To sum up our opinion: In the case of rediscounts the Reserve Bank would seem to be the absolute owner of the paper, with the right to sell the collateral and to enforce the liability of any party liable on the paper. Even an accounting for any excess in collateral securing the rediscounted item would properly be between the Reserve Bank, the owner of the note, and the maker of the sane. Of course a settlement or compounding of the rtidiscounted item would absolve the endorsing bank and its assets from any further liability arising from its endorsement. With respect to secured notes which are hypothecated (as contradistin-guished from discounted) we think that the Reserve Bank, as the holder thereof, would have the right to sell collaterals securing the sane by virtue of its rights as holder thereof, but that it could not compromise or compound any of such hypothecated notes without the approval of the Comptroller of the Currency and an authorization by order of Court.

Inasmuch as cases involving questions similar to those arising in connection with the specific matter mentioned above will doubtless occur in the future, we are asked by the Federal Reserve Bank to trans-mit to you its position in the premises, so that if possible an under-standing may be had as to the respective rights of the Receiver and the Reserve Bank in such cases.


X-4375a

-3-

Mr. J. L. Canp'bell, Deputy Governor of the Federal Reserve Bank, and the writer, will be in Washington July 13th, and for several days thereafter, and would appreciate the opportunity of discussing the questions herein presented.

Very respectfully yours,

ESP-G

Mr. J. L. Canp'bell, Deputy Governor, Federal Reserve Bank cf Atlanta, Atlanta, Georgia.



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-4377

July 10, 1925.

SUBJECT: Employment of Expert Services by Federal Reserve Banks.

Dear Sir:

At a meeting of the Board, yesterday, the matter of Federal reserve banks employing the services of experts in the conduct of litigation, special studies, etc., was considered, and the Board voted that all reserve banks, before making or authorizing such engagements, shall first secure the approval of the Federal Heserve Board thereto.

Very truly yours,

Edmund Piatt, Vice Governor.

TO ALL CHAIRMEN


39 FEDERAL RESERVE BOARD X-4378.

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

July 11, 1925.

SUBJECT: Payment Counsel Foe in connection with Catlettsburg Par Clearance Cases,

Dear Sir:

There is enclosed, herewith a copy of a statement rendered to the Federal Reserve Board by Honorable Newton D. Baker in the sum of $1,000 covering his professional services in connection with the Catlettsburg par clearance cases. The Board has considered and approved this statement, and has re-quested the Federal Reserve Bank of Cleveland to remit the amount to Mr, Baker direct.

Inasmuch as this case heretofore has "been considered a System matter, the Board has directed that this feo be pro-rated among all Federal Reserve Banks, It is requested, there-fore, that you remit direct to the Federal Reserve Bank of Cleve-land the sum of $83,33 as your proportionate share of the total fee.

Very truly yours,

(Enclosure) J. C. Boell,

Assistant Secretary.

LETTER TO BE SBIT TO AM. CHAIRMEN EXCEPT CLEVELAND,


X-4378(a)

C O ? Y

Federal Reserve Boar d to Uewton D. Baker, Dr. July 3, 1925,

To Professional Services.

Retainer and services in connection with Catlottsburg cases in equity and at law; examination of pleadings, decisions, con-ferences with Mr. Howell, Mr. Boyle and Mr. iyatt at various times; conferences with witnesses and examination of affidavits and evidence; preparation for trial and con-sultation in regard to final settlement. $1,000,


41


WASHINGTON X-4380


July 14, 1925.

SUBJECT: Amendment to Manual of the Federal Beserve System leased Wire Service.

DtivO.* Sir:

The Manual of the Federal Reserve System Leased Wire Service, issued ty the Board in 1922, provides under the heading "Instructions to Tele-graph Operators" that "Telegrams containing code words will bear a check or count indicating the total number of code words in the message".

On occasions this requirement has had the effect of delaying the dispatch of messages partly in code, -owing to the inability of the operators to readily determine just which words were code words, and the Board has adopted a suggestion made by the Leased Tire Committee that the requirement be withdrawn and the Manual bo amended in this respect to read as follows:

"Telegrams containing code words will bear a check or count indicating the total numbe.r of words in the message. Form tel-egrams such as gold settlements, Tend, Druid, Drummer, and others of like character should not bear a check."

please instruct your telegraph operators accordingly.

Very truly yours,

J. C. Ho$ll, Assistant Secretary.

To Governors of all F.H.Banks.



WASHINGTON X- +JSl


July 16, 1925

SUBJECT: Expense Main Line, Leased. Wire System, June, 1925.

Dear Sir:

Enclosed herewith you will find two mimeograph statements, X-43SI-a and X-UjSl-b, covering in detail operations of the main line, Leased Wire System, during the month of June, 1925»

Please credit the amount payable by your bank in the general account, Treasurer, U.S., on your book&, and issue C/D Form 1, National Banks, for account of "Salaries and Expenses, Federal Be serve Board, Special Fund", Leased Wire System, sending duplicate C/D to Fed-eral Reserve Board.

Yours very truly,

Fiscal Agent,

Enclosures:

To Governors of all banks except Chicago.


43

X-4381-a

From

REPORT SHOWING CLASSIFICATION AMD NUI.ffiER OF WORDS TRANSMITTED OVER MAIN LINE OF THE FEDERAL RESERVE LEASED FIRE SYSTEM FOR THE MONTH OF JUNE, 1925.

Fed. Res. Bank Business

Percent of Total Bsnk Business(*)

Treasury Dept.

Business

War Finance Corp, Business Total

Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco

25,680 157,431 34,031 67,428 42,898 51,904 98,306 66,347 32,107 69,737 53,147 103,723

3.,30 6,162 -

19. bl 9,808 -

4,24 6,178 -

8.40 8,131 -

5.34 6,531 -

6 . 4 7 5,048 -

12.25 9,750 -

8 . 2 6 9,551 -

4.00 4,901 -

8 . 6 9 7,534 -

6 . 6 2 4,996 12.92 16,523 -

100.00 98,113

54,652 426

152,765 426

12.47# .03#

31,842 167,239 40,209 75,559 49 ,429 59,952 108,056 75,898 37,008 77,271 58,143 120,246

900,852

324,306

1,225,158

TOTAL 802,739

Board 269,228

Total 1,071,967

Percent of Total 87*50#

Bank Business 1,071,967 words or 67.53$

Treasury Dept.152.765 " " 12.47# Total 1,224,732 100.00#

(*)These percentages used in calculating the pro rata share of leased wire ex-penses as shown on the accompanying statement (X-4381-b)


4

REPORT OF EXPENSE X-^Sl-b MAIN LINE

FEDERAL RESERVE LEASED WIRE SYSTEM, JUNE, 1925.

Name of Bank Operators' Salaries

Pro Rata Payable t< Share of Federal

Operators * ' Wire Total Total Reserve Overtime Rental Expenses Expenses Credits Board

$ $ $ 250 .00 $ 636 .39 $ 2 5 0 . 0 0 $ 356.39 - — 1 , 0 0 5 . 3 2 3,699-85 1 , 0 0 5 . 3 2 2,594.56

6 2 6 . 5 6 - - 216.66 643.22 216.66 2,594.56

6 2 6 . 5 6 - - 260.33 1,670.52 250.33 1,390.19

- 170 .00 1,061.98 170 .00 (&)1,096.65 - - 255-00 1,256.70 255 .00 1,031.70 - - 3,805.55 2,436.18 3,805.55 (*)1,309.37 - 274 .00 1,642.68 ? 7-4.00 1,368.68 • — - 241.35 795.49 241.35 554.14 - - 275-64 1,728.20 275.64 1,452.56 .75 - 251.75 1,316.53 251.75 1,064.78 - — 380.00 2,569.42 380.00 2,189.42

15,326.83 15,326.83

Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Federal-Reserve

$ 250.00 1,005.32

216.66 260.33 170.00 255.OO

(#) 3,605.55 274.00 241.35 275*64 251.OO 36O.OO

Board

TOTAL $ 7 , 4 0 4 . 6 5 $ .75 $ 1 5 , 3 2 6 , 8 3 $ 2 2 , 7 3 2 . 4 3 $ 1 9 , 5 5 7 . 1 9 $ 7 , 4 0 5 . 6 0 $14 , 0 5 5 . 6 3 (a) 2,845-24 (b)l,369.37

$19,887.19 $12,686.26

(&) Includes $204.67 for branch line business transmitted over ma,in line circuit (#) Includes salaries of Washington operators. (*) Credit (a) Received $10. 73 from War Finance Corporation and $2,834.51 from Treasury Department

covering business for the month of June, 1925. (b) Amount reimbursable to Chicago.


45

FEDERAL RESERVE BOARD X-4383

WASHINGTON


July 16, 1925.

SUBJECT: Code 'Words to be used by the Federal Reserve Bank of ITew York in advising other Federal Reserve Banks of changes in the Participated Foreign Accounts.

Dear Sir:

In order to reduce the phraseology in telegrams between the Federal Reserve Bank of Few York and other Federal reserve banks in cormoction with advices covering changes in the participated foreign accounts, it has been suggested for such purpose that additional code words be supplied from the Federal Reserve Telegraphic Code.

The Board has approved this suggestion and, effective July 24, 1925, the following code words will be used between the Federal Reserve Bank of Hew York and other Federal reserve banks covering the transac-tions referred to:

JURISTS: Your participation foreign accounts Free balance Bills Please make necessary changes your books to conform and credit us ___ to adjust free balance.

JURY30X: Your participation foreign accounts Free balance Bills Please make necessary changes your books to conform and we credit you __ to adjust free balance.

JURYMAN: Your participation foreign accounts Free balance __________ Credit us __________ to adjust.

JUSTICE: Your participation foreign accounts Free oalance ____________ We crodit you. to adjust.

JUSTIFY: Your participation foreign accounts Bills . Please make necessary changes your books to conform.


- 2 - X-4383

The code words indicated should be inserted in the Federal Reserve Telegraphic Code at the bottom of page 130 following the code word "JUNKETED".

Yours very truly,

J. C. Noell, Assistant Secretary.

TO GOVERNORS OF ALL F.R.BANKS.


X-4384


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 July 17, 1925.

SUBJECT: Holiday, Denver Branch, August 1, 1325.

Dear Sir:

The Denver Branch of the Federal Reserve Bank of Kansas City will be closed on Saturday, August 1st, on account of observance of Colorado Day. That office, therefore, will not partici-pate in either the regular Gold Fund Clearing or the Federal Reserve Note Clearing of that date.

Please include your credits of August 1st for the Denver Branch, with those of the following business day, in the Gold Fund Clear-ing.

Very truly yours,

J. C. IToell, Assistant Secretary.

TO GOVERNORS OF ALL FEDERAL RESERVE BANKS.


X-4S85

R E C O R D

-of the-

JOIMT CONFERENCE OF COUNSEL OF THE FEDERAL RESERVE BAMS

-and-

REPRESENTATIVES OF THE COMPTROLLER OF THE CURRENCY

IN CONNECTION WITH CLAIMS AGAINST INSOLVENT

NATIONAL BANKS, HELD IN WASHINGTON, D.C.

July 13, 1925.


49

X-43S5

RECORD OF THE JOINT CONFERENCE OF COUNSEL OF THE FEDERAL RESERVE BAMS AND REPRESENTATIVES OF THE COMPTROLLER OF THE CURRENCY IN CONNECTION WITH CLAIMS AGAINST I2TSOLVENT NATIONAL BANKS, HELD IN WASHINGTON, D.C. JULY 13, 1925.

The conference convened, on the morning of July 13 at 10 o'clock in the Board room of the Federal Reserve Board, Treasury . Department, Washington, D.C. Those present were:

L. R. Mason, Federal Reserve Bank of New York, J. S. Sinclair, Sterling B. Newell, M. G. Wallace, R. S. Parker, C. L. Powell Jas. G. McConkey, A. Ueland, H. G. Leedy, E. B. Stroud, Jr., A. C. Agnew,

Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, San Francisco.

Mr. Walter Wyatt and Mr. George B. Vest from the Federal Reserve Board.

In addition to the Counsel to the Federal reserve "banks and the Federal Reserve Board, listed above, there were present from the Federal Reserve Bank of Atlanta, Mr. J. L. Campbell, from the Federal Reserve Bank of Kansas City, Mr. G. E. Barley, and from the Federal Reserve Bank of Dallas, Mr. R. B. Coleman. On the first day of the conference no representative from the office of the Comptroller was present.

Mr. Piatt, Vice Governor of the Federal Reserve Board, made a short address of welcome to the Conference. Mr. Wyatt was elected Chairman of the Conference and Mr. Vest was elected Secretary.

As a preliminary to any formal action by the Conference, the following resolution prepared by Mr. Parker and offered by Mr. Mason, was adopted with Mr. Powell voting "no":


- 2 -

50

X-4385

RESOLUTION NO. 1

RESOLVED that any resolutions passed or opin-ions voiced "by this confercnce shall "be taken as expressing merely the opinions of Counsel on the respective questions involved.

The conference first took up the question discussed in Mr. Wallace's letter of Kay 26, 1925, addressed to Governor Seay of the Federal Reserve Bank of Richmond.

On the subject of the necessity for filing separate-claims for each rediscounted item, after discussion, Mr. Agnew offered a resolution, which with an addition thereto by Mr. Powell, was adopted as follows:

RESOLUTION IIP. 2.

RESOLVED that it is the sense of this conference that the Federal reserve banks accede to the prin-ciple of the suggestion of the Comptroller that separate claims against insolvent national banks be predicated upon each note rediscounted by the Federal reserve bank and in its hands at the time of insolvency; and be it further

RESOLVED that it be thu sense of this meeting that it is the right of the Federal reserve banks in filing claims against failed national banks on rediscounted paper to file one claim on all dis-counted paper, setting out all proper particulars, and this conference recorcnends the adoption by the Comptroller of the Currency of procedure consistent with this method.

Mr. Sinclair not voting.

Statement of Mr. Sinclair.

Mr. Sinclair requested to oe recorded as not voting on the foregoing resolution after having made the statement that Mr. Willians was agreeable generally and in the ordinary case to conform to the consensus of opinion of the conference with respect to the mat-ters therein contained, but that he did not wish to feel obligated to conform to such expression of opinion in a case where it should become material to the rights of the Federal Reserve Bank of Philadelphia to file one proof of claim for dividend purposes, based upon


-3- X-4385

the aggregate of all items rediscounted by the insolvent national bank. Die qualifica-tion contained in this statement shall apply to subsequent resolutions in as far as proof of rediscount items as separate claims is concerned.

The conference next discussed the set off of reserve bal-ances against claims due from insolvent national banks and adopted the following resolution, offered by Mr. Mason, without dissenting vote:

RESOLUTION NO. 3.

RESOLVED that this conference agree to the proposal of the Comptroller that reserve balances be treated as a set off to claims against failed national banks.

The right to treat Federal reserve bank stock as col-lateral rather than as set off was next taken up and the following resolution, offered by Mr. Mason, was adopted without dissenting vote:

RESOLUTION NO. 4.

RESOLVED that it is the sense of this confer-ence that it is the lawful right of reserve banks to treat amounts realized on account of surrender of stock of failed national banks in the Federal reserve banks as collateral and not as an offset to claims against such banks.

The conference then discussed the manner of applying and crediting payments made on collateral, and the following resolution, offered by Mr. Wallace, was adopted without dissenting vote:

RESOLUTION NO. 5.

BE IT RESOLVED that it is the sense of this con-ference that collateral pledged for a specific note made or endorsed by a member bank should be credited in a separate account, until the net amount realized from such collateral and dividends paid upon such note is sufficient to pay the said note, adding interest on the note from the date of insolvency to the date of final payment, and giving credit allow-ance for interest on the amounts collected on col-lateral from the date of collection to the date of final payment. If the note or other agreement with the member bank provides that such collateral shall likewise be held for other debts, after such note


52

-4- X-4385

is paid collateral then remaining should "be held as general collateral.

Collection made on general collateral should be credited in a collateral account until the time for final settlement. In no event should collec-tions made from or on account of collateral af-fect the basis of dividends, until such net col-lections and dividends equal the amount due on the obligations for which the collateral was pledged.

Next discussed was the subject of interest on rediscounted items and the following resolution offered by Mr. Lecdy was adopted without dissenting vote:

RESOLUTION NO. 6.

RESOLVED that it is the sense of the Conference that there is no legal liability on the part of the Federal reserve banks to account to the receivers of insolvent national banks for interest accrued on rediscounted notes after the failure of the bank re discounting the same, and that the Federal reserve banks are entitled to such ac-crued interest according to the terms of such rediscounts, or if not provided for by their terms, then, at the legal rate.

The conference then proceeded to a consideration of the topics suggested for discussion in Mr, Stroud's memorandum, which accompanied his letter of June 6, 1925, addressed to the Federal Reserve Board. Some of these topics, it was found, had already been covered by resolution and upon others no action m s taken. The remaining topics were disposed of by agreeing to the recom-mendations contained in the memorandum, except for the following changes:

The statement contained in Mr* Stroud's memorandum under Topic I B (2) was amended so as to read as follows:

It is our view that we are entitled to dividends upon the full amount of the claim as originally filed and allowed until such time as the dividends, plus collections on collateral and offsets, equal one hundred per cent of the indebtedness, together with interest thereon, and also until we have been fully reimbursed for the expense reasonably neces-sary in preserving, selling and collecting col-lateral to which we have been incident in the collection of the paper.


-5-X-4385

In considering Topic II B(l), Mr. Parker's letter of Juno 29 was endorsed "by the Conference as an addition to the statement suggested in Mr. Stroud's memorandum.

The statement contained in Mr. Stroud's memo random under Topic II C(2) was amended so as to read as follows:

We are of the opinion that we are entitled to divi-dends upon each of the rediscounted notes for the full amount of claim as originally filed and allowed until such time as the dividends, plus collections made from parties liable upon the rediscounted note, equal one hundred per cent thereof with interest and expense reasonably necessary in preserving, selling and collecting collateral.

The statement contained in Mr. Stroud's memorandum under Topic II D(l) was amended so as to read as follows:

It is our view that "before any compromise or set-lement is made upon a rediscounted note that the consent and acquiescence of the receiver should he obtained, if it is desired to continue the liability of the receivership and not desired to preserve the right of recourse as provided in the next paragraph. In "uho event the receiver refuses to give his consent or acquiescense to the settlement, then he should be given an opportunity to tnke the rediscounted note up for the amount offered in settlement, permitting the claim to stand and continuing to pay dividends on the amount as originally filed and allowed until such time as it is fully paid.

If the receiver does not care to take the note up and the Federal reserve bank is still of the opinion that the settlement is a good one, we think it has the right to make such settlement with the parties prior to the insolvent bank, provided that when doing so recourse is expressly reserved on said note against the receiver of the insolvent bank.

The statement contained in Mr, Stroud's memorandum under Topic III A was amended so as to read as follows:

It is our view that a Federal reserve bank has no right to settle or compromise notes held as col-lateral in the absence of contract to the contrary. However, they would be liable only for the value of such collateral notes, and if a settlement or compromise should be effected whereby the Federal


54 -6- X-4385

reserve "bank obtained, the full market value of the note, there would be no liability upon its part. Hence, we think that when such set-tlements are made without reserving right of recourse against party secondary liable, con-sent of receiver should be obtained.

The statement contained in Mr. Stroud's memorandum under Topic I A(2) had already been disposed, of by Resolution Mo. 6; Topic I A by Resolution No.4; Topic II A by Resolution Ho.3; Topic II B(2) by Resolution Mo.6; and Topic III C by Resolution Mo.5. Upon the following topics, no action was taken: II B(3), IV B, IV D, IV E, V A, V B, V C, and V E.

Inasmuch as the views of the conference were agreed, to in most cases by the representatives of the Comptroller on the second day of the conference, and are set out hereafter in the form agreed to by the joint conference, it is deemed unnecessary to set out in"detail at this point the action of the conference on each topic considered.

After disposing of the topics suggested in Mr. Stroud's memorandum, there was placed before the conference for discussion the suggestion made in a letter dated June 26, 1925, from the Federal Reserve Agent of the Federal Reserve Bank of Dallas to the Governor of the Federal Reserve Board, that special counsel of national reputation and outstanding ability be employed on a special retainer to assist in par clearance cases and similar cases in wnich Federal reserve banks may bo involved and to act as a sort of clearing house for legal departments of all Federal reserve banks. After a considerable discussion on this subject, the following resolution offered by Mr. Powell, with an addition by Mr. Mason, wp.f adopted, Mr. Mewell and Mr. Stroud voting "no":

RESOLUTIOM MO. .7.

RESOLVED that it is the sense of this conference that it is not essential to the proper adminis-tration of the Federal reserve banks to employ advisory counsel for general supervision of legal matters affecting the System.

BE IT FURTHER RESOLVED, however, that it is the sense of this meeting that the banks continue as heretofore to employ special counsel to assist in litigation of system wide interest when in the judgment of counsel concerned the occasion re-quires it and the banks are agreeable.


-7- X-4385

The conference then adjourned and met the next morning, July 14th, at 10 o'clock.

On the convening of the conference on the morning of July 14, on motion of Mr. Powell, Mr. Stroud was elected spokes-man for the Counsel of the Federal Reserve Banks in the forthcom-ing joint conforcnce with the representatives of the Comptroller of th-a Currency with the privilege reserved to other Counsel to make such suggestions or comments as they deemed appropriate.

The following representatives of the Comptroller of the Currency then entered the conference:

Deputy Comptroller Stearns, Deputy Comptroller Collins, Mr. Garrett, Mr. Poage, Mr. Touts, Mr. Slack.

The matters which had been discussed on the day previous by the Counsel for the Federal reserve banks were then taken up topic by topic, as indicated in Mr. Stroud's memorandum, with the representatives of the Comptroller. All matters taken up were finally agreed upon. There is recorded below the action of the joint conference on the various topics considered;

I.

CLAIMS EVIDENCED BY MEMBER B A M PROMISSORY BOTES.

A. Amount of Claim.

(1) Time of determining amount „

Representatives of the Comptroller and Counsel of the Federal Reserve Banks agreed as follows:

It is our view that this question has been finally decided by the Supreme Court of the United States and that the claim should be filed for the amount of the indebtedness on the date of insolvency.

(2) Interest.

On the question how interest should be computed in de-termining the amount of claims it was agreed that:


- 8 - X-4385

In determining the amount of the claim against an insolvent hank, unaccrued in-terest should he rebated at the discount rate at the time of discount, and past due interest should he included at the contractual rate specified in the note, and if no contractual rate is specified, then according to the legal rate in effect in the state in which the claim arises.

Claims filed on member hanks' promissory-notes should bear interest at the con-tractual rate specified in the note, and if no contractual rate is specified in the note, then according to the legal rate in effect in the state in which the claim arises.

With reference to the interest to be charged an insolvent bank upon claim in final settlement, it was agreed that when the member bank note contains an express rate of interest to be paid after maturity, the rate of interest so expressed shall govern; and the question whether a failed bank should have the benefit of the rate of rediscount is a question of policy for determina-tion by the officers of the Federal reserve banks.

(3) Attorney's fees.

Representatives of the Comptroller and the Counsel of the Federal Reserve 2ariks agreed as follows:

Whore a member bank's promissory note provides for payment of attorney's fees if placed in the hands of an attorney for collection, we are of the opinion that this item should be remitted except when it is necessary to actually insti-tute suit in order to effect collection of the note.

(4) Offsets.

(a) Is the refund of capital stock and accrued dividends an item of offset?

Representatives of the Comptroller of the Currency and the Counsel of the Federal Reserve Banks agreed to the view ex-pressed in Resolution No. 4, as follows:

RESOLVED that it is the sense of this conference that it is the lawful right of reserve banks to treat amounts realized on account of surrender of stock of failed national banks in the Federal re-serve banks as collateral and not as an offset to claims against such banks.


—9—

5 7

X-4385

(b) Ledger balances.

Representatives of the Comptroller and the Counsel of the Federal Reserve Banks agreed as follows:

We are of the opinion that ledger balance is an item of offset.

B. Dividends.

(1) Anount upon which dividend should bo paid.

Representatives of the Comptroller and the Counsel of the Federal Reserve Banks agreed as follows;

It is our view that every dividend paid by the receiver should bo based upon the amount of the claim as originally filed and allowed, and that no deductions should be made for collection received upon collateral, or otherwise, between the payment of any two dividends.

(2) When Federal reserve bank no longer entitled to dividends.

Representatives of the Comptroller and tho Counsel of the Federal Reserve Banks agreed as follows:

It is our view that Federal Reserve lanks are entitled to dividends upon the full amount of the claim as originally filed and allowed until such time as the dividends, plus collec-tion on collateral and offsets, equal one hun-dred per cent of the indebtedness, together with interest thereon, and also until they have been fully reimbursed for the expense reasonably necessary in preserving, selling and collecting collateral to wldch they have been incident in the collection of the paper.


-10- X-4385

II.

CLAIMS EVIDENCED BY REDISCOUNTED NOTES.

A. Whether proven collectively or singly.

The first paragraph of Resolution No. 2 adopted by Counsel for the Federal reserve banks was agreed upon; "but the Fed-eral Reserve 3ank Counsel on motion of Mr. Stroud receded from their position as set forth in the 2nd paragraph of the said resolution, Mr. Ueland and Mr. Lcedy voting "no",

That part of Resolution No* 2 which was agreed to is as follows:

RESOLVED that it is the sense of this confer-ence that the Federal reserve hanks accede to the principle of the suggestion of the Comptrol-ler that separate claims against insolvent nation-al hanks be predicated upon each note re discounted by the Federal reserve bank and in its hands at the time of insolvency.

It was agreed, however, that the Comptroller of the Cur-rency might require a separate, claim to be filed on each note redis-counted by a Federal reserve bank and that no such claim should be predicated upon more than one rediscounted note.

B. Amount of Claim.

(1) Time of Determining Amount.

It was agreed that the amount of tfce claim should be de-termined as of the date of insolvency, for dividend purposes.

(2) Interest.

Representatives of the Comptroller's office and Counsel for the Federal Reserve Banks agreed to the view expressed in Reso-lution No. 6, which reads as follows:

RESOLVED that it is the sense of this conference that there is no legal liability on the part of the Federal Reserve banks to account to the re-ceivers of insolvent national banks for interest accrued on rediscounted notes after the failure of the bank rediscounting the same, and that the Federal reserve banks are entitled to such accrued interest according to the terms of such redis-counts, or if not provided for by their terms, then, at the legal rate.


—11— X-4385

(3) Attorney's fees.

Not discussed.

(4) Offsets.

a. How applied.

The representatives of the Comptrollers-office and Counsel to the Federal Reserve Banks agreed as follows:

It is our view that Federal reserve hanks have the right to apply offsets as they deem advisable.

b. Capital stock and accrued dividends thereon.

This point had been discussed and decided by previous action.

c. Ledger balance.


C. Dividends.

(1) Amount upon which dividends should be paid.


(2) When no longer entitled to dividends.

The representatives of the Comptroller's office and Counsel to the Federal Reserve Banks agreed as follows:

Ti'c arc of the opinion that Federal reserve banks arc entitled to dividends upon each of the redis-countcd notes for the full amount of claim as originally filed and allowed until such time as the dividends, plus collections made from parties liable upor. the re discounted note, equal one hun-dred per cent thereof with interest and expense reasonably necessary in preserving, selling and collecting collateral.


-12-

60 X-4385

a. Do payments made subsequent to the maturity of the note or date of insolvency affect the amount of dividends?

The representatives of the Comptroller^ office and Counsel to the Federal Reserve Banks agreed as follows:

It is our view that a claim once having been filed and allowed subsequent payments made by parties liable on the note should not be de-ducted from the amount of the claim when divi-dends arc paid. In other words, -the claim once having boon filed and established , we think Federal Reserve Bapks are entitled to dividends on the full amount of the claim until such time as those dividends plus payments equal to one hundred per cent of the note.

D. Compromises and Settlements.

(1) Right to make.


It is our view that before any compromise or settlement is made upon a rediscounted note that the consent and acquiescence of the receiver should be obtained, if it is desired to continue the liability of the receivership and not desired to preserve the right of recourse as provided in the next paragraph. In the event the receiver refuses to give his consent or acquiescence to the settlement, then he should be given an opportunity to take the rediscounted note up for the amount offered in settlement, permitting the claim to stand and continuing to pay dividends on the amount as originally filed and allowed until such time as it is fully paid.

If the receiver does not care to take the note up and the Federal Reserve Bank.is still of the opinion that the settlement is a good one, we think it has the right to make such settlement with the parties prior to the insolvent bank, provided that when doing so recourse is expressly reserved on said note against the receiver of the in-solvent bank.

(3) In cases of compromises and settlements of rodis-countcd notes, what authority needed by the receiver?


/ -13- X-4385


It is our view that whenever a receiver consents to the settlement of a rediscounted note, he should obtain an order of a court of competent jurisdiction permitting same,

E. Expense's of Preservation and Collection of Rediscounted Notes.

The f.epresentativos of the Comptroller's office and Counsel to the Federal Reserve Banks agreed as follows j

It is our view that proper contractual agreement with member banks will make such expenses indebtednesses of the bank and, therefore, collectible from collat-eral which might be held.

III. COLLATERAL.

A. Right of Compromise and Settlement.


It is our view that a Federal Reserve Bank has no right to settle or compromise notes held as collateral, in the absence of contract to the contrary. However, they would be liable only for the value of each collateral note, and if a settle-ment or compromise should be effected whereby the Federal Reserve Bank obtained the full market value of the note, there would be no liability upon its part. Hence, we think that when such settlements are made without reserving the right of re-course against party secondary liable, consent of receiver should be obtained.

B. Authority needed by Receiver to Compromise a Settlement of Collateral Note.

No action was taken on this subject.

C. How and When Applied.

(1) Collateral to member bank's promissory note.

Representatives of the Comptroller's office and Counsel to the Federal Reserve Banks agreed upon the view expressed in Digitized for FRASER

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

-14- JC-4385

Resolution No. 5, with an addition thereto, drafted by Mr. Agnew and adopted by the Counsel of the Federal Reserve Banks, so that the entire resolution reads as follows:

BE IT RESOLVED that it is the sense of this Conference that collateral pledged for a spe-cific note made or endorsed or a member bank should be credited in a separate account, until the net amount realized from such col-lators! and dividends paid upon such note is sufficient to pay the said note, adding interest on the note from the date of insolvency to the date of final payment, and giving credit allowance for interest on the amounts collected on collateral from the date of collection to the date of final payment. If the note or other agreement with the member bank provides that such collateral shall likewise be held for other debts, after such note is paid collateral then remaining should be held as general collateral.

Collection made on general collateral should be credited in a collateral account until the time for final settlement. In no event should col-lections made from or on account of collateral affect the basis of dividends, until such net collections and dividends equal the amount due on the obligations for which the collateral was pledged.

Sums realized from collateral to a specific obligation shall be applied to the liquidation of such obligation until the amount so realized and dividends paid on such obligation are suf-ficient to retire it.

(<;) Collateral to Rediscounts.

Representatives of the Comptroller's office and Counsel to the Federal Reserve Banks agreed as follows:

We are of the opinion that collections on collateral to rediscounts should not be applied until final settlement with the receiver.


-15- X-4385

(3) Where insolvent tank's indebtedness consists of both rediscounts and collateral.

This question had already been agreed upon as in Reso-lution No. 5 set out tinder III C(l) above.

(4) Expense of preservation and collection.

Representatives of the Comptroller's office and Counsel to the Federal Reserve Banks agreed as follows:

We are of the opinion that the legitimate expense incurred by Federal Reserve Banks in the preservation and collection of collateral notes is a recoverable expense and can best be handled upon final settle-ment rather than as each note is collected.

(5) Special advances necessary for collection of collateral notes.

This subject was not discussed.

IV.

CLAIMS OH ACCOUNT OF UNPAID CASH OR COLLECTION LETTERS,

A. Amount of Claims.

This subject not discussed.

B. Proof Required.


C. Duplicate Claims.


D. Offsets.


E. Application of Collateral.


F. Whether General or Preferred Claims.



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64 X-4385

V.

MISCELLANEOUS CLAIMS.

A. Claims on account of. Itediscounted or Collateral Notes Sent for Collection and Remittance which are Collected but not Remitted. For.


B. Claims on Behalf of Makers of Notes who Pay Amount Thereof to Insolvent Bank not Knowing the note has "been Rcdiscounted or Pledged as Collateral.


C. Claims on Behalf of the United States.


D. Renewal notes in Hands of Receiver Evidencing same Indebted-ness as Notes held by Federal Reserve Bank under rediscount or as Collateral.

Representatives of the Comptroller1s office and Counsel to the Federal Reserve Banks agreed as follows:

It not infrequently happens that a bank, before its failure, takes a renewal note covering a certain indebtedness, telling the maker that his old note will be mailed him later. The bank fails before the old note has been obtained from the Federal reserve bank. In such cases, the receiver not infrequently takes the position that his note is a valid note and as a result much trouble is experi-enced. We think in such cases as these the receiver should be instructed that after he has satisfied himself that the note in his possession really evidences the same indebtedness as the note in the possession of the Federal reserve bank he should turn over to the Federal reserve bank the renewal note.

E. Claim for Forgeries.



-17- X-4385

VI.

FINAL SETjiTISI-IEHTS WITH BECEIVEB5 .


After agreement with the representatives of the Comptroller's office on the various topics as noted above, the conference adjourned at 2 p.m.

(Signed) George B. Vest, S e c r e t a r y .


*1 *

X-4457

MEMORAEDUM BY PROF. SPRAGUE

regarding

LEGISLATIVE PROPOSALS ACCEPTED BY THE

ADVISORY COMMITTEE.

ITovember 21, 1925.


X-4457

The Advisory Committee has approved without change all of the numerous provisions of the first McF&dden bill designed to liberalize the national "banking law, suggesting changes only in Section 5200 cov-ering loan limitations and in the new investment banking section# ITo action was taken on the branch banking proposals contained in the bill, the Committee being of opinion that it would be unwise for the reserve system to take any position on this highly controversial matter. The Committee also agreed upon a limited number of additional amendments, confining itself to those which presumably would not arouse serious op-position. The text of the various proposals of the Committee is here-witJi submitted together -rri th summary indications of their scope and purpose.

SECTION 5300. REVISED STATUTES.

(Suggested changes are enclosed, in brackets)

Section 5200. The total liabilities(other than those incurred

under Section 13 of the Federal Reserve Act)to any (national banking) as-

sociation of anv person, firm, company, or corporation for money borrowed,

including in the liabilities of a company or firm the liabilities of the

several members thereof, shall at no tine exceed 10 per centum of the

capital stock of such association actually paid in and unimpaired, and 10

per centum of its unimpaired surplus fund. This limitation as to such

liabilities to such association shall be subject to the following ex-

ceptions:

No change in the present statute other than the specific exclusion of bank acceptances*

(l) Liabilities arising out of the discount (or purchase) of

tiie following described paper shall be subject to no limitations based

upon the amount of such capital and surplus:

The phraseology of the Senate draft of the McFadden bill is followed here with the addition of definite provision to cover purchased paper.


X-4457

With its numerous exceptions, "both limited and. unlimited, this section of the national bank act is unavoidably long and complicated, -riving rise to many difficulties of interpretation in practice. Much might be said in favor of the policy embodied in the recent legislation of a number of States, notably New York and Missouri, limiting the amount which may be lent to any one interest regardless of the form or nature of the obligation, loans se-cured by U. S. Bonds or by bonds of the State or its local governing units being the sole unlimited exception. In Mew York, for example, there is a blanket limitation of 15 per cent for city banks and 25 per cent for country banks covering all paper as to which more than the customary 10 per cent is allowed. Owing to the wide diversity of conditions in different sections of the country, this does not seem to be a feasible policy in the ease of the national banks.

(a) Bills of exchange drawn in good faith against actually

existing values; (b) Commercial or business paper actually owned by the

person, firm, company or corporation negotiating the same; (c) Drafts and

bills of exchange secured by shipping documents conveying or securing title

to goods shipped —(but provided that no such drafts, bills of exchange, or

commercial or business paper included under (a), (b), and (c) of this sub-

title, shall be included within the meaning of this exception when both

drawer and drawee, or both maker and payee are corporations and one such

corporation is affiliated with or a subsidiary of the other, i.e., if a

majority of the stock of one such corporation is owned by the other or by

the stockholders thereof.)

The purpose of the additional clause is to ex-clude at least some portion of those bills of exchange and notes that are in substance nothing more than the obligations of a single interest,

(d) Demand obligations when secured by documents covering

commodities in actual process of shipment (when such obligations are or have


X-4457

"been discounted or purchased for the account of the drawer or endorser.)

The additional proviso here is designed to exclude the holding of accepted demand obligations for an indefinite period of time by a "bank, a practice which involves making an unsecured loan to the borrower.

(e) Bankers* acceptances of the kinds described in Section

13 of the Federal Reserve Act.

(f) (Obligations secured by not less than a like face amount

of bonds, notes, or certificates of indebtedness of the United States.)

A bank may purchase an unlimited amount of these securities. Loans thus secured would appear to be a no loss satisfactory investment* It is, therefore, proposed that the present limitation to an additional 15 per cent of capital and surplus be removed.

(2) Liabilities arising out of the discount (or purchase) of the

following described paper shall be subject to the following limitations

based upon the amount of such capital and surplus, (but provided that the

exceptions permitted under this sub-title shall not be cumulative,):

(a) Liabilities as surety, drawer, endorser,'/or guarantor,

other than of bills of exchange, (notes) and commercial and business paper

excepted under (l) hereof and excluding accommodation paper, having a ma~

endorser, turity of not more than six months, where the surety, drawer,/or guarantor

obtains a loan from or discounts paper with or sells paper to any national

banking association, shall at no time exceed 15 per centum of such capital

and surplus in addition to such 10 per centum of such capital and surplus

(but provided further that such obligations as surety, drawer, endorser, or

guarantor of any corporation a majority of the stock of which is owned by


_4~ X-4457

any borrower shall be included, as a part of the aggregate obligations of

such borrower.)

This paragraph does not appear in any form in existing law, which imposes no limitation upon indirect liabilities, although under a ruling of the Comptroller of the Currency endorsements of ac-commodation paper are included within the 10 per cent limitation. To the McFadden bill draft amend-ments definitely excluding accommodation paper and eliminating the guarantees of interrelated corpora-tions are suggested.

(b) ^otes secured by shipping documents, warehouse receipts,

or other such documents conveying or securing title covering readily market-

able non-perishable staples when such property is fully covered by insurance,

provided that the market value of such staples is at no time less than 115

per centum of such obligations, shall be subject to a limitation of 15 per

centum of such capital and surplus in addition to such 10 per centum of such

capital and surplus, (but this exception shall not apply to obligations of

any borrower arising from the same transactions and secured upon the identi-

cal staples for more than six months in any consecutive twelve months); and

provided further that obligations of this character shall be subject to a

further increase of limitation of 15 per centum of such capital and surplus

in addition to such 25 per centum of such capital and surplus for a period of

not more than three months in any consecutive twelve months.

The McFadden bill, as it passed the House, had extended the period from six to ten months on loans secured by non-perishable staples, but the Senate Committee did not approve the change. The House bill, also, contained a provision, for loans on staples up to 50 per cent of capital and surplus, requiring ad-ditional margins in a succession of steps until for the final 5 per cent a 40 per cent margin was neces-sary. This extension of the loan limit was stricken


-5- X-4457

out in the Senate draft. There is reason to "believe that it will "be "brought forward again and with strong backing. As an alternative, a more liberal provision than is contained in the present law is suggested, "but for the relatively short period of three months. Under the pro-posed arrangement it is believed that all finan-cing requirements for marketing staples can be supplied by the banks.

(c) Notes secured "by documents conveying or securing title

covering livestock when the actual market value of such livestock is not

less than 115 per centum of the face amount of the notes secured by such

documents, (when such livestock are being prepared for market during the

period of the loan and provided no part of the total accommodation granted

the "borrower is unsecured,) shall "be subject to a limitation of 15 per

centum of such capital and surplus in addition to such 10 per centum of

such capital and surplus, but this exception shall not apply to the ob-

ligations of any one borrower for more than six months in any consecutive

twelve months.

The present law includes livestock in the paragraph in which an additional 15 per cent loan is allowed for six months secured by insured staples. Insurance dn livestock is generally im-practicable, and this requirement was eliminated in both the House and the Senate bills, which con-tain separate livestock paragraphs. The House bill further does not retain the six months limita-tion which reappears in the Senate draft. The sub-stitute favored by the Committee does not require the maintenance at all times of the 15 per cent margin, but introduces a provision designed to ex-clude dairy and breeder loans. On the ground that livestock loans arc less liquid and involve more hazards than loans secured by staples, a further provision is added requiring the entire loan to be on a secured basis.

(d) (Obligations of any borrower in the form of bonds,


X-44S7

notes, debentures, and tho like, purchased for investment or resale, under

such restrictions as to the.character and volume of such securities as may

"be made by the Comptroller of the Currency, shall at no time exceed 15 per

centum of such capital and surplus in addition to such 10 per centum of such

capital and surplus, but this limitation as to amount shall not apply to

obligations ®f the United States, or general obligations of any State or

of any political subdivision thereof, or obligations issued under authority

of the Federal Farm Loan Act.)

The McFaaden bill, as an additional paragraph to Section 24 of the Federal Reserve Act, contains provisions relating to investment security dealings by national banks. Business in which the bonks have long been engaged is thus recognized and placed under the supervision of the Comptroller and is also re-stricted as to amount in the cass of any one obligor. The Advisory Committee favors transferring this matter to Section 5200 of the Revised Statutes, and also the elimination of the provision in the McFadden bill sub-jecting this business to the Blue Sky laws of the several States.


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AM3ITOICI-ITS TO THE NATIONAL BAmi:% LAW DESIGNED TO FtTRftlSH M05E ADEQUATE M T A HEGABDIII& THE CONDITIONS 0? THE BAMS THROUGH EXAMINATIONS.

I.

All obligations of every nature both direct ahd indirect arising out of the

sale, pledge, or hypothecation of any of its assets "by a national banking associa-

tion shall be definitely recorded upon its books at the time such assets are sold,

pledged, or hypothecated. For each failure to comply with this requirement a

national banking association shall be subject to a fine of Five Hundred Dollars,

to be imposed by the Comptroller of the Currency.

This proposal is designed to cover the rather common practice of the assumption of obligations by banks in an informal fashion, often in correspondence between bank$. officials. These obligations frequently escape the notice of bank examiners because they are not definitely recorded on the books of the banks.

II.

Where an officer or director of a national banking association is an offi-

cer or director of any other bank, banking association, trust company, securities

company or investment company, and where in the judgment of the Comptroller of

the Currency the national banking association is related in management and oper-

ation in such close degree with such other bank, banking association, trust

company, sednarities company or investment company, that the examination of the

national bank fails to disclose its true condition in the absence of detailed

information regarding such other related institutions, then such other bank,

banking association, trust company, securities company or investment company

shall furnish the Comptroller of the Currency with a copy of an examination

simultaneously made by the State authorities or through such arrangements as

may be deemed satisfactory by the Comptroller of the Currency furnish detailed

information regarding its condition and operations; and upon failure so to do

the officer or director may be disqualified by the Comptroller of the Currency

from further acting in such capacity, and in such cases the Comptroller of the


-8- X-4457

Currency, upon request, is authorized to furnish the State Supervisor of Bank-

ing, or other similar officers, copies of such examination of the affiliated

national bank.

This proposal is designed to secure adequate infor-mation regarding national hanks which are closely affiliated with other financial institutions, in particular the situa-tion in the case of chains of banks — a type of branch bank-ing which readily lends itself to grave abuse. During the last few years, a number of such chains have collapsed, and investigation shows that when a national bank was in such a chain, the examination of the bank failed to indicate its true position on account of the shifting of assets back and forth between the various institutions in the group.

III.

That Scction 5146 of the Revised Statutes of the United States, as amended,

be amended by adding at the end thereof a new paragraph as follows:

It shall be unlawful for any national banking association to make a loan

or loans of more than Five Hundred Dollars in the aggregate unless secured by

readily marketable collateral, to any salaried officer of such association or

to any corporation in which such officer or any director of such banking associ-

ation owns or controls a majority of the stock or is an officer or director,

except upon submission to and approval by the board of directors of such

association, as a condition precedent, of a financial statement from such offi-

cer or from such corporation as the case may be. A violation of this provision

shall disqualify any such officer or director and vacate his place.

It would seem not unreasonable to require financial statements from all directors borrowing on an unsecured basis, but as such a proposal would probably arouse wide-; spread opposition this recommendation is limited to salaried officers and to corporations in which they or the directors are interested.

MISCELLANEOUS AMBgmHEHTS •

Sec. 5205. Shorten the period allowed for payment of assessments in cases

of impaired capital from three months to two months with a further provision


4 *

-g- X-4457

authorizing the Comptroller of the Currency to extend the period when in his

judgment it may "be deemed advisable.

Sec. 5146. Last Sentence. Any director who ceases to "be the owner of the

required number of shares of the stock (or who pledges or hypothecates the

same), or who becomes in any other manner iisTualifled, shall be declared by

the Comptroller of the Currency to have vacated his place.

This is a minor change designed to meet an apparent oversight in the Banking Act which fails to disqualify a director who pledges his stock.


7 3

X-4390 F E D E R A L R E S E R V E B O A R D

STATEMENT FOR THE PRESS

For Release in Morning Papers, Monday, July 27, 1925.

The following is a summary of general business and. financial conditions throughout the several Federal 113serve Districts, based upon statistics for t:.xe months of June and July, as contained in the forthcoming issue of the Federal Reserve Bulletin.

Production of "basic commodities and factory employment declined further

in June, while railway freight shipments and the volume of wholesale trade in-

creased* Wholesale prices, after declining for two months, advanced in June.

Production.- Production in basic industries, as indicated by the Federal

Reserve Board1s index, declined about one per cent in June to the lowest level

since the autumn of 1924, but was 17 per cent above the low point of last summer.

Output of pig iron, steel ingots, lumber, newsprint, and petroleum, and mill

consumption of cotton declined in June, while production of bituminous coal,

sole leather, and wheat flour increased* The number of automobiles manufactured

during June was slightly less than in May, Factory employment declined one

per cent and factory pay rolls over 2 per cent between May 15 and June 15, re-

flecting substantial declines in the automobile, boot and shoe, textile, and

iron and steel industries. Building contracts awarded during June were larger

in value than during May and almost equaled the peak figure for April, In

square feet of floor space the June awards were a little smaller than those for

May. Residential contracts in June were the smallest for any month since Feb-

ruary, but greatly exceeded those of a year ago*

The Department of Agriculture estimate of the condition of all crops

combined on July 1 showed some improvement from the month before. The corn

crop forecast places it at approximately 550,000,000 bushels above last year. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

74 2. X-4390

The July 15 cotton crop estimate was 13,588,000 bales, compared with a fore-

cast of 14,339,000 hales on June 25.

Trade.- Freight car loadings were larger during June than during May, as is

usual at that season, and also considerably oxccoded the figures for June, 1924,

the low point of last year. Sales at department stores during June were season-

ally smaller than in May, hut totaled 5 per cent more than last year. It should

be borne in mind, however, that in June of this year there were 4 Sundays as

compared with 5 in the preceding month as well as in June, 1924. Mail order

sales were 6 per dent larger than in Kay and exceeded the amount for June, 1924.

Sales of wholesale firms were 5 per cent greater than in May and larger than in

any June in the last five years. Department store stocks were reduced further

in June, but were slightly larger than a year ago. Wholesale stocks of gro-

ceries, shoes, and hardware were smaller at the end of June than a month earlier,

but those of dry goods and drugs were larger. Compared with a year ago stocks

of groceries, and drugs were larger in value while stocks of dry goods, shoes,

and hardware were smaller.

PricesWholesale commodity prices advanced 1.4 per cent in June, according

to the index of the Bureau qf Labor Statistics, following declines in April

and May. The largest increase for any commodity group was for the miscellaneous

group which includes crude rubber; prices of farm products, foods, and fuel

and lighting also advanced, while prices of building materials declined con-

siderably. In the first half of July quotations on flour, beef, hogs, wool,

copper, petroleum, hides, and rubber increased, while prices of. sugar,

bituminous coal, and hardwood lumber declined.

Bank Credit.- At member banks in leading cities the volume of loans on

securities continued to increase after the middle of June and during the first

half of July was at a higher level than at any previous time. Demand for bank


3,

75 X-4700

credit for commercial purposes was relatively inactive and the volume of com-

mercial loans at reporting member banks remained near the low level for this

year, although considerably above the amount for the corresponding period in

1924.

At the reserve banks the seasonal demand for credit and currency was re-

flected in increased borrowing by member banks which carried discounts at the

beginning of July to the highest level in more than a year, and notwithstand-

ing the subsequent decline the total on July 22 was still at a relatively high

level. Total earning assets on that date showed little change as compared with

the figures for four weeks earlier.

Firmness in the money market at the close of the fiscal year was followed

by an easing of money after the first week of July. In the latter part of

the month there was again evidence of firmer money conditions. These changes

were reflected chiefly in the movement of rates for call money, quoted rates

on prime commercial paper and on bankers' acceptances remaining throughout

the period at 3 3/4 - 4 per cent and 3 l/4 per cent.


76

F E D E R A L R E S E R V E B O A R D X-4391


For immediate release July 27, 1925.

CONDITION OF ACCEPTANCE MARKET June 18, 1925 to July 15, 1925.

Acceptances.

The acceptance market was relatively quiet during the four weeks ending

July 15, with the smallest volume of transactions reported for many months.

Rates on all maturities were unchanged throughout the period. During the last

half of June the demand for "bills of the longer maturities, based partly on

foreign orders, exceeded the supply at prevailing rates in New York, Boston,

and Chicago, and New York reporting dealers' portfolios were reduced to a new

low point for the year. Over the first of July, however, slightly firmer

money conditions were accompanied "by a moderate increase in the supply of "bills

and a slackening in demand. Later the volume of offerings again fell off and

exceptionally quiet conditions were reported from all the important markets.

Dealers' portfolios on July 15 were of moderate size and consisted chiefly of

"bills of the shorter .maturities. Rates in the New York market on July 15

were 3-1/8 bid and 3 per cent offered en 30-day bills, 3-1/4 bid and 3-1/8

offered on 60-day bills, 3-3/8 bid and 3-1/4 per cent offered on 90-day bills,

with 3-5/8 to 3-3/4 bid and 3-1/2 to 3-5/8 per cent offered on the longest

maturities.


77


WASHINGTON


X-4393

August 4,;192^

SUBJECT: Code Words for use between Federal Reserve Banks in connection with Telegraphic Tracings and Advices coverirg Non-Cash Collection Items.

Bear Sir:

It has "been suggested to the Board by one of the Federal reserve banks that, in order to reduce the .phrase-ology in telegrams between Federal reserve banks covering telegraphic tracings or advices in connection with non-cash collection items, where such messages arc sent over the leased wires for the benefit of Federal reserve banks, and consequently at their expense,additional code words for such purpose be supplied from the Federal Reserve Telegraphic Code*

The Board has approved this suggestion and, ef-fective August 15th, the following code words will be used covering the transactions referred to:

BUCKISH: We credit your account today with representing proceeds of collection

number . sent direct to us by .

BUCKLE; Referring to our collection number payable at for $ sent if outstanding obtain immediate tele-graphic report. Advise us status by wire.

OLYMPIAN: Telegraph reply over private leased wire.

In instances where messages of this nature incidental to member bank transfers are transmitted over the commercial wires it may be desirable to also use the above code words in such messages in order to reduce the additional expense to the member banks concerned*


78

- 2 - X-4393

The code words "BUCKISH" and "BUCKLE" and the code word "OLYKPIAU" should be inserted in the Federal Reserve Telegraphic Code at the "bottom of pages 35 and 168 following the code words "BUCKHOEtt" and "OLIVINE", respectively.

Yours very truly,

J. C. Nocll, Assistant Secretary.

TO GOVERNORS OF ALL F.R.BAHKS.


( C O P Y )

WILLIAMS and SIUKLER X—'4394

Attorneys at Law 601 Commercial Trust Building

PHILADELPHIA.

August 3, 1925.

Walter Wyatt, Esq., General Counsel Federal Reserve Board

Washington, D.C.

Dear Mr* Wyatt:

I am writing to "bring to your attention a case recently decided "by the Superior Court of the State of Pennsylvania, The case is reported at page 52 of Volume 85 of the Pennsylvania Superi-or Court Reports, and was decided on February 27th, 1925. It has recently come to my attention in the advance sheet form, and inasmuch as there arc no extra copies on hand I am unable to -send you a complete report of the case. It may be that you have already seen a copy of it.

The case is interesting inasmuch as it seems to apply the Malloy case doctrine. The effect of the decision is to hold that a bank of deposit receiving an item for collection from its depositor must first prove knowledge on the part of the depositor of a regula-tion providing that a collecting bank will be liable only for actual funds coming into its possession, before it will be permitted to re-cover from the depositor an overdraft resulting from the failure to collect the item deposited for collection. In that case the bank of deposit had forwarded the items, which were two certificates of de-posit, through ordinary channels for collection. In due course the items come into the hands of the Federal Reserve Bank of Cleveland, and it forwarded the items directly to the bank of issue for collec-tion, The Federal Reserve Bank accepted the bank draft of the bank of issue in payment of the two certificates. Prior to payment of the bank draft, the bank of issue made an assignment for the benefit of creditors and the drawee bank dishonored the draft. The items were charged back in the usual manner and the bank of deposit, by reason of having permitted overdrafts, was forced to bring suit against the depositor for the amount of the two certificates.

The lower court made absolute a rule in favor of the plain-tiff bank for judgment against the depositor for want of a sufficient affidavit of defense on two counts, namely:

"(1) the plaintiff by accepting the deposit certificates did not become the owner and that the bank whose negli-gence caused the loss to the defendant was the agent of the depositor and not the agent of the bank; and (2) that the affidavit of defense did not contain a sufficient allegation of facts to justify a conclu-sion that the certificates were received by the bank


80 - 2 - X-4394

Walter Wyatt, Esq., General Counsel 8/3/25

as cash, or that it became the owner thereof."

The defendant appealed from the judgment of the lower court, and the Superior Court upheld the first contention stating clearly that the law, of Pennsylvania had long "been settled on the basis of the Massachusetts rule, namely that the liability of the bank of de-posit in the absence of instructions or an agreement to the contrary, extends merely to the selection of a suitable and competent agent, with proper instructions, and does not involve responsibility for default and misconduct of the correspondent bank. The Court further upheld the second ground for the decision of the lower court, namely that the allegations of the affidavit of defense were not sufficient to show that the certificates were not received by the plaintiff for collection but were received as cash, and that the plaintiff bank became the owner thereof.

The Superior Court, however, reversed the judgment of the lower court and remitted the record for further proceedings, on the ground that the plaintiff had not averred in its statement of claim that the plaintiff had knowledge or was charged with knowledge of Regulation J of the Federal Reserve Board whereby the Federal Reserve Bank of Cleveland was authorized to limit its liability to cases in which the proceeds of collection items in actual funds came into its hands. The Court in its opinion said:

"The depositor is not bound by the knowledge of its agent of the regulation which provides for variation of the set-tled law. On what principle of law may such a regulation bind a depositor? Clearly, only if the depositor has know-ledge of the regulation when he makes his deposit. The plaintiff avers no such knowledge on the part of the de-fendant and the defendant denies that he had such knowledge."

Yours very truly

MLS (Signed) Parker S.Williams.


1 I

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


Released for publication Monday morning, August 10, 1925.

COMMODITY CLASSIFICATION OF ACCEPTANCES

Of the bankers1 acceptances purchased outright by the Federal Reserve banks

in March and April of this year, 40 per cent, in dollar value, were drawn to

finance the marketing of cotton and grain, according to a statement by the Fed-

eral Reserve Board, based on a study which appears in the Federal Reserve Bulletin

for August issued today. Another 10 per cent of the acceptances were drawn to

finance the storage or movement cf other American agricultural commodities, bring-

ing the proportion of farm products among the commodities underlying purchased

acceptances to 50 per cent of the total.

During the two months included in this study the reserve banks purchased

$24?,000,000 of bankers* acceptances, exclusive of acceptances bought under repur-

chase agreements. Of this amount $87,000,000 was drawn to finance imports,

$77,000,000 to finance exports, $59,000,000 to finance domestic transactions, of

which a large proportion covered the storage of agricultural staples in elevators

and warehouses awaiting export, and $24,000,000 to finance the storage and ship-

ment of feoods between foreign countries.

Before the Feaer&l reserve system was established, this convenient and

economical way of financing the marketing of crops by the use of American bankers'

acceptances was not available,and a large part c r our foreign trade was financed

through the use of acceptances drawn on foreign banks, which involved the

X-4395

81


' " 8 2 -2-> X-4-395

payment of commissions and. discounts-in foreign markets# The ^

Federal Reserve Act made it possible for "banks in this country to accept drafts

and the Federal reserve "banks, "by standing ready to purchase acceptances, have

fostered an acceptance market in this country, the extent of which is indi-

cated by the fact that there are now outstanding at different times of the year

between $600,000t000 and $800,000,000 of bankers' acceptances.

Through the acceptance market, facilities have been also provided for

financing the storage and shipment of American farm products by exporters and

cooperative marketing associations at lower rates and more conveniently than

was possible before.

The analysis made by the Federal Reserve Board shows that acceptances pur-

chased by the reserve banks cover a wide range of different commodities# During

March and April import acceptances covered about 600 commodities, and export

acceptances covered over 250 commodities# The principal commodities under-

lying the $247,000,000 of acceptances purchased by the reserve banks in March

and April, combining acceptances in foreign trade and in domestic transactions,

were as follows:

Cotton $74,836,000 Grain 27,180,000 Sugar 19,782,000 Coffee 17,752,000 Silk 15,082,000 Wool 11,431,000 Hides and skins 7,300,000 Copper 6,679,000 Lard and meat 5*323,000 Flour 5,266,000 Tobacco 4,195,000 Rubber 3,046,000 Cotton manufactures 2,337,000 Woodpulp 1,915,000 Lumber 1,886,000 Pars 1,689,000 Farm Implements 1,235,000



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 y — 4 t h e f e d e r a l r e s e r v e b o a r d a °

August 5, 1925.

Dear Sir;

Will you kindly furnish the Board at

your early convenience with a list of non-member

"banks maintaining clearing accounts with your

bank on July 1, 1925, together with the amount

of the balances standing to the credit of each

such bank on the above date*

Very truly yours,

Walter L. Eddy, Secretary.

DRAFT OF LETTER fO GOVERNOR AT EACH FEDERAL RESERVE B A M .


i

• * 84 FEDERAL RESERVE BOARD x - 4 3 9 7

WASHINGTON August 5, 1925.

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: Estimating population of Towns and Cities in which Banks applying for Membership are located.

Dear Sir:

Attention is directed to the Board's circular let-ter of December 20, 1919, X-1769, in which it is stated that the Board will accept estimates of the population of towns or cities in which hanks applying for membership in the Fed-eral Reserve System are located as shown by the last official census unless there is good reason to believe that these fig-ures are incorrect, in which event an estimate of the popula-tion will be required through means of local data supported by affidavits.

This letter, however, applies only to cases in which there has been an official enumeration of the popula-tion of the place in which the applying bank is located. In a number of cases in recent years the Board has been called upon to determine the eligibility for membership of banks situated in communities of which no official enumeration of the population had been made, either be-cause the communities were unincorporated or for some other exceptional reason. In cases of this kind the Board has required that evidence as to the population of such communities be furnished through affidavits obtained from public officials or prominent business men.

Hereafter in cases in which there is doubt as to the population of the place in which a bank applying for membership in the System is located, either because there is good reason to believe that the last official census is incorrect or because there has been no official census of the place in question* the Board will require estimates of the population of the place by public officials, such as the postmaster, the school superintendent, members of the school board, county supervisors, city or county treasurers, tax collectors, judges or clerks of local courts, or from prominent residents or business men in the community. An affidavit should accompany each estimate stating th*\t it has been made according to the best of the affiant*s knowledge and belief, In some cases it may be desirable to have an examiner make an investigation of the popula-


— 2 - X-4397

tion of the place and report his conclusions on the question. Where the community in which the hank is located is unincor-porated the Board desires estimates of the population of the physically well defined area having the characteristics of a town which lies about the place where the bank is located.

Very truly yours.

D. R. Crissinger, Governor.

TO ALL FEDERAL RESERVE AGENTS.



WASHINGTON


X-4398

August 5, 1925.

SUBJECT: Corrections in Inter-District Time Schedule.

Dear Sir;

By agreement between the Federal He-serve Bank of Dallas and the Federal Reserve Bank of St. Louis the following changes should "be made in the inter-district time schedule:

Dallas to Little Rock - 1 day-Little Rock to Dallas - 1 day.

Yours very truly,

J. C. Noell, Assistant Secretary,

TO GOVERNORS OF ALL F.R.BASKS.



87 FEDERAL RESERVE BOARD

WASHINGTON

X-4400

August 6, 1925

SUBJECT: Employment of Hon. Newton D. Baker in Brookings Par Clearance Case.

Dear Sir:

Referring to the Board's telegram of June 25th (Trans. 570), you are advised that all Federal reserve hanks have signified their willingness to bear a pro rata share of the expense of retaining Honorable Newton D. Baker in connection with the appeal from the decision of the United States District Court in the suit of the Brookings State Bank, Brookings, Oregon, vs. Federal Reserve Bank of San Francisco.

Upon completion of his services, Mr, Baker will render his bill to the Board for approval, after which it will be paid by the San Francisco Bank, and the other re-serve banks will be advised by the Board of the amounts which they are to remit to San Francisco.

By direction of tho Board.

Very truly yours,


To Governors of all F.H.Banks (Except San Francisco)


88 Federal Reserve Board, B'j:rr:, No, Z<i402, August, 1925.

NOTIFICATION 0? TBBHST10N 0? INSOLVENCY OB SUSPENSION...

FEDERAL E3SEHVE i^GBNT AT DATE

Name of bank Location

Date of insolvency or Date of termination of suspension insolvency or suspension .

Indicate manner of termination of insolvency or suspension by a check mark on the blank line opposite the appropriate item.

1. Bank declared insolvent: a. Eoopencd after reorganization (assessment $ ) ___ b. Reopened after assistance from the directors c. Succeeded by newly organized bank..

Nemo of bunk d. Absorbed by or merged with another bank.....

Nome of bank g. Otherwise liquidated (spqeify)*

2. Bank found solvent: a. Beopened. __ I), Succeeded by newly organized bank.

Name of bank c. Absorbed by or merged with another bank

Name of bank d. Liquidated voluntarily

3. Losses wore sustained by: a. Federal reserve bank ($ ) b. Depositors e. Stockholders

Remarks:

* Should include banks in process of liquidation. Report on this form should bo submitted at the earliest practicable date cover-

ing each bank previously closed or suspended whose insolvency or suspension has beer, terminated or which is in the process of liquidation.


IN THE DISTRICT COURT OF THE UNITED STATES

FOR THE DISTRICT OF OREGON.

BROOKINGS STATE BANK, an Oregon Banking Corporation,

Plaintiff,

-vs- NO. Ii» 9041

FEDERAL RESERVE B A H OF SAN FRANCISCO, a Federal Reserve Banking C o r p o r a t i o n ,

Defendant.

MEMORANDUM OF AUTHORITIES

ON MOTIOU TO DISMISS.

R. ff. Wilbur, Joseph N. Teal, Rogers Mao Veagh,

Portland, Oregon, Albert C, Agnew,

San Francisco, California,

Attorneys for Defendant.

\


-2- X-4403

IN THE DISTRICT COURT OF THE UNITED STATES

FOE THE DISTRICT OF OREGON.

90

BROOKINGS STATE BANK, an Oregon Banking Corporation,

Plaintiff,

-vs- NO. L. 9041

FEDERAL RESERVE BANK OF SAN FRANCISCO, a Federal Reserve Banking Corporation,

Defendant.

itoiORAflbDM OF AUTHORITIES ON. MOTION TO DISMISS.

The position of the defendant in relation to this motion may "be

briefly summarized as follows:

1. The complaint in this action, from the allegations of which

the theory upon which the jurisdiction of the United States District Court

is predicated must "be ascertained,, thvabod jurisdiction upon the sole ground

of the Federal incorporation of the defendant.

2. The Act of the Congress of February 13, 1925# (c.229, 43 Stat,

Sec. 12), effective May 13, 1925, deprives this Court of jurisdiction founded

upon the Federal incorporation of the defendant.

3. This Act affects cases pending when it takes effect, as well

as cases thereafter arising and deprives this Court of power to proceed with

the trial of this case in any particular.

4. This action is not one "arising under the laws of the United

States" except in so fax as it is such by reason of the Federal incorpora-

tion of the defendant.


X—4403

5« This action is not ono "between citizens of different

states" nor ""between citizens of a state and foreign states, citizens or

subjects-,"

6. There being only one ground upon which the jurisdiction of

t h i s Court could tic predicated, the Federal incorporation of the defendant,

and t h a t ground having been removed by the recently enacted statute, t h i s

Court s h o u l d f o r t h w i t h dismiss the action.

These contentions will be considered more fully in the order stated.

I.

THE COMPLAINT DOES HOT STATE A CAUSE OF ACTION FOUNDED UPON A FEDERAL QUESTION NOR UPON DIVERSITY OF CliTlZEN-SHIP. THE SOLE GROUND OF JURISDICTION STATED IS THE FEDERAL CHARACTER OF DEFENDANT.

The only allegations in the complaint which in any way refer to

the character of the defendant or the laws under which it exists are those

contained in paragraph II, which is as follows:

"That the defendant, Federal Reserve Bank of San Francisco, is a corporation organized, created and existing under and by virtue of the laws of the United States, and being the Federal reserve system of the United States, the principal office of which is in the city of Son Francisco.,: California; that said bank is doing business within the State of Oregon and has duly organized a branch bank in pursuance of the Federal Reserve Act, which said branch bank is located in Portland, Multnomah County, Oregon, and that said defendant is carrying on the business of a reserve bank and is doing business within the State of Oregon."

The statement that the defendant is organized under the laws of

the United States and that it has a branch at Portland, Oregon, established

in pursuance of the Federal Reserve Act, does nothing more than identify

the defendant as a Federal corporation. Neither in this paragraph nor else-

where in the complaint does the plaintiff claim any right founded upon the

Reserve Act nor does it attack the constitutionality of said act nor allege


92 -4- X-4403

any infringement or violation of th6 provisions thereof "by defendant. The

entire action eeunde la common law tort and, in so far as the allegations of

the complaint are concerned, every issue involved could be decided inde-

pendently of the defendant's character as a Federal corporation and without

reference to any law of the United States. Defendant is charged with wilful

and malicious interference with plaintiff's business and with certain alleged

libels, the commission of which might, with equal force, be charged against

any corporation, however organized*

If, then, as we will hereafter show, the mere Federal character of

defendant no longer serves to -Vest this Court with jurisdiction, upon what

possible theory can Jurisdiction be longer retained?

Existence of Federal question most be plainly stated in the

complaint.

tf there is any rule firmly established in the Federal decisions,

it is that in order to predicate jurisdiction upon the ground that the action

is one arising under the laws of the United States, the action must be one

actually and not potentially involving a Federal question and that such is

the fact must be plainly and unequivocally shown by the initial pleading, un-

aided by subsequent pleadings or proof. On this point the case of

Roman Catholic Church v. Pa. Ry. Co.. 237 U.S.575; 35 SUP. Ct. 729

is pertinent. This was a suit for injunctive relief and an award of damages

against the railway company for an alleged nuisance occasioned by the operation

of trains along a certain highway* The court, passing upon the matter of

whether a Federal question is involved, say:

"The only passage in the bill which in any degree whatever gives basis for the assumption that jurisdiction was invoked because of a reliance on rights claimed under the Constitution and laws of


-5— X-4403 *

" t h e "United S t a t e s , i s p a r . Xx, which i s a s f o l l o w s : 'That the said acts of the defendant have taken from your orator

property consisting of casements of light and air to which your orator is legally entitled, and deprives it of the same without due process of law and without just compensation, .... and that such acts of the defendant have been and no® are a violation of the provisions of thb Constitution of the United States.1 As from any point of view it is impossible, "because of the vagueness of these averments, to es-cape, to say the least, doubt as to whether the bill asserted rights under the Constitution and laws of the United States which would be adequate to sustain the jurisdiction of the Circuit Court...,i it fol-lows that they arc insufficient to sustain the claim of jurisdiction, since the rule is that averments to accomplish that result must be ex-plicit and clearly made. ... But even if this impossible assumption were yielded to, there will yet be no ground upon which to rest juris-diction, since the bill contains allegations which would exclude the possibility of implying from the facts alleged that there was an in-tention to base jurisdiction on rights asserted under the laws of the United States. We say this because paragraph XII of the bill unmis-takably charges that the acts complained of were the result of the negligence of the carrier in operating its trains, thus excluding the possibility of affixing to them the character of state action so as to bring them within the 14th Amendment."

Again the rule is clearly stated in

Hull v. Burr. 234 U. S.. 272: 34 SUP. Ct. 892.

wherein it is said:

"The g e n e r a l r u l e i s f i i rmly e s t a b l i s h e d t h a t a s u i t does n o t s o a r i s e u n d e r t h e i a t f s o f t h e U n i t e d S t a t e s u n l e s s i t r e a l l y and s u b s t a n t i a l l y i n v o l v e s a d i s p u t e o r c o n t r o v e r s y r e s p e c t i n g t h e v a -l i d i t y , c o n s t r u c t i o n , of e f f e c t of some law of t h e U n i t e d S t a t e s , upon the determination of which the result depends* And this must appear not by mere inference* but by distinct averments according to the rulos of good pleading; not that matters of law must be pleaded as such* "but that the essential facts averred must show, not as a matter of mero inference or argument, but clearly and distinctly, t h a t s u i t a r i s e s u n d e r some f e d e r a l l a w . "

Where the jurisdiction of the District Court is originally invoked,

or the case is brought there by removal, on the ground that the case is one

arising •under the Constitution, laws or treaties of the United States, that

it does so arise must appear from plaintiff's own statement of his claim,

that is, "a statement of facts in legal and logical form such as is required

in good pleading," showing the plaintiffTs cause of action without regard to


94

-6- X-4403

what may "be the contentions or claims of the defendants.

Carson v. Dunbam, 121 U. S. 421; 7 Sup. Gt. 1030, Metcalf v. Watertown, 128 U. S. 586; 9 Sup. Ct. 173, Colorado Mining Co. v. Torek, 150 U. S. 138; 14 Sup, ct. 35, Tennessee v. Union Bank, 152 U. S. 454; 14 Sup. Ct. 654, Boston Copper Co* v. Montana Ore Co., 188 U. S. 632; 23 Sup. Ct. 434.

'•Whether or not a case arises under the laws of the United States is a question which must be decided, not "because of questions which might arise in the subsequent progress of the cause, but upon the grounds of jurisdiction asserted in the plaintiff's pleading."

Love11 v. Newman, 227 U. S. 412; 33 Sup. Ct. 375.

"When the complaint shows a case which arises out of a contract or a common-law right of property, and only indirectly and remotely depends on federal law, such a case not only does not, but cannot properly turn upon a construction of such law, But when the complaint asserts a right created by federal law, it presents a suit which may properly turn upon a construction of that law."

McGoon v. N o r t h e r n Pacific Ry. Co., 204 Fed. 998.

"The averments of the complaint cannot be helped out by resort to the other pleading or to judicial knowledge*"

Mountain View Mining Co. v. McFadden, 180 U. S. 533; 21 Sup. Ct. 488.

"It has become firmly settled that whether a case is one arising under the Constitution or a law or treaty of the United States, in the sense of the jurisdictional statute, must be determined from what necessarily appears in the plaintiff's statement of his own claim in the bill or declaration, unaided by anything alleged in anticipation or avoidance of defenses which it is thought the defendant may inter-pose,"

Taylor v. Anderson, 234 U.S. 74; 34 Sup. Ct. 724, See, also, Joy v. St. Louis, 122 Fed. 524,

affirmed in - 201 U. S. 332; 26 Sup. Ct. 478, Third Street By. Co. v. Lewis, 173 U. S. 457;

19 Sup. Ct. 451, Poabody v. Gold H m Mining Co. (C.C.A. 9th Cir.)

Ill Fed. 817.

"The suggestion in a complaint in an action at law that the de-fendant may or will set up a defense based on a statute repugnant to the Constitution, does not make the suit one arising under the Con-st! tution."


-7-

95 X—4403

Fergus Falls v. Fergus Falls Water Co., (C.C.A.8th Cir.) 72 Fed. 873.

"Where, however, the original jurisdiction of a circuit (now district) court of the United States is invoked upon the ground that the determination of the suit depends upon some question of a federal nature, it must appear at the outset, from the dtidlaratioir or the bill of the party suing, that the suit is of that charactcr; in other words, it must appear in that class of cases, that the suit was one of which the circuit (now district) court at the time its jurisdiction is in-voked, could properly take cognizance of. If it does not so appear, then the court, upon demurrer, or motion, or upon its own inspection of the pleadings, must dismiss the suit; just as it would remand to the state court a suit which the record at the time of removal, failed to show was within the jurisdiction of the circuit court.

"It cannot retain it in order to see whether the defendant may not raise some question of a federal nature upon which the right to re-cover will finally depend; and if so retained, the want of jurisdiction is not cured "by an answer o^.plea which may suggest a question of that kind,"

Metealf v. Watertown, 128 U. S. 586; 9 Sup. Ct. 173.

"In other words, as was said, in substance, in Osborn v. U. S. Bank, 9 Wheat. 739; the right of the plaintiff to sue does not depend upon the defense which the defendant may choose to sot up, because the right to sue exists, if at all, before any defense is made, and must be judged exclusively as of the date of the filing of the complaint, on the state of facts therein disclosed."

St. Paul Ry. Go* v* St# Paul, etc. 68 led. 2. Decree affirmed 18 Sup* Ct. 946.

In San. Francisco v* United Railroads. (C.C.A. 9th Cir.) 190 Fed.

507. the plaintiff alleged that section 499 of the California Civil Code

entered into and became a part of its contract with the defendant city and

that ordinances adopted by the city with a view to the construction of a

municipal railroad and its acts in carrying out those ordinances would result

in an impairment of plaintiff's contract as expressed in its franchise.

Holding that no federal question was presented, the Court said;

"If, as alleged in the bill., the impairment of the appellee's contract consists in the fact that the city is proceeding to dis-regard its covenant, and to construct a road in violation of the pro-visions of Sec. 499, which was made a part of the contract, we are confronted with the fact that the city is proceeding to violate a law


96 -8- :.;:-4403

of the state* If its action is illegal and unwarranct ,15 it is primarily so "because it violates that lav;. If its action had the effect to impair the obligation of the contract, it also has the effect to violate the express and paramount law of the state, and it is therefore void, and is not state legislation. .... In Barney v. Hew York, 193 U. S. 430; 24 Sup. Ct. 502, jurisdiction was in-voked on the ground of the deprivation of property without due process of law in violation of the fourteenth amendment. It ap-peared on the face of the plaintiff's bill that the acts of the city officers therein complained of were not only unauthorized, but were forbidden by state legislation. It was held that no fed-eral question was involved. The Court said! 1 In the present case defendants were proceeding, not only in violation of the provisions of the law, but in opposition to plain prohibition.1"

In Parson v. Chicago, 138 Fed. 184, the Court said:

"Turning, now, to the question as to whether the suit is one arising under the Constitution, two elements mast concur to give the court jurisdiction; The suit must be one actually and not potentially arising under the Constitution, as said by Mr, Chief Justice Fuller, speaking for the court in Hew Orleans v. Benjamin, 153 U. S. 411, 424, and it must appear at the outset that the al-leged deprivation was by the act of the State. Barney v. H. Y., 193 IT. S. 430« ... The court mast look to the substance of the bill to determine whether there is in fact a federal question presented, or whether the said federal question, if there be one, is but in-cidental to the controversy. ,.. The federal courts should be slow to assume jurisdiction, unless it appears that a federal question is necessarily involved in the case,"

The following cases are to the same effect:

Oregon Short Line v. Skottowe, 162 U, S. 490; 16 Sup. Ct. 869,

Brown v. Keone-, 8 Pet. 112; 8 U. S. (L. Ed.) 885, Sheldon v. Sill, 8 How. 441; 12 U. S. (L. Ed.) 1147, Robertson v. Cesse, 97 U. S. 646, Hanford v. Davies, 163 U. S. 273; 16 Sup. Ct, 1051, State of Tennessee v. Union Bank, 152 U. S. 454;

14 Sup. Ct. 654, Defiance Water Co. v. City of Defiance, 191 U. S,

143; 24 Sup. Ct. 53, Little York Co. v. Keyes, 96 U. S.199; %4 L. Ed. 656, Blackburn v. Portland Mng, Co, 175 U. S. 571;

20 Sup, Ct. 222, Shreveport v. Cole, 129 U. S. 36; 9 Sup. Ct. 210, Hew Orleans v. Benjamin, 153 U, S. 411; 14 Sup, Ct.

905, 909, Arbuckle v, Blackburn, 191 U. S. 405; 24 Sup. Ct. 148,


Spencer v. Duplan Silk Co. 191 U. S. 526; 24 Sup. Ct. 174.

Peabody &old %bg. Co. v. Gold Hill Co. (C.C.A. 9ch Cir.) Ill Fed. 817.

That the court, separately from ths trial on the merits, should

hear and determine questions relating to its jurisdiction in any action be-

fore it, whether those questions be raised by objections to the complaint, or

by a plea in abatement, or whether taken advantage of pending the trial, is

unquestioned.

American Sheet Co. v. Wenzler, 227 Fed. 321.

This uniform rule is so well stated in Shulthis v. McDougal.

225 U. S. 561. 32 Sup. Ct. 704 that further authority seems unnecessary.

In this case, involving the question of the title to certain oil

lands, the jurisdiction of the Supreme Court was challenged on a motion to

dismiss the appeal. In opposing the motion, the appellants contended that

the case was one arising under certain laws of the United States and was not

one, therefore, dependent upon diversity of citizenship. In considering this

contention, the Court said:

"The consideration of the contention will be simplified if, before taking up the specific grounds on which it is advanced, the rales by which it must be tested are stated. They are:

"1. Whether the jurisdiction depended upon diverse citi-zenship alone, or on other grounds as well, must be determined from the complainant's statement of his own cause of action, as set forth in the bill, regardless of questions that may have been brought into the suit by the answers or in the course of subse-quent pleadings. ...

"2. It is not enough that grounds of jurisdiction other than diverse citizenship may be inferred argumentatively from the statements in the bill, for jurisdiction oezuot rest on any ground that is not affirmatively ar„d distinctly set forth. ...

"3. A suit to enforce a right which takes its origin in the laws of the United, utaccs is not necessarily, or for that reason alone, one arising uider those laws, for a suit does not so arise unless it really and substantially involves a dispute or controversy respecting the validity, construction or effect of such a law, upon the determination of which the result depends.


98 -10- X-4403

This is especially so of a suit involving rights to lands acquired. under a la# of the United States. If it were not, every suit to establish title to land in the central and western states would so arise, as all titles in those states are traceablo back to those laws....

"To sustain the contention that the suit was one arising under the la\7S of the United States, counsel for the appellants point out the statutes... But the bill makes no mention of those statutes or of any controversy respecting their validity, construction or ef-fect. Neither does it by necessary implication point to such a con-troversy. "

Emerson v. Baker 3 Fed. (3d) 831. (Jan. 30. 1925)

Judged by the matter alleged in the complaint, which, as has been

seen, is the only source from which a foundation for jurisdiction can be de-

rived, it certainly cannot bo said that the cause of action therein stated,

substantially or at all "involves a dispute or controversy respecting the

validity, construction or effect of any Federal law, upon the determination

of which tho result depends." The action can be decided solely by reference

to the common law liability for tort. Mo portion of the Reserve Act is

pleaded; ho interpretation of the Reserve Act is asked; no claim is made

that any tight accorded by the Act has been infringed or that any consti-

tutional right is, by tho Act, denied. Federal jurisdiction was invoked and

is now maintained solely upon the ground that the defendant exists and con-

ducts its operations under Federal law. This being so, may this Court re-

tain jurisdiction to complete the trial of this case?

II

THE ACT OF CONGRESS OF FEBRUARY 13. 1925. EFFECTIVE MIT 13. 1925. (c. 229; 43 Stat. Sec. 12) DEPRIVES THIS COURT OF JURISDICTION FOUNDED UPON THE FEDERAL

INCORPORATION OF THE DEFENDANT.

The sixty-eighth Congress passed an act (Public-No. 415 H.R. 8206)

entitled, "An Act to amend the Judicial Code, and to further define the

jurisdiction of the Circuit Courts of Appeal and of the Supreme Court, and


99 -11- X-4403

for othefr purposes*" (cu229, 43 Stat.) Section 12 of this Act reads as

follows:

"That no district court shall have jurisdiction of any action or suit by or against any corporation upon the ground that it was incorporated "by or under an Act of Congress; Provided, that this section shall not apply to any suit, action, or proceeding "brought "by or against a corporation incorporated by or under an Act of Congress wherein the Government of the-United States is the owner of more than one-half of its capital stock."

Section 13 of the Act repeals certain sections of the Judicial ii

Code and certain existing Acts of Congress, among them section 5 of An Act

to amend an Act entitled 'An Act to codify, revise, and amend the laws re-

lating to the judiciary' approved March 3, 1911," approved January 28, 1915,

to Which repeal reference is hereinafter made.

Section 14 provides:

"That this Act shall take effect three months after its approval; but it shall not affect cases then -pending in the Supreme Court, nor shall it affect the right to a review, or the mode or time for exercising the same, as respects any .judgment or decree entered prior to the date when it takes ef-fect. (Underscoring ours.)

The Act was approved February 13, 1925, and goes into effect May

13, 1925.

Congress could not have used more positive language than that used

in section 12. Where jurisdiction is based upon the Federal origin of one

of the parties, as in this case, the jurisdiction of the United States Dist-

rict Court ends on.May 13, 1925. This intent is made additionally plain by

reason of the fact that section 12 of the new Act takes the place of sec-

tion 5 of the Act of January 28, 1915, (38 Stat. L, 803, ch. 22, sec. 5)

repealed.

"No court of the United States shall have jurisdiction of any action or suit by or against any railroad company upon the ground that said railroad company was incorporated under an Act of Congress."


100 -12- X-4403

By the recently enacted law this provision is repealed and

the same rale is applied to all corporations incorporated by or under an

Act of Congress. The defendant is such a corporation.

III.

THE ACT OF FEBRUARY 13, 1925. AFFECTS CASES PENDING WnM THE ACT TAKES EFFECT. AS WELL AS CASES THEREAFTER ARISING. IT DEPBIVI.S THIS COURT OF POWER TO PROCEED AT ALL WITH

THE TRIAL OF THIS CASE.

The above conclusion would seen to be inevitable from the very

wording of the Act* Section 14 thereof declares that the Act shall take

effect three months after its approval, May 13, 1925; but that it shall

not affect cases then pending in the Supreme Court. The omission of any

exception as to cases then pending in the District Courts which, by the

provisions of section 12 are divested of jurisdiction in certain cases,

clearly evinces an intention not to except cases pending in such District

Courts. Further, section 14 expressly provides that the Act shall not af-

fect the right to a review or the node or tine for exercising the same, as

respects any judgment or decree entered "prior to the date when it takes

effect." Thus, the Act does operate in respect to all judgments and de-

crees not entered prior to the date when it takes effect.

But we are not confined to a construction of the wording of the

Act to support the contention that the Act in question divests this court

of power to proceed in all cases pending upon its effective date, when

jurisdiction is predicated upon the Federal origin of one of the parties.

The rule that jurisdiction over pending cases is ousted by the repeal or

amendment of the statute upon which jurisdiction depends, was early laid

down and has been uniformly followed by the Supreme Court of the United


-12- • j£~4iX 1 0 1

States. The only oxcoption to this rale is representod by those ct:seti

whore the repealing or amending act contains a clause saving ponding cases

from its operation.

Norris v« Crocker. IS Row. 439; 14 I. Ed. 210

In this case an Act of Congress imposing a penalty for aiding in

the escape of fugitive slaves was repealed while an action brought for the

purpose of collecting the penalty fixed by the Act was in progress; the

Supreme Court holding that since the action for the recovery of the penalty

was pending at the time of the repeal of the Act, such repeal was a bar to

the action, the Court saying!

"Che suit was ponding below when the Act of September 18, 1850 was passed, and was for the penalty of $500 secured by the fourth section of the Act. As the plaintiff's right to recover depended entirely on the statute, its repeal deprived the court of jurisdiction over the subject matter. And in the next place, as the plaintiff had no vested right in the penalty, the Legis-lature might discharge the defendant by repealing the law. Wo therefore answer, to the second question certified, that the re-peal of the fourth section of the Act of 1793 does bar this action, although pending at the time of the repeal."

In the case of

McNulty v. E'.atty. 10 Howard. 646; 13 L. Ed. 353. the Court said:

"In the case of U, S. v. Boisdere's Heirs, 8th How. 121, it is said, that aa this court can exercise no appellate power ovor cases unless conferred on it by Congress. If the act conferring the jurisdiction has expired, the jurisdiction ceases, although the appeal or writ of error be actually pending in the court at the tine of the expiration of the Act. The cases on this point are referred to in the brief in that case and afford full authority for the principle, if any were needed. The writ of error, there-fore, fell with the abrogation of the statute upon which it was founded."

Ex parte MeCardle, 7 Wall. 506; 19 L. Ed. 264.

This case came before the Supreme Court on appeal from the Cir-

cuit Court for the Southern District of Missouri. The matter arose on a

petition for a writ of habeas corpus• A motion to dismiss the appeal


102 -14- X-4405

was made, argued and denied. Subsequently the Supreme Court permitted

reargument and while the matter was pending awaiting reargument, an Act

of Congress was passed affecting the jurisdiction of the Supreme Court in

such cases. The attention of the court was called to tne Act of Congress

restricting its jurisdiction and, holding that even while the matter was

pending before it, its jurisdiction could be and had "been foreclosed, the

Court said:

"On the other hand, the general rule, supported by the best elementary writers, is that when an Act of the Legislature is repealed, it must be considered, except as to transactions past and closed, as if it had never existed. And the effect of repealing Acts upon suits under Acts repealed has been de-termined by the adjudications of this court. The subject was fully considered in Morris v. Crocker, 13 How. 429, and more recently in Insurance Co. v. Ritchie, 5 Wall. 541; 18 1* Ed. 540. In both of these cases it was held that no judgment could be rendered in a suit after the repeal of the Act under which it was brought and prosecuted.

"It is quite clear, therefore, that this court cannot pro-ceed to pronounce judgment in this case* for it has no longed jurisdiction of the appeal; and judicial duty is no less fitly performed by declining ungranted jurisdiction than in exercising firmly that which the Constitution and the laws confer. ... The iqjpeal of the petitioner in this case must be dismissed for want of jurisdiction."

Baltimore and Potomac Ry. Co# v. Grant, 8th Otto 398; 25 L. Ed. 231;

In this case an appeal from the Supreme Court of the District

of Columbia to the Supreme Court of the United States involving less than

$2500 was pending at the time that an Act of Congress was passed limiting

appeals in such cases to those in which the amount in dispute, exclusive,

of the costs, exceeded the sum of $2500. The question presented was

whether, the jurisdictional amount having been changed while the case was

in process of appeal, the jurisdiction of the Supreme Court had been taken

away. The Court say:


-15- X-4403

11 t is equally well settled, that if a law conferring jurisdiction is repealed without any reservation as to pending cases, all such cases fall with the law. ... It is claimed, however, that taking the Act together, the intention of Congress not to interfere with our jurisdiction in pending cases is mani-fest. There is certainly nothing in the Act which, in express terms, indicates any such intention. Usually where a limited re-peal only is intended, it is so expressly declared. ... Indeed, so common it is, when a limited repeal only is intended, to in-sert some clause to that express effect in the repealing act, that if nothing of the kind is found, the presumption is always strong against continuing the old law in force for any purpose. ... There is nothing in the statute which indicatos any intention to make a difference between suits "begun and those not begun .... If it had been the intention to confine the operation of what w&s done to judgments thereafter rendered or td cases not pending, it would have been so easy to have said so; we must presume that Congtesti meant the language employed should have its usual and ordinary signification, and that the old law should be unconditionally repealed.

"Wi thou t more we conc lude t h a t o u r j u r i s d i c t i o n i n t h e c l a s s of c a s e s o f which t h i s i s one h a s been t a k e n away, and t h e w r i t i s a c c o r d i n g l y d i s m i s s e d . "

In the case of

Gates v. Osbo rne . 9 Wall. 567; 19 L. Ed. 748.

a jurisdictional question was raised and ^r. Justice Clifford, speaking for

the Court,said:

"Jurisdiction was conferred by an act of Congress, and when that act of Congress was repealed, the power to exercise such jurisdiction was withdrawn, and inasmuch as the repealing act contained no saving clause, all pending actions fell."

To the same effect see!

Yeaton v. U. S., 5 Cfanch 281; 3 L. Ed. 101, Hamilton Bank v. Dudley, 2 Pet. 492; 7 L. Ed. 496, B. & 0. Railway Co. v. Grant, 98 U.S., 398;

25 L. Ed. 231 Hendrix v. U.S. 219 U. S. 79; 31 Sup. Ct. 193, Hallowell v. Commons, 239 U. S. 506; 36 Sup. Ct. 202.

This rule is not confined to the Supreme Court of the United

States but has been uniformly followed by the other Federal courts, as well

as the state courts. 15 Corpus Juris. 825. Thus, in the case of Hpyle v.

New Orleans Railway. 23 La. Ann. 502. it was decided that even though


-16-

104 X-4403

judgment had boon rendered, a divestiture of jurisdiction "before tho

judgment is signed deprives the court of authority to sign it.

U# S. v. Kelley, (C.C.A. 9th Cir.) 97 Fed. 460; followed in Parr, v. Colfax - C.C.A. 9th Cir., 197 Fed. 302)

A former judgment of -the lower court was reversed on the writ

of error from the Circuit Court of Appeals and the cause was remanded for

new trial. After the mandate had issued, it was discovered that before

the Circuit Court of Appeals had rendered its decision, Congress had passed

an act abridging the jurisdiction of the Circuit Court and District courts

in cases such as the one then under consideration. A notion was made by-

defendant in error for an order recalling the mandate, upon the ground that

the court had been deprived of jurisdiction.

The Circuit Court of Appeals, deciding that tho lower court had

been deprived of jurisdiction while the case was pending, and its mandate

should therefore be recalled, since the lower court had no jurisdiction to

further try the case, said!

"The question arises whether the act deprives the courts of the United States of jurisdiction of causes which were pending at the tine of its enactment. The plaintiff in error invokes the well-settled rule that a prospective operation of a statute is presumed to be intended unless/!e§islative intent to the con-trary is declared, or necessarily implied, either from the contents of the statute or from the circumstances which attended its enactment. In the Circuit Court of Appeals for the Fifth Circuit, in U. S. v. McOrcry, 91 Fed. 295, it was held that the effect of the statute was to deprive the courts of the nited States of jurisdiction to entertain pending cases. The same view of the statute was taken by Kirkpatri-ck, District Judge, in Fairchild v. U. S. (91 Fed* 297) .... The Supreme Court in a series of decisions has recognized the doctrine tint, when jurisdiction of a cause depends upon a statute, the repeal of the statute, without a reservation as to pending cases deprives the court of all jurisdiction which the act conferred. ...

"We are unable to discover how a law which amends the act where-by jurisdiction was conferred differs from a repealing act such as the acts considered in the decisions above referred to. Such an


105 -17- :> 4

amendment is, in effect, a repeal. It repeals pro ta-rco tho grant of jurisdiction. It revokes a portion of the jj.rLc-diction which was conferred. There is nothing in the language of the act in question to indicate a purpose to except from its operations cases which were then pending. In the absence of such a reservation, the intention of Congress is clear. ... As amended, the statute expresses the measure of the court's power over pending cases. ... This court has no power to review the judgment of the circuit court in a matter of which the latter had been divested of its jurisdiction. This court can act upon the circuit court only through its mandate. It will not issue its mandate to a court which has no power to enforce it. ...

"The argument that the construction which we place upon the act will in some cases lead to harsh results is one that would have persuasive force if the language of the act left its meaning doubtful. In view of the settled construction which has been placed upon similar legislation, it must be presumed that, in omitting a saving clause as to pending suits, Congress intended all the results of its act, and that it. had in view the possible exerci?o of its own power to grant relief in cases in which the dismissal of pending causes and the intervention of the Statute of limitations might result in hardship. The motion for an order recalling the mandate will be allowed, the judgment of this court set aside, and the writ of error dismissed."

It is interesting to note that Judge Gilbert, who wrote the

opinion in this case, was urged to his conclusion by Jos. 1ST. Teal, Esq.,

there counsel for defendant in error, and here one of counsel for the de-

fendant , Federal Reserve Bank.

The language of the court is particularly apt, for section 14 of

the Act of Congress of February 13, 1925, not only does not evince any in-

tention to save pending cases from the operation of the statute, but does

plainly evince an intention to allow the statute to operate on pending cases.

The Act says:

"This Act shall take effect three months after its approval; but it shall not affect cases then pending in the Supreme Court, nor shall it affect the right to a review, or the mode or time for exercising the same, as respects any judgment or decree entered prior to the date when it takes effect."

Patently, the act is intended to affect cases pending in the District courts

on the date when it takes effect, as well as the right to a review and the


106 -18- X-4403

mode and time for exercising same, as respects all judgments and decrees

not entered prior to the date when it takes effect# The conclusion is in-

escapable that the act serves to divest the District courts of all juris-

diction in cases pending on the effective d a t e of the Act, May 13, 1925*

Bond v# United States, 181 Fed. 63 3 (Clrci?.t Heart District of Oregon* 1910),

This was a suit brought by an Indian to declare heirship in certain

allotted lands# The Government defended the suit on the merits. The report

of the case does not show in what manner the question of jurisdiction was

raised.and, so far as the decision shows, that question was investigated by

the court upon its own motion.

After issue had been joined but before the trial of the case,

Congress passed an act (June 25, 1910; 36 Stat. 855), declaring that in

matters such as the one involved in this suit, the Secretary of the In-

terior should decide the question of heirship and "his decision thereon

shall be final and conclusive#** There was no statute expressly repealing

an existing act which conferred upon the United States District Court juris-

diction to entertain cases of the kind in question#

Judge Sean, in passing upon the question of jurisdiction, said;

"If the jurisdiction thus conferred upon the Secretary of the nterior is exclusive, the court should proceed no further in this suit but should dismiss it..# Unless the court has juris-diction to ascertain and determine disputes arising over the question of heirship of deceased allottees by virtue of some act of Congress* and especially if Congress has conferred exclusive jurisdiction over that question upon another department of the Government, the court is without authority to proceed in the matter#*

After quoting the statute upon which jurisdiction had depended

prior to the enactment of the latter statute giving the Secretary of tiie

Interior jurisdiction, the Court continued:


-19- X-4403

"If Congress intended by the act of 1901 to confer upon the courts jurisdiction to determine questions of heirship and descent as it may affect allotted lands during the trust period, it was a Jurisdiction, which it could take away at any time. This, it did "by making the Secretary of the Interior a special tribunal to determine such questions and declaring that his de-cision shall ho final and conclusive, thus making the juris-diction conferred upon him exclusive and to that extent operated as a repeal, by implication, of the act of 1901, conferring jurisdiction upon the courts, ... and as there is no saving clause, the authority of the court immediately ceased over pending cases. In qy judgment, therefore, the court has no jurisdiction of this suit, but the qaestion sought to be litigated mast be de-termined by the Secretary of the Interior." (Underscoring ours.)

This case was followed by Pel-Ata-Yakot v. United States, de-

cided by the District Court for the District of Idaho, and reported in

188 Fed. 387.

In this case, Judge Dietrich, quoting the Act of Congress con-

ferring upon the Secretary of the Interior power to render final decisions

in Indian allotment cases, said:

"The provision is comprehensive, and clearly evinces the intention of Congress to confer exclusive jurisdiction to de-cide such controversies upon the Secretary of the Interior. This being true, it oust bo held that by implication the existing act conferring jurisdiction upon the courts, was repealed. ... The repeal thus effected being without any reservation as to pending cases, the present case, although commenced prior to the of the repealing act, must fall with the act upon which it rested," (Underscoring ours.)

Neither of these cases were taken to the Circuit Court of Ap-

peals but in the case of Parr v. Colfax. 197 Fed, 302. tiae Circuit Court

of Appeals for the Ninth Circuit decided the same question in identically

the same way, saying:

"What is the effect of that statute upon the appeal in this case? The contention is made that it has no application to a case which was begun before the date of the statute, but we do not think so. There is in the statute no clause reserving jurisdiction as to pending cases, and the meaning of the statute is clear that exclusive jurisdiction is given to the Secretary of the Interior of all cases where an Indian, to whom allotment of land had been made or might thereafter be made, dies or had


-20- X - 4 4 0 7

died, intestate before the expiration of the trust period and before the issuance of the fee simple patent. That construction "being given, the statute deprived the Circuit Court of juris-diction to entertain an action such as is here under considera-tion and thereby, as a necessary incident, it took away the juris-diction of this court to entertain an appeal from the decree of the Circuit Court sued out after the statute went into effect, and this for the reason that the act deprives this court of the power to enforce any judgment it may render on appeal. The appeal is dismissed."

It will be noted that in these cases the court held that the

jurisdictional statute previously existing was repealed by implication,

by virtue oi the fact that final authority was vested in another depart-

ment of the Governments In the present case there is no repeal of tho

statute conferring general jurisdiction upon the District Courts but there

has been enacted a special statute eliminating from that jurisdiction suits

brought against corporations organized under acts of Congress where juris-

diction rests upon that ground. That the District Courts have been di-

vested of jurisdiction in cases such as the one at bar does not, therefore,

rest for its support upon inference or implication, but upon a positive

Congressional enactment.

IV.

THIS ACTION IS NOT 0MB "ARISING- UNDER QHE LAWS OF THE UNITED STATES" EXCEPT AS THE DEFENDANT IS A FEDERAL CORPORATION.

We have seen that the plaintiff in its complaint does not at-

tempt to state a Federal question except by alleging that the defendant is

a Federal corporation and operates under Femoral law. %e have also seen

that by the recent Act of Congress, jurisdiction predicated upon this

ground has been taken av7o.y.

But, i t may be r.aid, every act of the d e f e n d a n t i s gove rned by

F e d e r a l law and grows out of such laxr; t h e r e f o r e any a c t i o n a g a i n s t such

a c o r p o r a t i o n must n e c e s s a r i l y be one a r i s i n g u n d e r a law of t h e U n i t e d


-21- X-4403 J L V '

States, irrespective of the allegations of the complaint. Any such con-

tention is, of course, at once confronted with the uniform rule discussed

in Subdivision I ante, that jurisdiction cannot he presumed or left to

conjecture hut must be predicated solely upon what the plaintiff sets up

in its complaint as a ground for jurisdiction. Moreover, the gradual re-

striction by Congress of the jurisdiction of the United States Courts and

the decisions interpreting the Congressional enactments so Restricting juris-

diction show plainly that no such contention is tenable.

Since the case of Osborn v. jBaaki 9 Wheat;738; 6 Ut S> (L.Ed) 204.

it has been uniformly held by the Supreme Court that a mere averment that

the plaintiff or defendant is a corporation organized under an act of

Congress makes the case one "arising under the laws of the United States."

Bankers Trust Co. v. T. & P.Ry. 241 U. S. 295, Pacific Removal Cases, 115 U. S. 1; 5 Sup. Ct. 1113, American Bank v. Fed. Reserve Bank, 256 U. S. 350;

41 Sup. Ct. 499.

In the case last cited, the Supreme Court, referring to a Federal

Reserve Bank say:

"The principal defendant was incorporated under the laws of the United States and that has been established as a ground of jurisdiction since Osborn v. Bank."

The only theory upon which jurisdiction was sustained in the

Osborn case, the Pacific Removal cases and the ones which follow them, was

the Federal character of one of the parties. A^& now, Congress has said

that "no district court shall have jurisdiction of any action or suit by

or against any corporation upon the ground that it was incorporated by or

under an Act of Congress." The intent to destroy the basis upon which juris-

diction was predicated in these early cases could not be made plainer.

This curtailing of jurisdiction in action by and against federal


110

-22- X-4403

corporations has been a matter of gradual growth.

Xfp to 1882 the right of national banks to sue and be sued in

Federal courts was based upon their Federal origin. The passage of the

Act of July 12, 1862 (Comp.. Stats. 9665; 22 Stat. L» 172) left the juris-

diction as to these banks, with certain specified exceptions, dependent on

diversity of citizenship, or the existence of a federal question.

Up to 1915 railroad companies incorporated under acts of Congress

were subject to suit and could sue in the Federal courts by reason of their

Federal incorporation.,

T. and P. Ry. Co. v. .Cody. 166 U. S. 608: 41 L. Ed. 1134.

Congress, by the Act of January 28, 1915, (ch, 22, sec. 5, 35 Stat,

at L. 803), provided that no Federal jurisdiction should attach in the case

of suits by or against any railroad company upon the ground that said rail-

road company was incorporated under an Act of Congress. The Congress has

now seen fit to still further restrict the jurisdiction of the Federal court

by saying that no district court shall have jurisdiction of suits or actions

by or against any corporation upon the ground that it was incorporated under

an Act of Congress, at the sane time repealing the Special statute in regard

to jurisdiction against Federal railroad companies. Thus the gradual re-

striction of Federal jurisdiction is plainly seen, applying first to national

banks, next to federally incorporated railroads, and, by the recently en-

acted statute, to all Federal corporations.

That Congress has this power cannot be questioned, for the Con-

stitution left to Congress the sole power to declare the extent and dis-

tribute the jurisdiction among the Federal courts. These courts possess no

powers except such as the Constitution and the laws of Congress concur in


Ill —23™ Jv -440o

conferring and the pr§sropiotion is always against jurisdiction unless it

affirmatively appears.

Hashville v. Cooper, 6 Wall. 252; 18 L. Ed. 852, U. S. v. S. P. Ry. Co. 49 Fed. 297, Hanford v. Davies, 163 U. S. 273; 41 L. Ed. 157.

As has "been already shown, a case presents a federal question

only where, by the allegations of the complaint, it is apparent that it

will "become necessary to construe the Constitution, laws or treaties of

the United States in order to reach a correct decision of the material

issues or to decide as to the existence of some right asserted under the

Federal Constitution or laws. The Constitution or laws of the United States

mast "be directly involved and the existence of such question must be set

forth in the complaint. The issue mast be one of law, and not of fact.

Simpkins Fed. Practice. Rev. Ed. 395. 396. 409.

A mere reference to the Federal statute or even a claim that it

will become necessary to construe a Federal statutet does not set up a

federal question. It mast appear from the complaint that the recovery

sought is based upon the construction given and that it is the substantial

issue.

Simpkins. Fed. Practice. Rev. Ed. 416. 418.

Where, as in this case, the answer raises no Federal question,

the case should be dismissed at once.

Robinson v. Anderson, 121 U. S. 522, 524; 30 L. Ed. 1021, Hooker v. Los Angeles, 188 U. S. 318; 47 L. Ed. 491, Devine v. Los Angeles, 202 U. S. 338; 50 L, Ed. 1055, Boston Min. Co. v. Montana Ore Co., 188 U. S. 634;

47 L. 3d. 633.

The case of

Bankers Trr.et Co. v. Tt & P< Ry* Co* 241 U* S.« 395; 36 Sup* Ct* 569«


112 —24:*- X—440o

is directly in point on this phase of our contention, This was a suit to

foreclose a mortgage given by the railway company. It was "brought in the

United States District Court for the Northern District of Texas and was dis-

missed for want of jurisdiction. A direct appeal was taken to the Supreme al

Court on the Jurisdiction/question.

The bill alleged that the defendant corporation was one created

and existing under the laws of the United States with its principal place

of business and its general offices in the Northern District of Texas, The

Act of Congress under which the railway coiripany was created provided, in

part| that such company " shall be able to sue and be sued, plead and be im-

pleaded, defend and be defended in all courts of law and equity within the

United States." By motion to dismiss the railway company challenged the

jurisdiction of the District "curt upon the ground of the special statute

passed by Congress, heretofore referred to, which read as follows;

MHo court of the United States shall have jurisdiction of any action or suit by or against any railroad company upon the ground that said railroad company was incorporated under an Act of Congress." (Act of Jan. 28, 1915, ch. 22, sec. 5; 38 Stat, at L. 803.) *

The plaintiff insisted that, in refusing to entertain the suit,

the District Court erred because the bill showed that the suit was one

arising under the laws of the United ^tates in that it arose under an Act

of Congress and upon the further ground that the bill showed the suit to

be one between citizens of different states* Deciding both of these con-

tentions in the negative, the Supreme Court said:

"Upon reading Sec. 1 of the Act of 1871, it is plain that the words 'shall be able to sue and bo sued, plead and be im-pleaded, defend and,be defended in all courts of law and equity within the United States' were not intended in themselves to confer jurisdiction upon any court. As the context shows, Congress was not then concerned with the jurisdiction of courts, but with


-25- 113

the faculties and powers of the corporation which it was creating; and evidently all that was intended was to render thin corporation capable of suing and being sued by its corporate name til any court of law or equity - federal, state or territorial - whose juris-diction as otherwise competently defined was adequate to the oc-casion, Had there been a purpose to take suits by and against the corporation out of the usual jurisdictional restrictions relating to the nature of the suit, the amount in controversy, and the venue, it seems reasonable to believe that Congress would have expressed that purpose in altogether different words* ...

As long ago as Osborn v. Bank of United States, it was settled that a suit by or against a corporation chartered by an Act of Congress is one arising under the laws of the United States. ... ffcer the Act of March 3, 1875 extended the jurisdiction of the circuit courts to cases arising under the laws of the United States, the ruling just quoted was uniformly followed and applied in suits by and against federal corporations...... save where the particular suit was with-drawn or excluded from that jurisdiction by some specific enactment, like that of July 12, 1882 (22 Stat, at L. 162) placing most of the suits by and against nati'onal banks in the same category with suits by and against banks not organized under the laws of the United States...

u^t results that if the general jurisdictional provision now embodied in Sec. 24 of the Judicial Code, respecting suits arising under the laws of the United States, were alone to be considered, it would have to be held that the District Court had jurisdiction of the present suit as one falling within that class by reason of the incorporation of the Texas and Pacific Railway Company under a law of the United States. But Sec. 5 of the Act of Jan. 28, 1915 mast also be considered. It is a later enactment, is shown by the title to be amendatory of the Judicial Code, and, as has been seen, declares that 'no court of the United States shall have jurisdiction of any action or suit by or against any railroad company upon the ground that said railroad company was incorporated under an Act of Congress.1

These are direct and comprehensive words, and when read in the light of the settled course of decision just mentioned, must be taken as requiring that a suit by or against a railroad company incorporated under an Act of Goiyrress, be not regarded, for jurisdictional purposesf as arising under the laws of the United States, unless there be some adequate ground for so regarding it other than that the company was thus incorporated* Primarily, there was a purpose to effect a real change in the jurisdiction of such s u i t s * . A n d so, when due regard is had for the terms of the amendatory section of 1915 and for the real basis of the jurisdiction affected, the conclusion is unavoidable that what is intended is to make the fact that a railroad company is incorporated under an Act of Congress - that is to say, derives its existence, faculties, and powers from such an act - an entirely negli-gible factor in determining whether a suit by or against the company is one arising under the laws of the United States.

"Upon examining the bill in the present suit, it is certain that it does not arise under those laws apart from the incorporation of the Texas and Pacific Company under Acts of Congress ... Portions thereof are copied into the bill as showing that the mortgage sought to be enforced was given under a power conferred by Congress, but this does not help the jurisdiction. As under the amendatory section,


114 -26- X-4403

the fact that the company derives its existence and. all of its faculties and powers from a Federal charter, cannot avail to give jurisdiction, it is obvious that to dwell upon the fact that any particular power comes from the common source must "be equally unavailable."

The language of the Supreme Court in this case, applied to para-

graph two of the complaint in the Brookings case, will convince at once

that there are no allegations in that paragraph sufficient to sustain juris-\

diction on any ground other than the federal incorporation of the defendant.

The fact that the defendant Was organized, created, and exists under the

laws of the United States is immaterial. The jurisdiction is not aided by

the additional allegations that the defendant has duly organized a branch

bank in pursuance of the Federal Reserve Act, because as ^r. Justice Van

Deventer says, in the Bankers Trust Company case, under the recent statute

the fact that the defendant derives its existence, its franchise and its

powers from a Federal charter cannot avail to give jurisdiction* Therefore*

to dwell upon the fact that any particular power comes from Federal source

or that any act has been done under Federal authority, must be equally

unavailing to confer jurisdiction.

Western Union Telegraph Company v. «*kni Arbor Railroad. 178 U. S. 239: 30 Sup, Ct. 867.

This was a bill filed in the state court of Michigan against the

railroad company to restrain the defendant from interfering with the right

of the telegraph company in certain telegraph lines along the defendant * s

railroad. % e bill stated that the telegraph company was doing business in

many parts of the United States and that it had filed with the Post Master

General its acceptance of the provisions of a certain Act of Congress re-

lating to telegraph companies. It further alleged that the telegraph com-

pany had the right to maintain its telegraph line under the provisions of


-27-

115 X-4403

the statutes of the United States*. The action was removed by the de-

fendant to the Circuit Court of the United States, upon a petition alleging

that the action was one arising under the laws of the United States, citing

the specific Acts of Congress to which the bill of complaint referred. The

defendant filed an answer and cross-bill and the cause was submitted to the

Circuit Court. That court dismissed the bill and from the decree of dis-

missal an appeal was taken to the Circuit Court of Appeals which affirmed

the docree.

Mr. Chief Justice Fuller, speaking for the Supreme Court, said:

"Defendant's application to remove was based on the averment that the suit arose under the Constitution and laws of the United States. Whether it did so arise depended on complainant * s state-ment of its own case. The sixth and seventh paragraphs of the bill contained all the defendant could have relied on as bringing the case within that category. Those paragraphs were to the ef-fect that conplainant had accepted the provisions of the Act of Congress and that, independent of the contract, it had a right to maintain its telegraph line under the provisions of the Statutes of the United States. .....

"When a suit does not really and substantially involve a dis-pute or controversy as to the effect or construction of the Con-stitution or laws of the United States, upon the determination of which the result depends, it is not a suit arising under the Con-stitution or laws. And it must appear on the record, by a state-ment in legal and logical form, such as is required in good pleading, that the suit is one which does really and substantially involve a dispute or controversy as to a right which depends on the con-struction of tho Constitution or some law or treaty of the United States, before jurisdiction can be maintained on this ground. We are unable to perceive that paragraphs 6th and 7th mot this re-quit oment and it does not appear to us that they were intended to do so by the pleader* ... It is entirely clear that there were no averments in the bill in respect to this contention, which would bring the case within tho category of cases arising under the Con-stitution or laws of the tfnited States so that jurisdiction could be held to have rested on that ground.0

The rule announced in tho foregoing cases might bo multiplied by

the citation of an endless number of other decisions of the Supremo Court.

A few, however, will suffice to show the uniformity of the principle in-

volved.


- 2 8 -

116 iOo

Cohens v. Virginia, 6 Wheat. 264; 5 L„ 3d, 257, leather Mfg. Co..v. Cooper, 120 U. S. 778;

7 Sup. Ct. 777, Whittemore v. Amoskeag National Bank, 134 U. S. 527;

10 Sup. Ct, 592, Continental Bank v. Buford, 191 U. S. 119;

24 Sup. Ct. 54, Spencer v. Duplan Silk Co., 191 U. S. 526;

24 Sup. Ct. 174,

In the case of Leather Mfg. Co. v. Cooper, cited above, referring

to the statute localizing national "banks, the court said:

"This was evidently intended to put national "banks on the same footing as the "banks of the state where they were located for all the purposes of the Jurisdiction of the courts of the United States. ... The removal of this class of cases from a state court to a cir-cuit court was first provided for by the Act of March 3, 1875, in that clause of Sec. 2 which relates to suits'arising under the Con-stitution or laws of the United States'as construed in the Pacific Railroad Removal cases. Then the Federal and state courts had con-current jurisdiction for suits "brought "by or against national "banks and a suit of that character begun in a state court could be removed.., because, as a national bank is a Federal corporation, a suit by or against it is necessarily a suit arising under the laws of the United States. But the Act of 1882 provided in clear and unmistakable terms, that the courts of the United States should not have jurisdiction of such suits thereafter brought. ... Consequently, so long as the Act of 1882 was in fotco, nothing in the way of jurisdiction could be claimed by a national bank because of the source of its incorporation. A national bank was by that statute placed before the law in this re-spect the same as a bank not organized under the laws of the United States."

V,

THIS ACTION IS NOT ONE "BETWEEN CITIZENS OF DIFFERENT STATES" NOR "BETWEEN CITIZENS OF A STATE AND FOREIGN STATES^ CITIZENS OR SUBJECTS.

Section 24 of the Judicial Code, defining the jurisdiction of

district courts, provides, so far as applicable to this case, as follows:

"The district courts shall have original jurisdiction as follows:

"First. Of all suits of a civil nature, at common law or in equity...where the matter in controversy exceeds, exclusive of interest and costs, the sum or value of Three Thousand Dollars, and (a) arises under the Constitution or laws of the United States, or treaties made, or which shall be made, under their


117 *29* X—4:4.0*3

authority, or (b) is between citizens of different states, or (c) is between citizens of a state and foreign states, citizens or subjects .

It may be contended that, granting this is not an action arising

under the laws of the United States and conceding that the Federal character

of the defendant does not serve to confer jurisdiction, this is an action

between a citizen of the State of Oregon and a citizen of another state and,

t^sa^' hofefoi ,''' jurisdiction attaches by reason of diversity of citizen-

ship* Any such contention is entirely untenable.

This same question, in another phase, was at issue in the case of

Bacon v. Federal Reserve Bank of San Francisco. 289 Fed. 513.

That case involved the question of whether or not the Federal Reserve Bank

of San Francisco was an inhabitant of the State of Washington by virtue of

the fact that it maintained an office in that state, and therefore subject

to suit against its objection, in the United States District Court for the

Eastern District of Washington, Judge Heterer decided this question in the

negative, holding that the Reserve Bank was an inhabitant of the Northern

District of the State of California within the meaning of section 51 of the

Judicial Code but that it was not a citizen of either the State of Wash-

ington or the State of California. In this case, if it had been determined

that the Reserve Bank had any state citizenship, the United States District

Court would have had jurisdiction, either upon the ground of diversity of

citizenship or upon the ground that the defendant was a citizen of the State

of Washington and therefore amenable to process served in that state. In

the Bacon case the court said, in part:

"The defendant, Federal Reserve Bank, is not a citizen of California, it being incorporated under an Act of Congress; its activities are not confined to a single state or locality, but are carried on in different states. ... The defendant Federal


of

-30- X-4403

Reserve Bank "bears the same relation to the United States, or at least to the Federal Reserve District, as a corporation does to the state of its creation. It is a creature of the Congress. It is a citizen, if it may be so termed, of the United States. It is transacting business under and by virtue of national authority."

In Fletcher's Enc. of Corporations, Vol. 1, p. 866, it is said*

"A national corporation - that is, a corporation created by Congress in the exercise of its powers as the Legislature of the United States - is not regarded as a foreign corporation, but as a domestic corporation, in any state or territory in which it may do business, or in which it may have an office* ... A railroad company, incorporated under Acts of Congress, whose activities and operations were not intended to be, gad are not in fact, con-fined to a single state, but are carried on in different states, is not a citizen of any state for the purpose of Federal juris-diction on the ground of diversity of citizenship."

This same question was decided by the Supreme Court in the case

Bankers Trust Co. v. T. & P. Ry» Co. 4 241 U.S. 295; 36 SUP. Ct. 569

heretofore cited on another point. In that case the Court said:

"Whether ^his is a suit between citizens of different states tui'ns upon whether the Texas and Pacific Company id a citizen of Tex&Si It is doubtful that the pleader intended to state a case of diveffce citizdnGhip; but* be this as it may. we are of the opinion that the bdmpany is not a citizcn ff niiy state. It was incorporated under acts of Congress, not under state laws; and its activities and operations were not to be confined to a single state; but to be carried on, as in fact they were, in different states. Sf bourse, it is a citizen of the UnitedStates in the sense that a corporation organized under the laws of one of the states is a citizen of that state, but it i# not within the clause of the Fourteenth Amendment which declares that native born and natural-ized citizens of the United States shall be citizens of the state wherein they reside. Nor has Congress said that it shall be re-garded as possessing state citizenship for jurisdictional purposes, as isdone in respect of national banks by Sec. 24, par. 16, of the Judicial Code. In short, there is no ground upon which the company can be deemed a citizen of Texas, and this being so, the suit is not one between citizens of different states."

State of Texas v. Interstate Commerce Commission. 258 U. S. 158: 42 SUP. Ct. 261.

In this case the Supreme Court decided that the Interstate


-31-

119 X-4403

Commerce Commission and the Railroad Labor Board, when sued by a state

as corporate entities created by the United States for governmental pur-

poses, are not citizens of any state within the provisions fixing the juris-

diction of the Federal courts,

A bill was brought in equity in the Suprmo Court by the State of

Texas against the Interstate Commerce Commission and the Railroad Labor

Board. The state sought a declaration that the transportation act was un-

constitutional; that all action taken thereunder should be declared void;

and that the defendants should be restrained from proceeding under the Act.

The defendants were referred to as citizens of states other than Texas, for

the purpose of vesting jurisdiction. The Court said:

"Both defendants are sued as corporate entities created by the United States for governmental purposes; and, if this be their status, they a,re not citizens of any state, but have the same relation to one state as to another. So, to enter-* tain the suit, we should have to find some ground of jurisdiction other than the one suggested. ... It is only where rights, in themselves appropriate subjects of judicial cognisance, are being; or about to "be affected prejudicially by the application or enforcement of a statute that its validity may be called in question by a suitor 6nd determined by an exercise of the ju-dicial power. .. .What has been said suffices to show that we are not at liberty to entertain the bill in the exercise of our limited original jurisdiction.11

Petri v. Commercial National Bank. 142 U.S. 644; 12 Sup.—Ct.325.

This case involved the question of whether the fourth section

of the Act of Congress of March 3, 1887 (24 Stat# 552), declaring national

banks, for the purposes of actions by or against them to be citizens of the

states in which they are located, prevented national banks from bringing

actions in the Federal courts on the ground of diversity of citizenship.

Mr. Chief Justice Fuller, resolving this question in the mgative,

reviewed the legislation in relation to national banks and concluded by


-32-120

X-4403

quoting the provisions of the fourth section of tho Act of July 12, 1882,

which is as follows:

"Jurisdiction for suits hereafter brought "by or against any association established under any law providing for national hanking associations, shall be the same as, and not other than, the jurisdiction for suits by or against banks not organ-ized under any law of the United States, which do or might do banking business where slich national banking associations might be doing business when suits may be begun,"

Commenting upon this statute, the Court say:

"Hence the jurisdiction of the circuit courts over suits by or against national banks could no longer be asserted on the ground of their Federal origin, as they were placed in the same category with banks not organized under the laws of the United States... So far as the mere source of its incorporation rendered suits to which a national bank might be a party cognizable by the circuit courts, that was taken away, bat the jurisdiction which those courts might exercise in such suits when arising between citizens of different states or under the Constitution or laws of the United States, except in that respect, remained unchanged."

So, in the case at bar, it must be apparent that the enactment

by Congress of the recent statute creates a situatioh where jurisdiction

by the District Courts over suits by of against Federal reserve banks can

no longer be asserted on the ground of their Federal origin* This statute

places the Reserve banks in the same category with banks not organized

under the laws of the United States, in so far as jurisdiction of the

Federal courts is concerned. Of course it is true that jurisdiction of the

Federal courts remains in so far as diversity of citizenship is concerned

and in so far as actions arising under the laws of the United States are

concerned, but, as has been seen, the case at bar involves neither of these

questions. VI.

CONCLUSION

Summarizing, we submit the following:

First. The jurisdiction of this court is predicated in the complaint upon


121 -33- X--4403

the sole ground that the defendant is a creature of the Federal law and

therefore subject'to suit in this court.

Second, The complaint is the only source from which the "basis of juris-

diction can he ascertained. If not adequately pleaded there* jurisdiction

cannot he aided by judicial knowledge, the allegations of the subsequent

pleadings nor the testimony developed at trial.

Third, Congress has, by the Act of February 13, 1925, divested this court

of jurisdiction upon the only ground stated in the complaint.

Fourth. Jurisdiction cannot be predicated upon the ground of diversity of

citizenship because this is not the theory of the complaint, because there

is no diversity of citizenship, the defendant not being a citizen of any

state, and because this Court is now without power to grant leave to amend

the complaint in an attempt to state even a specious diversity of citizen-

ship.

Fifth. The terms of the Act of February 13, 1925, and the construction

placed upon analogous statutes by the Federal courts lead inevitably to the

conclusion that this Court is divested of jurisdiction over this action for

all purposes upon and after the effective date of the Act of May 13, 1925.

Mayor v. Cooper. 6 Well. 247; 18 L. Ed. 851

Sixth. We respectfully submit that this honorable Court should eo instanti

strike this case from its files and dismiss the same without an award of

costs or other relief to either party.

Respectfully submitted,

Portland, ^regon, May 13, 1925

Attorneys for Defendant


122

, x—44 05 TREASURY DEPARTMENT

Office of the Secretary WASHINGTON

August 11, 1925. The Governor

Federal Reserve Board. Sir:

You are hereby advised that the Department has referred to the Disbursing Clerk, Treasury Department, for payment, the account of the Bureau of Engraving and Printing for preparing Federal reserve notes during the period July 1 to July 31, 1925, amounting to $115,500.00, as follows

Federal Reserve Notes, 191*4-

& $10 |20 150 $100 Total

Boston . . . . . . 500,000 200,000 50,000 i 11 750,000 New York . . . . . 500,000 .— » • — — 500,000 Philadelphia . . . 420,000 • — — 15,000 — — 435,000 Cleveland. . . » • — — 200,000 100,000 — — 5 , 0 0 0 305,000 Chicago . . . . . 600,000 — • —

111 600 ,000 Minneapolis • . — — — — — 5 , 0 0 0 5 , 0 0 0 Kansas City . . . 1 0 0 , 0 0 0 " — — 100 ,000 San Francisco. . . 2 5 0 , 0 0 0 • 5 0 , 0 0 0 5,OGO 305,000

2 , 3 7 0 , 0 0 0 400,000 200,000 15,000 15 ,000 3 , 0 0 0 , 0 0 0

3,000,000 sheets at $38.50 per M . . . . $115,500.00

The charges against the several Federal Reserve Banks are as follows,—

Corn-pen- Plate Sheets sation Printing Materials Total

Boston 750,000 $13,312.50 $6,135.00 $ 9,427.50 $ 23,875.00 New York 500,000 8,875.00 4,090.00 6,285.00 19,250.00 Philadelphia . . . . 4 3 5 , 0 0 0 7 , 7 2 1 . 2 5 3 , 5 5 8 . 3 0 5 ^ 7 - 9 5 16 ,7^7-50 Cleveland 3 0 5 , 0 0 0 5,413.75 2 , 4 9 4 . 9 0 3,833-85 1 1 , 7 4 2 . 5 0 Chicago . . . . . . 600,000 10,650.00 4,908.00 7,542.00 23,100.00 Minneapolis 5,000 8 8 . 7 5 40.90 62.85 192.50 Kansas City 100,000 1,775.00 818.00 1,257.00 3,850.00 San Francisco. . . . 305,000 5,413.75 2,494.90 3,833.85 11,742.50

3,000,000 $53,250.00 $24,540.00 $37,710.00 $115,500.00

The Bureau appropriations will be reimbursed in the above amount from the indefinite appropriation "Preparation and Issue of Federal Reserve Notes, Re-imbursable", and it is requested that your board cause such indefinite appro-priation to be reimbursed in like amount.

Respectfully, (signed) S. R. Jacobs,

Deputy Commissioner of the Public Debt.



WASHINGTON


X—-1406

August 15, 1925

SUBJECT: Expense Main Lino, Leased. Wire System, July 1925.

Dear Sir:

Enclosed herewith yon will find two mimeograph statements, X-4406-a and X-4406-"b, covering in detail operations of the main line, Leased Wire System, during the month of July, 1925.

Please credit the amount payable by your hank in the general account, Treasurer, U.S., on your hooks, and issue c/d Form 1, National Banks, for account of "Salaries and Expenses, Federal Reserve Board, Special Fund", Leased Wire System, sending duplicate C/D to Federal Reserve Board.

Tours very truly,

Fiscal Agent.

Enclosures:

TO GOVERNORS OF ALL BAMS EXCEPT CHICAGO.


124

X-4406-a

REPORT SHOWING CLASSIFICATION AND NUMBER OF WOEDS TRANSMITTED OVER MA IB LIKE OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF JULY, 1925.

Percent of Treasury War Fed. Res. Total Bank Dept. Finance Corp.

From Bank Business Business(*) Business Business Total

Boston 26,270 3.26 3,156 29,426 New York 158,595 19.66 5,123 - 163,718 Philadelphia 33,083 4.10 2,802 - 35,885 Cleveland 67,647 8.39 2,833 - 70,480 Richmond 42,100 5.22 2,167 - 44,267 Atlanta 56,501 7.00 2,632 - 59,133 Chicago 97,159 12.04 4,751 ~ 101,910 St. Louis 68,663 8.51 3,434 - 72,097 Minneapolis 35,562 4.41 1,443 ~ 37,005 Kansas City 68,328 8.47 3,025 - 71,353 Dallas 53,647 6.65 1,869 38 55,554 San Francisco 99,114 12.29 5,750 20 104,884

TOTAL 806,669 100.00# 38,985 58 845,712

Board 273,478 25,704 300,182

Total 1,080,147 65,689 58 1,145,894

Per cent of Total 94.26# 5.73# .01#

Bank Business 1,080,147 Words or 94.27# Treas.Dept. 65.689 " " 5.73# Total 1,145,836 " " 100.00#

(*) These percentages used in calculating the pro rata share of leased wire ex-penses as shown on the accompanying statement (X-4406-h)


\o 04 •H

REPORT OF EXPENSE' MAIN LINE

FEDERAL RESERVE ISASED WIRE SYSTEM, JULY, 1925

x-44o6-b

Name of Bank Operators1

Salaries Operators' Overtime

lire Rental

Total Expenses

Pro Rata Share of Total

Expenses Credits

Payable to Federal Reserve Board

Boston 1

8 $ -ee- $ — $ 25O.OO $ 694.10 $ 25O.OO New York 1 , 3 7 7 . 3 2 - 1,077.32 4,185.88 1,077.32 Philadelphia 2 1 6 . 6 6 - - 216 .66 872.94 216.66 Cleveland 280.33 - 280.33 1,786.34 280.33 Richmond 175*00 - 175.00 1,111.41

1,490.39 175.00

Atlanta 255-00 - 255.OO 1,111.41 1,490.39 255.00

Chicago ( * > 3 , 6 9 8 . 8 5 - 3,698,85 2,563.48 3,698.85 St.Louis 200•00 — - 200.00 1,811.89 200.00 Minneapolis 198.72 - 198 .72 938.95 198.72 Kansas City 275*64 - 275.64 1,803.38 275-64 Dallas 251.OO - 251.00 1,415.87 251.OO San Francisco 38O.OO - 380.00 2,616.70 380.00 Federal Reserve Board 1 5 , 3 2 9 . 3 0 1 5 , 3 2 9 . 3 0

Total $7,258.52 $ 1 5 , 3 2 9 . 3 0 $ 2 2 , 5 8 7 . 8 2 (a)l,296.49 $21,291.33

$21,291.33 $7,258.52

444.10 3 , 1 0 2 . 5 6

656.28 1 , 5 0 6 . 0 1 11,141,08 1,235.39 1,135.37 1,611.89

740.23 1,527.74 1,164.87 2 , 2 3 6 . 7 0

(b)3L,iy?.37

$14,237*48

(#) (*) (&) (a)

(b)

Includes $204.67 for branch line business transmitted over main line circuit. Includes salaries of Wshington operators. Credit. Received $ 1 . 6 3 from War Finance Corporation and $1,294.86 from the Treasury Department covering business for the month of July, 1925.

Amount reimbursable to Chica.go.


FEDERAL RESERVE BOARD 126

WASHINGTON


X-4407

August 18, 1925.

SUBJECT: Holidays, September, 1925.

Dear Sir:

On Monday, September 7th, Labor Bay, there will be no Gold Settlement Fund or Fed-eral Reserve "oto Clearing, and the books of the Board will be closed.

On Saturday, September 12th, the Baltimore Branch of the Federal Beserve Bank

, of Richmond will be closed on account of observance of Defenders' Day. Please include your credits of September 12th for the Balti-more Branch in the Gold Fund Clearing of the following business day.

Kindly notify branches, •v

Very truly yours,

V

J. C« IToell, Assistant Secretary.

TO GOV3B1IOHS OF ALL F.R.3AHS.


±27


WASHINGTON


X-4409

August 25, 1925. SUBJECT: B a n k Suspensions and Insolvencies*

Dear Sir:

In view of the importance attaching to statistics relating to

bank suspensions and insolvencies, the Board is desirous of obtaining

more uniform and more detailed reports on the subject.

^ o u are requested, therefore, not only to advise the Board

as heretofore b y telegram of all banks, whether incorporated or unincor-

porated, which are declared insolvent, or are closed to the public b y

order of supervisory authorities or b y the voluntary action of the di-

rectors on account of financial difficulties (regardless of the ultimate

disposition of the institution) but also to furnish as soon as possible

detailed information concerning each suspension or insolvency on form

No-* X4401 of which a supply is being forwarded under separate cover.

Kindly continue to advise the Board by telegram of all banks formerly

reported as suspended or insolvent that have resumed operations* and as

soon as possible report on form Ho. X 4 4 0 2 (which is also being furnished

you) the termination of each suspension or insolvency. A report on form

Ho» X4402 should be submitted for each closed b a n k within two months of

the date of closing, and in case final information is not then avail-

able^ the report should be marked "preliminary" and another be submitted

at a later date.

There is enclosed a list of suspended banks made up from our

record of reports for the year 1924 and the first 7 months of 1925.

W i l l you please correct or confirm this list and complete the indicated

information at an early date.

It is realized that there may be difficulty in obtaining com-

plete data for no;irae'auer banks, but the Board will appreciate your ren-

dering as full a report as possible. In order to do this it will be

necessary to obtain information from state authorities, who, it is be-

lieved, w i l l be willing to cooperate in a constructive study of bank


-2- . X-4409

failures. In cases whore all the desired information cannot be obtained from state officials, please give such information as is available to you from other sources, indicating that it is un-official.

Very truly yours,

Walter Lt Eddy, Secretary.

(Enclosure)

TO ALL F. R. AG-EIiTS.


X-4411

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

STATBiviEMT FOR THE PRESS

For Release in Morning Papers, Thursday, August 27, 1925.

The following is a summary of general "business and. financial conditions throughout the several Federal Reserve Districts, based upon statistics for tha months of July and August, as contained in the forthcoming issue of the Federal Reserve Bulletin.

Production in basic industries turned upward in July after a continuous decline

since January. Wholesale prices advanced further and the distribution of commodi-

ties continued in large volume*

Production.- The Federal Reserve Board's index of production in basic industries,

which makes allowance for usual Seasonal variations, advanced by about 2 per cent in

July to a point ne&rly 20 per cent above the low level of a year ago. Increased

output was shown for lumber, coal, and cement, cotton consumption declined less than

usual at this season, while the output of the iron and steel industry and the

activity in the wool industry continued to decrease. In nearly all the industries

activity was greater than in July of last year. Among industries not represented

in the index the production of automobiles, rubber tires and silk continued to be

large. Volume of factory employment and earnings of industrial workers declined

further in July, seasonal increases in the clothing, shoe, and meat packing indus-

tries being more than offset by decreases in the other industries. Building con-

tracts awarded in July were in only slightly smaller volume than the exceptionally

large total reached in June and the total for the first seven months of this year

exceeded that for any previous corresponding period.

Estimates by the-Department of Agriculture indicated a less favorable condition

of all -crops combined on August 1 than a month earlier. Expected yields of corn,


180 _2_ X-4411

wheat, rye, tobacco, and hay were soner/hat smaller than in July, while the in-

dicated production of oats, "barley, and ^hite potatoes was larger. According to

present indications the yields of all principal crops, except corn and "barley,

nill "be smaller than last year. The mid-August cotton crop estimate was 13,990,000

hales as compared with a forecast of 13,565,000 "bales on August 1.

Trade.- Freight car loadings during July were larger than in June and exceeded

those of any previous July, and weekly figures for August indicated a continued

large volume of loadings. Sales at department stores showed loss than the usual

seasonal decline in July and wore 3 per cent larger than a year ago, and mail order

sales were considerably above those of July, 1924; Wholesale trade continued at the

June level and was 6 jier cent above the corresponding period a year ago,,

Prices.•» Wholesale prices advanced further by nearly 2 per cent in July, accord-

ing to the index of the Bureau of Labor Statistics* Prices of farm products and

of miscellaneous commodities rose over 4 per cent, reflecting chiefly increases in

livestock and rubber, while in the other c o m m o d i t y groups price changes were

relatively small. The general level of prices in July was 9 per cent higher than

a year ago, the rise being chiefly in agricultural commodities. In August raw

sugar, potatoes, silk, metals, and fuels advanced, while grains, leather, hogs,

and rubber declined.

Bank credit.- Demand for commercial credit at member banks in leading cities

increased in August and the volume of commercial loans on August 12 was larger than

at any time since the middle of May, but still considerably below the level at the

beginning of the year. Loans on securities increased between the middle of July

and the middle of August, while the banks' investments showed little change for

the period.

Discounts for member banks increased at all the reserve banks in recent weeks


131

X-4411

-3-

and the total on August 19 was the largest in more than a year and a half. The

reserve "banks' holdings of securities and "bills bought in the open market continued

to decline, "but total earning assets in the middle of August vzere near the high

point for the year.

During the latter part of July and the first half of August conditions in

the money market were soaevrhat firmer. The prevailing rate on prime commercial

paper, r;hich had remained at 3 3/4 to 4 per cent since early in May, advanced in

August to 4 l/4 per cent.


132

X-4413


STATELET FOR THE PRESS

For Immediate Release August 27, 1925

CQITDITIOff Op ACCEPTANCE MARKET July 16, 1925 to August 19,1925*

Acceptances.

The acceptance market continued seasonally quiet during most of the

five weeks ending August 19. Hew York dealers reported the smallest average

volume of weekly transactions since the four week period ending September

10 last year. The small supply of bills offered in all markets was just

about covered by the demand, silk bills being in largest volume. Dealers'

portfolios showed but slight changes until the last few days of the oeriod,

when some improvement in demand, chiefly for ninety day maturities for the

investment of foreign money, reduced them substantially. Rates were unchanged

throughout the period and on August 19 were quoted in the Hew York market as

3 1/8 bid and 3 per cent offered on 30-day bills, 3 1/4 bid and 3 1/8 per cent

offered on 50-day bills, 3 3/8 bid and 3 1/4 per cent offered on 90-day

bills, with 3 3/4 bid and 3 5/8 per cent offered on the longest maturities.



X-4414

WASHINGTON

V 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

Dear Sir;

Under date of August 17 Mr. Wyatt wrote you that he had been advised by lir. McConkey that the Court of Appeals at Springfield, Missouri, had confirmed the preference obtained by the Federal reserve bank in the Circuit Court in the B&rik of Oran case. This office has now received from Mr. McConkey a copy of the opinion in this case, together with a copy of the opinion in the case of the Bank of Poplar Bluff v. Frank C, Liillspaugh, which latter case was decided by the Court of Appeals at Springfield, Missouri, at the same time that the Bank of Oran case was decided. The facts in the Bank of Popu-lar Bluff case were essentially the sane as those in the Oran case and the Court decided the Poplar Bluff case and then based its decision in th.3 Oran case upon it. Therefore, the reasoning of the Court upon which the decision in the Oran Case rests is contained largely in the Bank of Poplar Bluff opinion. In Lr. Wyatt's absence I an enclosing a copy of each of these opinions for your information.

As stated in Mr, Wyatt's letter of August 17th, in view of the fact that the ruling of the Springfield Court of , Appeals is in apparent conflict with that of the Court of ApV peals at St. Louis in the case of American Bank v. Peoples B&hk, 255 S.W. 943, the Springfield Court certified the Oran case to the - Supreme Court of Missouri in order that that court might pass upon the question as to which of the two courts of appeal is correct, Mr, McConkey is hopeful of obtaining a favorable decision from the Supreme Court of Missouri, thus establishing in the State of Missouri the same doctrine as was established in the JState of Virginia by the Peters case.

Very truly yours,

George B. Vest, Assistant Counsel.

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

134

X-4414—a IN THE SPBIIimSLD COURT OF APPEALS

. KARCH T3RI.:, 1925.

Federal Reserve Bank'of St. Louis, Respondent

vs So.3826

Frank C. Lillspaugh, Commissioner of Finance for the State of Missouri, in charge of th.6 Liquidation of the Bank of Oran, a-to el lan t.

APPEAL FRO:. THE CIRCUIT COURT OF SCOTT COUBTY.

Hon. Frank Kelly, Judge.

Bailey & 3ailey, of Sikeston, for appellant and Montgomery <?; Ruclcer, and Frank V.", Hays, all of Sedalia, as Alaici Curiae, filed "brief in support of Appellant#

James G-. LcConkey, of St. Louis, for Respondent,

AFFIRLSi) and Certified to Supreme Court.

.3RADI£Ti J. - Plaintiff filed its petition in the circuit court

seeking to have allowed as a preferred claim a demand against the Bank

of Oran which was in the hands of the Commissioner of Finance for Liqui-

dation. The court "below allowed the claim as a preferred one, and

defendant appealed.

The cause was tried upon an agreed statement of facts in substance

as follows: "That the Federal Reserve Bank , is and was at all times

herein mentioned, engaged in the business of banking as defined in a

certain Act known as the Federal Reserve Act; that the Bank of Oran, Oran,

Missouri, is and was at all the times herein mentioned a state banking

corporation engaged in the business of banking at Oran, Missouri; that


135 - 2 -

Z-4414~a

the Federal Reserve Bank of Ste Louis maintained 110 deposits with nor

kept any "balance accounts with the Bank of Or an, and the Bank of Or an

maintained m deposits with nor kept any "balance accounts with the

Federal Reserve Bank; 'that ®ie Federal Reserve Bank, under the Federal

Reserve Act and the rulings of the Federal Reserve Board, is required to

receive for collection and remittance all items collectable at oar and

payaole in the district of the Federal Reserve Bank when such items are

received from a member bank or another Federal Reserve Bank; that all

memoer banks are required to clear at par items drawn on or payable at

their bank when the collection is made through the Federal Reserve Bank*

Shat any non-member bank is permitted, under an agreement accept-

able to the Federal Reserve Bank, to have forwarded to it for collection and

remittance all items drawn on or payable at such non-member bank; that

at all the times herein mentioned there was in existence such an agreement

between the Federal Reserve Bank and the Bank of Orrui, by which the

Federal Reserve Bank agreed to forward through the United States mail

direct to the Bank of Oran all items coming through it for collection;

and the Bank of Oran agreed that on the same day the item was received

it ould either collect and remit the proceeds or return the item, duly

protested, the Bank of Oran to have the option of remitting by exchange

acceptable to the Federal Reserve Bank or by the shipment of currency

insured at the expense of the Federal Reserve Bank; that acting under

this agreement, the Federal Reserve Bank did on January 9th and 10th,

1924, respectively, forward by mail to the Bank of Oran its cash letters

containing items drawn on or payable at the Bank of Oran, aggregating

$2,522*59 endorsed for collection and remittance.


136 «• 3 —

X*~'±414--a

That on January 10th and 11th, 1924, when these respective cash

letters were received by the Bank of Oran, it collected the items by

charging them to the respective drawer1s accounts in the said Bank of

Oran, and, immediately, and on the same days drew its drafts on its

correspondent, The First national Bank of St. Louis for $1,733.^3 and

659.15, respectively, and forwarded such drafts to the Federal Reserve

Bank; that the Federal Reserve Bank duly presented the drafts for parent

and pa—ent was refused "because, in the meantime, the Bank of Oran had

clc£vJ- for Vusiness,. and was in charge of the Commissioner of icr

the purpose of liquidation. The drafts were duly protested and remain

uiToaid; that at the time the Bank of Oran collected the respective items,

"by charging the several amounts against the respective drawer * s Balance

in the Bank of Oran, each of the respective drawers had more than suf-

ficient funds to his credit in the bank than was necessary to sustain

the qhargc; that at the tine the items were collected, the Bank of Oran

had in its vaults cash amounting to $4,475.31, and, with its correspondent,

the First rational Bank in St. Louis, on whom the drafts wore drawn, and

subject to check, the sun of $14,906.00; that at the time the Bank of Oran

was closed and taken over by the Banking Department it had in its vaults,

in cash,$3,326.66, and on deposit with the First national Bank in St.

Louis subject to check, the sum of $18,239.16.

That of the items listed in Exhibit (A) and on which claim was

filed the item of $50.75, drawn by the 5ast St. Louis Cotton Oil Company,

in favor of Joe G-crst, and the item of $163,80 drawn by the East St. Louis

Cotton Oil Company in favor of B.3, Barber have been satisfactorily

adjusted between the drawer and payee, and are to be eliminated iron the


137

- 4 -

$2 .51X1»0S .clained- as preferred, leaving a balance of $2,095.53 on which

a preference is claimed."

In the Bank of Poplar Bluff v. Killspaugh S.W.

ooinion in which is handed down herewith we ruled upon every proposition

involved in the cause now in hand. That case involved the right of a

claia against the Bank of Puxico to preference. Therein we discussed

the law applicable to the facts at bar. Following the reasoning in that

case the judgment in the cause now in hand should be affirmed, and it is

so ordered.

As in the case of Bank of Poplar Bluff v. Liillspaugh, supra, we

deea our rulings and conclusions here in conflict with the holding by the

St. Louis Court of Appeals in American Bank v< People's Bank, 255 S.W*

943, and this cause is, therefore, ordered certified.to the Suprene Court

for final disposition. Cox, P.J. and Bailey, J. concur*

JOHN H. BBADI3Y, Judge.


X-4414-b

IH THE SPRHG-FIELD COURT OF APPEALS

MARCH TERM, 1925

Bank of POPLAR BLUFF, Appellant )

vs. ) )

FRAJJJK C» MILLSPAUGH, Commissioner ) HO. 3842 of Finance, and in Charge of the ) Liquidation of the BA2TK OF PUXICO, ) MISSOURI, Respondent. )

APPEAL FROM THE CIRCUIT COURT OF STODDARD COUNTY

Hon. W. Si C. Walker, Judge*

Oliver & Oliver, of Cape Girardeau, for Appellant.

John A. Gloried, of Poplar Bluff, for Respondent.

REVERSED AND REMANDED WITH DIRECTIONS, AND CERTIFIED TO SUPREME COURT:

BRADLEY, J.- This is an action to have allowed as a preferred

claim a demand against the Bank of Puxico which failed and was placed in

the hands of the Commissioner of Financo for liquidation. On trial "below

the claim was allowed as a general claim, "but was denied preference. From

the judgment plaintiff appealed.

The cause was tried upon an agreed statement of facts which agreed

statement in substancc is as follows; December 11, 1923, Ethel Roichcrt

had on deposit in the Bank of Puxico $5000. and on that dato she drew a

draft upon said Bank of Puxico payable to plaintiff bank. This draft was

delivered to plaintiff with direction to collect said $5000. from the Bank

of Puxico and place it to her credit in plaintiff bank. .December 12th

plaintiff bank presented said draft to the Bank of Puxico and demanded


139 -2- X-4414 -Tj

immediate payment and said draft was accepted by said Bank of Puxico. The

Bank of Puxico failed and refused to pay said draft or any part thereof

throughout the 12th, 13th, 14th and 15th of December, although during that

time it paid chocks, drafts and claims drawn upon it by others. On December

15th the Bank of Puxico drew and mailed to plaintiff its draft dated De-

cember 14th for $5000. on the Citizens Trust Company of G-orin, Mo., payable

to the order of plaintiff. Said trust company draft was received by plaintiff

December 16th, and was forwarded in the usual way and presented to the

drawee, the Citizens Trust Company of Gorin on December 19th, but payment

was refused. The draft on the trust company was protested, and on December

19th plaintiff was advised by telegram of non-payment. On same day, De-

comber 19th, plaintiff again demanded of the Bank of Puxico payment of the

Eoichert draft drawn on December 11th, and said Bank of Puxico promised to

pay it, but did not do so* Again on December 20th and 21st plaintiff de-

manded payment and each time the Bank of Puxico promised, but failed to pay.

From December 12th when the Rei chert draft was first presented and

accepted to December 22nd the Bank of Puxico continued to receive deposits,

and pay numerous demands amounting in the aggregate to many times $5000.

There was in the till of the Bank of Puxico and to its credit in other

solvent banks more than $5000. on December 12th when the Beichert draft was

first presented and accepted, and that condition continued to exist up to

and including December 20th. The books of the Bank of Puxico showed at all

times mentioned herein that it had on deposit with the Citizens Trust Company

of Gorin more than $5000., but the books of the trust company showed only

$640.46, and it is agreed that $640.46 is correct.

December 22nd the Bank of Puxico ceased to do business, but on


140

-3- X—4414wTD

December 26th the Conrnissio:.ior of finance, or tha deputy in charge, charged

the account of Ethel Roichert with the $5000. draft drawn by her on De-

cember 11th.

The act of the plaintiff bank, under the existing facts, in

sending to the Bank of Puxico the Roichert draft was equivalent to desig-

nating the Bank of Puxico as the agent of plaintiff to present the draft to

itself, collect it, and send the money to plaintiff. In other rzords the act

of the plaintiff bank in sending the Reichert draft to the Bank of Puxico

for collection and remittance created between the plaintiff bank and the

bank of Puxico the relation of principal and agent. Midland National Bank

v. Brightwoll, 148 Mo. 358, 49 S.W. 994, 71 A.m. St. Rep. 608; Capital

National Bank v. Coldwatcr National Bank, 69 M.Wi (Nobr.) 115, 59 Am. St.

Rep. 572; State v. Bank of Commerce, 85 N.W. (Ncbr.) 43, 52 L.R.A. 858; State

National Bank v. First National Bank, 124 Ark. 531, 187 S.W. 673; Goodyear

Tiro & Rubber Co. v, Hanover State Bank, 204 Pac. (Kan.) 992; 21 A.L.R. 677;

Federal Reserve Bank of Richmond v. Bohannan, 127 S.E, (Va.) 161; Federal

Reserve Bank of Richmond v* Peters, 123 S.E, (Va.) 379f- Board of Supervisors

v. Prince Edward-Lunenburg County Bank, 121 S.E. (Va.) 903; Nyssa-Arcadia

Drainage Dist. v. First Nat'l Bank, 3 Fed. (2nd) 648.

Midland National Bank v. Brightwoll, supra, the court said:

"When a note or draft is sent by one individual or bank to another bank for

collection and to remit the proceeds to the sender the relation of principal

and agent is created, and not that of creditor and debtor."

When the agent, the collecting bank, has collected the item sent

to it for collection and remittance, it holds the proceeds, according to the

great weight of authority, prior to remittance, as trustee for the sender,


141 -4- X-4414-b

unless the too "banks, the sender and the collecting bank, are transacting

business with each other on what is known as the reciprocal accounts method,

about which we shall have more to say, infra. If the money is sent in re-

mittance all the authorities agree that the transaction is final, and the

forwarding bank's title to the money after it leaves the hands of the col-

lecting bank is superior to all claims against the collecting bank. Federal

Reserve Bank of Richmond v. Peters, supra, I.e. 382. The divergence of

opinion, when the reciprocal accounts method does not exist, is upon the

legal effect of the collecting bank remitting by draft instead of sending

the money. Some authorities hold that the act*af remitting by draft changes

the theretofore relation of principal and agent to that of debtor and

creditor. Akin v. Jones, 27 S.ff. (Tenn.) 669, 25 L.R.A. 523, 42 Am. St. Rep,

921; Sayles v, Cox, 32 S.W. (Tenn.) 626, 32 L.R.A. 715, 42 Am. St. Rep. 940.

Also some authorities hold that where an item for collection is sent by one

bank to another in the usual course of business and without instructions that

only the relation of debtor and creditor is created. United States National

Bank v. Grlauton, 92 S.2. (Oa*) 625$ L.R.A. 1917 F. 600; Union National Bank

v. Citizens Bank, 54 N.E. (Ind*) 97; Peters Shoe Co* v* Murray, 71 S.W. (Tex.)

977.

Also some cases have been ruled because of a reciprocal accounts

arrangement between the forwarding bank and the collecting bank. Federal Re-

serve Bank of Richmond v, Peters, 123 S.3. (Va.) l*c. 382. The reciprocal

accounts method and the remittance method arc described in Federal Reserve

Bank of Richmond v. Peters, supra, as follows: "In order to make collections

of checks handled by them banks usually adopt one of two methods, reciprocal

accounts, or remittance. Under the reciprocal accounts method, the col-

lecting bank, upon receipt of payment of the checks, gives credit upon its


142 *5- X-4414-b

books to the for.7ard.ing bank, and the forwarding "bank charges the collecting

bank upon its books* They settle from tine to tine according as the bal-

ance accumulates, with the one or the other. Under this nethod, as soon as

the collection is nade the relation of the banks is that of creditor and

debtor; Under the remittance nethod the forwarding bank sends the checks to

the collecting bank with instructions to collect then and remit immediately*

The collecting bank is not authorized to retain the proceeds in its hands,

and therefore acts only as an agent for the forwarding bank."

To hold that the principal and agent, when the reciprocal accounts

course of business does not exist, is changed to that of debtor and creditor

by collecting an iton sent for collection and remittance, does not appeal to

us as sound reason* Heither is it sound, in our opinion, to hold that the

relation of principal and agent is changed to that of debtor and creditor by

the mere act of remitting by draft instead of sending the cash. Either holding

compels the sender of the item to bocome a depositor, a creditor, in the true

sense of the tern, of the collecting bank whether such is desired or not..

If an item is sent to an individual for collection and remittance, and he col-

lects, but fails to remit or remits by check or draft and the check or draft,

for any reason, is not paid, the individual remains the agent of the sender#

We can see no reason why the same rule should not apply to a bank.

We think that the correct and only reasonable and jus t rule is laid

down in 3 E.C.I, p. 635, See. 261 where, in discussing the question of title

to the proceeds of collections made by banks, this language is used; "These

principles must always be borne in mind in considering the question as to the

title to the proceeds of collections by banks, as it necessarily follows that,

if the title to the paper to bo collected passed to the bank, the proceeds of


143

-6- X~* 4414—*b

the colloction will "belong to it, and the bank will bo merely a general

debtor of the customer; whereas, if the paper was deposited for collection

merely, as title thereto remains in the customer, title to the proceeds will

not necessarily pass to the bank# When it is finally determined that a de-

posit of a check or draft was for collection only and vested no title

thereto in the bank, the question still remains as to the title to the pro-

ceeds of such check or draft. The question may be said to be simply one of

the intention of the parties. If they intended that the proceeds should be

remitted immediately upon receipt thereof, or if in any other way it can be

shown that the parties intended that the proceeds of the check as well as

the check itself should remain the property of the owner, such intention will

control and the bank will not take title to the proceeds."

In support of the rule of intention as stated in the text quoted

these cases are cited; Capital National Bank v. Coldwater National Bank,

supra; State v. Bank of Commerce, supra} Plane Mfg* Co* v* Auld, 86 N.W,

(S.D.) 21; Continental National Bank v. We ems, 6 S*W* (Tex.) 802; McLeod v.

Evans, 28 N«W. (Wis*) 173; North v» International Sugar Feed Company, 90 S.E.

(N*C.) 295.

If the notion that a remittance by draft changes the relation from

that of principal and agent to that of debtor and creditor is to be the

law in this state, then a forwarding bank sending an item for collection

under the remittance method will, in order to protect itself or its customer,

be compelled to require remittance in cash.

When the Beichert check was presented by plaintiff to the Bank of

Puxico these two facts existed; (l) Ethel Reichert, the drawer of the draft,

had on deposit in said Bank of Puxico the sum of $5000; (2) the Bank of


±44 -7- " X-4414-b

Puxico then had. in its till and. in other solvent "banks sufficient cash to

pay this draft* This "being true it was the duty of the Bank of Puxico to

pay this draft* This cause is in equity,. and equity will consider that as

done which ought to have "been done* Federal Reserve Bank of Richmond v.

Peters, supra. Hence we proceed on the theory that the draft was in con-

templation of law paid when presented* That is, the Bank of Puxico as agent

for plaintiff presented said draft to itself and collected the sane,* and

thereafter hold the proceeds as the agent of plaintiff, and in trust for

plaintiff# In Federal Reserve Bank v* Peters, supra, wo find this language:

"It appears from the rocord that as soon as tho draft was sent to the Federal

Reserve Bank of Richmond the cashier of the Prince-Edward lament)erg County

"bank deducted the amount thereof from the apparent "balance due from the Bank

of Commerce & Trust upon which the draft was drawn, just as if this amount

had already "been withdrawn from the latter bank and transferred to the Fed-

eral Reserve Bank of Richmond* By this act the cashier intended to set

apart such a portion of the "balance in the Bank of Commerce & Trusts as was

necessary to meet the draft sent to the Federal Reserve Bank of Richmond,

as he was obligated to do under his contract. Equity regards that as done

which ought to have been done. Under such circumstances the draft on tho

Bank of Commerce & Trusts was an equitable assignment of the funds to tho

Federal Reserve Bank of Richmond and wo will so adjudge."

'<fo rule that plaintiff's right to a preference should bo determined

by the sane rules of law as would govern, had the Bank of Puxico issued its

draft for $5000. at tho time tho Reichert draft was presented, upon a

solvent bank where it then had on deposit a sum sufficient to pay a draft for

$5000. and that tho only reason why said draft was not paid was tho failure


145 -8- X-4414-t

of the Bank of Puxico prior to the presentation of its draft. Such are the

facts in Federal Reserve Bank v, Millspaugh. ...........S.W

which we hand down concurrently with the cause now in hand. On principle

we think plaintiff in the cause at bar should and does occupy the same status

as does the plaintiff in Federal Reserve Bank of St. Louis v. Millsp&ugh,

supra. To hold otherwise would place premium upon the arbitrary conduct of

a banker, and permit him, when his bank is limping to its grave, to make

fish of one depositor and fowl of another.

hold that the Bank of Puxico held the $5000* which it should have

paid to plaintiff; impressed with the trust imposed by virtue of the re-

lation existing between the plaintiff and the Bank of Puxico, and that this

$5000. passed into the hands of the Commissioner of Finance still impressed

with the trust*

Relief has boon denied in some caSoid on the theory that the trans-

action in judgment did not result in augmenting the assets that pass&d to

the receiver or official acting as the receiver of a failed bank. The

argument in support of such theory runs about like this; If Ethel Reichert

had not drawn her draft on her deposit in the Bank of Puxico, and said bank

had failed as it did, it would have failed owing Ethel Reichort $5000, But

instead of owing Ethel Reichort $5000. when it failed the Bank of Puxico

owed plaintiff bank $5000. evidenced by the draft that it gave plaintiff on

the Citizens Trust Company of G-orin. . Therefore, there was in effect no dif-

ference in the amount of the estate or assets that passed to the Commissioner

of Financc; that the assets that passed to the Commissioner of Finance wore

neither increased nor diminished by the whole transaction. - But this argument

is not sound. It proceeds upon the theory that the Bank of Puxico simply


146 -9- X-4414r-t>

owed plaintiff $5000; that only the delation of debtor and creditor existed.

Such, however, under the authorities we prefer to follow was not the true re-

lation between plaintiff and the Bank of Puxico. The VBank of Puxico owed

plaintiff $5000 "because it held $5000 of plaintiff's money as much so as if

plaintiff had merely left $5000 with the Bank of Puxico for safe keeping

sealed and labeled and not intended for deposit* From the time the Heichert

draft was presented and accepted the Bank of Puxico held plaintiff1s $5000,

and this $5000* passed to the Commissioner of Finance and thereby increased

the funds in his hands $5000 above the actual assets of the Bank of Puxico.

Federal Reserve Bank of Richmond v. Peters, supra; Goodyear Tire & Rubber Co.,

v# Hanover State Bank, supra, The fact that this $5000 remained commingled

and unseparated from the funds of the Bank of Puxico and passed along with

the assets to the Commissioner of Finance does not place it beyond the reach

of the arm of equity« Harrison v. Smith, 83 Mo. 210; Midland National Bank

v, Brightwell, 148 Mo,, 35®, supra; Nyssa-Arcadia Drainage Dist. v* First

Nat. Bank, supra.

It is our conclusion that plaintiff is entitled to have its claim

of $5000 allowed as a preferred claim. 4 s we construe we do not consider our

conclusion in conflict with the Midland National Bank Case, The facts in

that ease as appear in the reported opinion arc as follows: "On December 12,

1894, the Midland National Bank sent collection items to the Slater Savings

Bank of Slater, Missouri, with instructions to remit in Kansas City exchange.

These items aggregated $6,726.44, a large part of which consisted of drafts

drawn on the Citizens Stock Bank of Slater, Mo. All of these items were

collected by the Slater Savings Bank, either by charging the accounts of de-

positors against whom the drafts were drawn, after being authorized to do so


-10- X-4414-b

by such depositors, and crediting the account of the Midland National Bank

(Italics ours) or "by a cloaring of the day's business with the Citizens

Stock Bank. In settlement of the balance for the day against it, the Citi-

zens Stock Bank gave the Slater Savings Bank its draft on St. Louis for

$4,134.31. The Slater Savings Bank indorsed this draft and forwarded it,

together with its own draft on St. Louis for $2,650, to the Midland National

Bank on Account of the collection items above mentioned. Neither of these

drafts were paid, and both the Slater Savings Bank and the Citizens Stock

Bank of Slater failed December 17th, 1894, and their assets arc in the hands

of their respective assignees. The Midland National Bank has not received

payment for any portion of the collection items above mentioned, represented

by these drafts for $4,134.31 and $2,650, At the tine tf the failure of tho

bank, the assignee found in the vault the sum of $449 in cash* %hd it is also

admitted that said draft of $2,650 was forwarded to plaintiff on December

14th, 1894, when payment was refused and said draft was protested for non-

payment, and also that the said defendant as assignee had in his hands at

the date of the trial sufficient assets to pay the draft of $2,650 and in-

terest thereon in full."

As appears from the facts in the Midland National Bank Case it is

distinguishable from the cause at bar in two controlling features; (l) It

would seem from the portion of the statement of facts which we have italic-

ized and certain language on pago 367 of the opinion as reported in the 148th

Missouri, that the reciprocal accounts nethod existed between the Midland

National Bank and the Slater Savings Bank; and (2) when the Slater Savings

Bank drew its draft, and endorsed the one drawn by the Citizens Stock Bank,

it did not have sufficient money in its vaults or elsewhere to pay its own


-11- X-44TA~>

draft or the one it endorsed. Hot having any funds with which to pay, there

was no payment in fact or law made, and therefore nothing existed upon rhich

a trust could "be impressed or claim of an o qui table assignment founded. It

scons to us that the lack of funds was also one of the decisive features in

the Midland National Bank Case.

In Ancrican Bank v. Peoples Bank, 2 5 5 S . W, (Mo.App) 943 the

facts as appear from the agreed statement are as follows; That plaintiff

is and was at all times mentioned in the petition a corporation engaged in

and doing a general "banking "business at DoSoto, Jefferson County, Mo. That

on the 30th day of December, 1920, and for a long time prior thereto, de-

fendant was doing a general banking business in the same city. That on tho

3rd day of January, 1921 (said bank having boon closed for business on tho

evening of December 30, 1920), the bank commissioner of the state of Missouri

took charge of the business and affairs of tho defendant bank, after which

Frank Dietfich was appointed to assist in liquidating tho business and af-

ffairs of said bank and is still in charge thereof. That it had been tho

custom for years between the plaintiff and defendant bank to clear or ex-

change bills and checks which each had received on the other and settle the

difference. Thfet on the 30th day of December, 1920 (on which day said

People's bank was closed and has not singe resumed business,) plaintiff, in

the due course of business and for a valuable consideration, had, come into

possession of and had for collection and settlement a great number of checks

drawn by the solvent customers of the Peoples Bank on their accounts in said

tank; all of which customers had to the credit of their accounts amounts suf-

ficient to pay said checks, except $878.92, to which amount said checks were

overdrafts, and which amount of overdrafts have since been maxie good and paid


149

- 1 2 - X-4414-'"b

staid bank ox cop t $229,20. That upon the clearing or exchanging chocks on

that day the balance duo from tho defendant hank to the plaintiff hank was

$5,414,72. That tho plaintiff hank turned oypr, to the defendant "bank, in .v

clearing, tho chocks whi ch it had received against defendant and received

fron defendant the checks which it had against plaintiff, and tho difference

nado the balance as above stated, for which balance defendant bank delivered

to plaintiff a draft on the Central National Bank of St, Louis, which draft

was not paid but protested* and tho protest fees arc $2.65* That the chocks

so roceivod by defendant fron plaintiff wore charged out of the accounts of

the various depositors who had drawn then. That plaintiff was not and never

had boon a depositor in tho defendant bank. That on said date and on the

day the bank closod there was between six and seven thousand dollars in cash

in the defendant bank*

That there is now duo on account of said balance and protest fees,

from defendant to plaintiff, tho sum of $5,417,37. That claim for said

amount was properly presented in duo time to the said deputy bank commis-

sioner for allowance which claim was by him allowed."

On this state of facts tho St. Louis Court of Appeals denied a

preference. Counsel for plaintiff bank in the cause at bar it would appear

arc inclined to concede that their contention is in conflict with and con-

trary to the law as written in American Bank v. People's Bank, supra.

Counsel for plaintiff in Federal Reserve Bank of St. Louis v. Millspaugh,

supra, says that the case of American Bank v. People's Bank was decided on

the theory that tho two banks there proceeded under tho reciprocal accounts

method. If such was tho fact then we arc not in conflict, but wo cannot say

from the statement of facts and tho opinion in American Bank v» Peoples


150 -13- X—4414—h

Bank that the W o banks in that caso wore doing business with oach other

under the reciprocal accounts method.- It seens that the conclusion wo have

reached,, and the law as we have endeavored to state it, arc in conflict with

the caso mentioned* We have given the cause at bar serious and prolonged

consideration and are of the opinion that sound reason* substantial justice

and the weight of authority support our conclusion.

The judgment should be reversed and cause remanded with directions

to allow plaintiff1s claim as a preferred claim as asked in its petition,

and it is so ordered.. Dooming our statement of the law and our conclusion

in conflict with the case of American Bank vi Peoples Bank, supra, by the

S U Louis Court of Appeals, this cause is ordered certified to the Supreme

Court for final disposition.

Cpx, P. J. and Bailey, J. concur.

JOHN H. BBADLEY,

Judge.



WASHINGTON


X-4416

September 8, 1925.

SUBJECT: Bank Examination and. Credit Work.

Dear Sir:

In tne Board's letter of Juno 4, 1925, you were advised that as soon as all replies had "been received to the Sub-Committee1s report on bank examinations and credit work you would he furnished with a summary thereof.

Replies have now been received and copies of summaries of the Governors' replies relating to the credit function and of the Agents' replies re-lating to the hank examination function are enclosed herewith.

The Board hopes that the Governors, at their forthcoming conference, will be prepared to submit a statement to tho Board outlining the view of the Conference with reference to the report on the credit function.

Yours very truly,


(Enclosure)

TO GOVERNORS OF ALL P. R. BASKS.



WASHINGTON


X-4417

September 8, 1925.

SUBJECT: Bank Examination and Credit Work.

Dear Sir:

in the Board*s letter of June 4, 1325, you were advised that after all replies had "been received from the Federal Reserve Agents with reference to the bank examin-ation portion of the report recently submitted on bank ex-amination and credit functions by three Deputy Governors, a summary Would be furnished to oach agent and the report placed on the program for discussion at one of the forth-coming conferences*

The replies have now been received and there is enclosed herewith a copy of a summary of these replies as we3! as a copy of a summary of the replies made by the Governors on the credit portion of the report.

Under date of June 29, 1925, the Board advised Mr. Perrin that it would like to have the Federal Reserve Agerts make a careful study of the Sub-Comnittec1 s report on the bank examination function and come to the conference prepared to recommend a definite set of rules outlining the scope of a credit investigation and of a bank examination in such clear and distinct terms that if adopted by the Board there will result a substantially uniform policy in this regard, including the assessment of costs of examin-ations against banks examined*

The Board hopes that the Agents will be prepared to submit their report at the forthcoming conference.

I Yours very truly,

Walter L# Eddy, (Enclosure) Secretary.

TO F* B. AGENTS OF ALL F. E. BAMS.



WASHINGTON


X-4418

f September 9, 1925.

SUBJECT: Cafeteria Expense.

Dear Sir:

In reviewing the cafeteria expenses of the Federal reserve banks for the past year it is found that the total expense of opera-tion as reported in the functional expense reports amounted to $441,913 and receipts to $344,387, leaving a net expense of $97,536, which was assumed by the banks. The expenses enumerated, of course, do not.include anything for rent, light, heat and power, refriger-ation, repairs and alterations, and furniture and equipment. The de-tailed expenses for all banks combined during the year ending June 30, 1925, were as follows:

Cost of food $241,324 Salaries: Cooks, waiters, etc. 127,411 Assigned staff 34,321 All other 4,423 Service supplies 7,267 Office and other supplies 3,570 Printing and stationery 1,244 Glass, china and furnishings 6,361 Gas - fuel 8,199 Uniforms 665 Mis cellaneous 7.128 Total expense of unit $441,913 Receipts 344.387 Het expense $ 97,526

According to information available at the Board's office at least one of the banks absorbs no cafeteria expenses except for re-frigeration, heat, rent, etc., which under the functional expense mamml are not required to be charged to the cafeteria expense unit, at six others the expenses for food and salaries only are reimbursable from receipts, while some others charge for the cost of food only. The Board feels that in the interest of economy and good administration


154

~3— X—44:18

there should "be greater uniformity in the operation of the cr-fOtcrias of the Federal reserve banks and will, therefore, place the subject on the program for consideration at the forthcoming Governors1 con-ference. It is requested that careful consideration be given to this subject in advance in order that if practicable some agreement may be reached as to what expenses, if any, now being charged to the cafeteria in the functional expense reports, should be absorbed by the Federal reserve banks.

By direction of the Federal Reserve Board,

Very truly yours,

D. R. Cribsinger, Governor.

TO ALL GOVERNORS OF F. R. BANKS.


155


WASHINGTON


X-4419

September 9, 1925.

SUBJECT: Code word, to covor new issue of Certificates of Indebtedness, Series TJ2-1926, in tele-graphic transactions.

Dear Sir!

In connection with telegraphic transactions in Government securities between Federal Reserve Banks, the code word "Begetteth" has been designated to cover the new issue of Certificates of Indebtedness dated September 15, 1925, Series TJ2-1926.

This word should bo inserted in the Federal Reserve Telegraphic Code Book, following the supple-mental code word "Beget" at the bottom of page 24,

Yours very truly,

J. C. Hoell, Assistant Secretary.

TO C-OVEBHORS OF ALL F. R. BANKS.



WASHINGTON


X-4421

September 14, 1925.

SUBJECT:- Expense Main Lihe, Leased Wire System, August, 1925.

Dear Sir:

•Enclosed hererrith you will find two mimeograph, statements, 1-4421-a and %-4421-t, covering in detail operations of the main line, leased Wire System, during the month of August, 1925.

Please credit the amount payable by your bank in the general account, Treasurer, U. S., on your books, and issue C/D Form 1, National Banks, for account of "Salaries and Expenses, Federal Reserve Board, Special Fund", Leased Wire System, sending duplicate C/D to Fed-eral Heserve Board.

Tours very truly,

Fiscal Agent.

(Enclosures)

TO GOVERNORS OF ALL BANKS EXCEPT CHICAGO.


157

X-4421-a

REPORT SHOWING CLASSIFICATION AND EHBER OF WORDS TRANSMITTED OVER MAI2T LIKE OF THE FEDERAL RESERVE LEASED WIRE SYSTEM FOR THE MONTH OF AUGUST, 1925.

Percent of Treasury War Fed. Res. Total Bank Dept. Finance Corp.

From Bank Business Business(*) Business !

Business Total

Boston 23,002 3„0S 2,401 - 25,403

Mew York 125,619 16.73 3,692 — 129,311 Philadelphia 31,710 4.22 2,512 - 34,222

Cleveland 67,692 9.02 2,475 - 70,167

Richmond 39,693 . 5.29 1,703 41,396

Atlanta 56,567 7.54 2,864 59 f431

Chicago 89,997 11.99 4,048 - 94,045 St, Louis 67,896 9.05 3,166 71,062 Minneapolis 30,603 4.08 1,202 31,805 Kansas City 67,287 8.96 2,418 106 69,811 Dailati 50,832 6.77 1,450 52,282 San Francisco 99,737 13.29 4,707 - 104,444

TOTAL 750,635 100.00$ 32,638 106 783,379

Board 362 ,951 24,176 420 287,547

Total 1,013,586 56,814 526 '1 ,070,926

Percent of Total 94.65$ 5.30$

Bank Business 1,013,586 words or 94.69$ Treas.Dept. 55.814 " " 5,31$ Total 1,070,400 " " 100.00$

(*) These percentages used in cal-culating the pro rata share of leased wire expenses as shown on the accompanying statement (X-4421-h)


REPORT OF EXPENSE * MAIN LIKE

FEDERAL RESERVE LEASED WIRE SYSTE&, AUGUST, 1925-

X-442l-b

Name of Bank Operators' Salaries

Operators' Overt ime

Wire Rental

Total Expenses

Pro Rata Share of Total

Expenses Credits


Boston $ 250.00 $ $ - $ 250.00 $ 6 6 0 . 5 4 $ 250.00 $ 410.54 New York 1,113.32 1,113.32 3 , 6 1 1 . 3 s 1,113.32 2,498.06 Philadelphia s 216.66 2l6.c6 910 .94 216.fa6 694.28 Cleveland 280.33 - 280.33 1 , 9 4 7 . 0 s 250.33 1,666.75 Richmond 175.00 175.00 1,141 .91 1 7 5 . 0 0 (#)1,171. Atlanta 225.00 225.00 1 , 6 2 7 . 6 1 2 2 5 . 0 0 1,402.61 Chicago (*>3,907-22 3,907.22 2 , 5 8 8 . 2 0 3 , 9 0 7 . 2 2 (&) 1 , 3 1 9 . 0 2 St. Louis 200.00 200.00 1,953.56 200.00 1,753.56 Minneapolis 183-34 183.34 880.72 183-34 697.38 Kansas City 275.64, 275.64 1,934.13 275.64 1,658.49 Dallas 251.00 x 251.00 1,461.39 251.00 1,210.39 San Francisco 380.00 380.00 2,868.82 38O.OO 2,488.82 Federal Reserve B oard 15,349.64 15,349.64

38O.OO

Total $7,457.51 $15,349-64 $22,807.15 $21,556.28 $7,457*51 $15,652.46 (a)l,220.87 (b)l,319.02 $21,586.28 $14,333.44

(#) Includes $204.67 for branch line business transmitted over main line circuit. ,(*) Includes salaries of Washington operators. (&) Credit (a) Received $10.32 from 7/ar Finance Corp. and $1209.95 from Treasury

Department covering business for the month of August, 1925. (b) Amount reimbursable to Chicago.

H-CJi (3D


159

FEDERAL RESERVE BOARD x - 4 4 2 2

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 b g p t g g l d g l " 1 5 , 1 9 2 5 «

SUBJECT; Code Words for use between Federal Reserve Banks in connec-tion with Telegraphic Tracings and Advices covering Non-Cash Collection Items,

Dear Sir:

Referring to the Board's circular telegram of August 11th, Trans.No•583, advising that the Board desired to submit to the Leased Wire Committee for recommendation the use of code words indicated in its circular letter X-4393, of August 4,1925, before such code words became e±factive, you are advised that a report from the Leased Wire Committee nas been received in which it is stated that there will be no objection on tne part of the Committee to the use of code words in t elegraphic trac-ings of non-cash collections, where such messages are sent over the leased

ior the oenefit of the Federal reserve banks, The Federal Reserve Board has designated, effective October 1,

1925, the following code words to be used over the leased wires:

BUCKLE: Referring to our collection number payable at . for $

, if outstanding obtain immediate telegraphic peport. Advise us status by wire.

OLYMPIAN: Telegraph reply over private leased wire.

The use of the following code word, in connection with direct $endings, is to De limited to telegrams sent over the commercial wires:

BUCKISH: We credit your account today with $ representing proceeds of collection number sent direct to us by .

It should be understood that the above code words have been supplied only for the purpose of reducing the phraseology in telegrams and are not intended to supersede or amend the present Leased Wire Regulations,

The code Words "BUCKISH" and "BUCKLE" and the code word "OLYMPIAN" should be inserted in the Federal Reserve Telegraphic Code at the bottom of pages 35 and 168, following the code words "BUCKHORN" and "OLIVINE", respec-tively.

Yours very truly

J, C. Sboll Assistant Secretary,

TO ALL GOVERNORS.


160

X-4423 TREASURY DEPARTMENT OFFICE OF THE SECRETARY WASHINGTON

September 10, 1925. The Governor

Federal Reserve Board. Sir :

You are hereby advised that the Department has referred to the Disbursing Clerk, Treasury Department, for payment, the account of the Bureau of Engrav-ing and Printing for preparing Federal reserve notes during the period August 1 to August 31, 1925, amounting to $110,168.00, as follows:-

Federal Reserve Notes, 1914

$5 $10 $20 $50 Total Boston 200,000 - - - 200,000 New York 800,000 - - - 800,000 Philadelphia 200,000 160,000 80,000 5,000 445,000 Cleveland 80,000 100,000 160,000 5,000 345,000 Chicago 420,000 - - - 420,000 Kansas City 300,000 40,000 - - 340,000 San Francisco 300,000 - 80,000 - 380,000

2,300,000 300,000 320,000 10,000 2,930,000

2,930,000 sheets @ $37.60 per M $ 110,168.00

The charges against the several Federal Reserve Banks are as follows:

Sheets Compensation Plate Printing Materials Total

Boston New York Philadelphia Cleveland Chicago Kansas City San Francisco

200,000 800,000 445,000 345,000 420,000 340,000 380,000

2,930,000

$ 3,540.00 14,160.00 7,876.50 6,106.50 7,434.00 6,013.00 6,726.00

$51,861.00

$ 1,640.00 6,550.00 3,649.00 2,829.00 3,444.00 2,788.00 3,116.00

$24,026.00

$2,340.00 9,360.00 5,206.50 4,036.50 4,914.00 3,978.00 4,446.00

& 7,520.00 30,080.00 16,732.00 12,972.00 15,792.00 12,784.00 14,288.00

34,281.00 $110,168.00

The Bureau appropriations will be reimbursed in the above amount from the indefinite appropriation "Preparation and Issue of Federal Reserve Notes, Reimbursable", and it is requested that your board cause such indefinite ap-propriation to be reimbursed in like amount•

Respectfully, S. R. Jacobs,

Deputy Commissioner of the Public Debt.


( COPY )

161 X-4425

C 0 I F I B 1 N T I A L

To Federal Reserve Board

From Mr, Wyatt, General Counsel.

Date Sept.16, 1925

Subject: Proposed Deduction of Items in Process of Collection from Gross Demand Deposits.

I am advised that the Board desires an opinion on the question whether, without any amendment to the law, it could, by a mere amendment to its regulations, adopt the following recommendation contained in the Report of the Federal Reserve Agents' Committee on Member Bank Reserves, dated May 12, 1925:

"The deduction of exchanges for clearing house, checks on other banks in the same place and other checks in process of collection from demand deposits instead of from 'due to banks' is proposed in order to correct the unequal bearing of the present require-ment on different banks."

In my opinion, the Board cannot, under the terms of the present law, amend its regulations in such a way as to permit member banks to . deduct these items from theit gross dematid deposits for the purpose of coiirputihg their Reserves, although such deductions may be made from the specific item "balances due to other banks." The reasons for my opihion are as follows:

Prior to the passage of the Federal Reserve Act, national banks were required to maintain certain specified reserves against their de-posit liabilities and no deductions whatever were permitted by statute. In order, however, to afford some relief from the high percentages of reserve then required to be maintained, the Comptroller of the Currency by regulation permitted national banks to deduct from their deposit liabilities the amount of balances due from other banks, including in such "due from" bank balances: (l) checks on out-of-town banks in pro-cess of collection; (2) checks on banks in the same place as the na-tional bank and (3) exchanges for clearing houses. These items were permitted to be included among balances due from banks on the theory that in the ordinary course of business they could shortly become balances due from banks. This practice of the .Comptroller's Office was in effect for some time prior to the passage of the Federal Re-serve Act,

Section 19 of the Federal Reserve Act as originally enacted provided in part: *

"In estimating the reserves required by this Act, the net balance of amounts due to and from other banks shall be taken as the basis for as-certaining the deposits against which reserves shall be determined."


-2-

162 1 - 4 4 2 5

This provision was amended "by the J),ct of June 21, 1917, so as to road as follows; which is its present form:

"In estimating the balances required by this Act, the net difference of amounts due to and from other banks shall be taken as the basis for as-certaining the deposits against which required balances with Federal reserve banks shall be de-termined. "

Thus, the Federal Reserve Act in effect ratified the regulation of the Comptroller of the Currency which had permitted national banks to deduct balances due from banks in computing their reserve require-ments, and it specifically authorizes member banks to offset "due to" and "due from" bank balances. It is significant, however, that it permits no deduction from gross deposit liabilities, but only a de-duction from deposit liabilities to other banks, and, except for the permitted deduction of balances due from banks from balances due to banks, Section 19 requires member banks to maintain specified reserves against the aggregate amount of their demnd deposits and their time deposits. That is to say, member banks m s t carry reserves against the aggregate of (l) all individual demand deposits; (2) all time de-posits, and (3) the excess of "due to" bank balances over "due from" bank balances.

Certain provisions in the various Liberty Bond Acts exempt Government deposits, other than postal savings deposits, from reserve requirements, but I do not know of any other provision of law which authorizes any deduction fromtiie amounts against which member banks must carry reserves and it seems clear that since Congress has spe-cifically defined deposits against which reserves must be carried and has specifically authorized certain deductions to be made, no other deductions can properly be implied and no discretion is vested either in the Federal Reserve Board or the Comptroller of the Currency to permit such deductions. In short, Congress has permitted balances due from banks to be deducted from balances due to banks, so that the only items which may be deducted are items which can be classed as balances due from banks, and these items can be deducted only from the item balances due to banks.

This question is discussed in detail in an opinion of Judge Elliott, in his capacity as Joint Counsel for the Federal Reserve Board and the Comptroller of the Currency, published in the Federal Reserve Bulletin for September 1917, at page 692. The conclusion was therein reached that member banks are permitted to deduct "due from" bank balances from "due to" bank balances and may include in the item "due from" bank balances, checks in process of collection, checks on "Lanks in the sane place, and exchanges for clearing houses,


-3-

163 X-4425

rut that this deduction is the only deduction permitted "by law and that accordingly member "banks may not deduct checks on other "banks, exchanges for clearing houses, or cash in vault fron gross demand, deposits.. Judge Elliott concludes:

"The argument advanced in favor of the allowance of these deductions should, in the opinion of this of-fice, have "been addressed to Congress rather than to the Federal Reserve Board or the Comptroller of the Currency. As above stated, neither the Federal Re-serve Board nor the Comptroller are vested with any discretion to permit deductions not specifically au-thorized "by the Act and could not, in the opinion of this office, justify a ruling that "banks might deduct cash or other items from their gross demand deposits in computing their reserves."

This opinion was adopted by the Board and has "been followed consistently. I concur fully in the opinion and I "believe, there-fore, that the Board cannot "by ruling or regulation permit member banks to deduct the items suggested by the Reserve Committee of Fed-eral Reserve Agents from their gross demand liabilities in computing their reserve requirements. As Judge Elliott stated, the arguments in favor of permitting such deductions should be addressed to Congress. If it is desired, I shall be glad to draft a bill to amend Section 19 so as to permit member banks to make these deductions.

MR. SMEAD'S SUGGESTION.

Mr, Smead has suggested that, while these items may not tech-nically be deducted from gross demand deposits, they may properly be omitted in computing the amount of a member bank1 s demand deposits; provided such member bank has a clear and binding contract with all its depositors to the effect that checks on other banks are received on deposit for collection and credit only, and that such deposits shall not be withdrawn until the checks actually have been collected.

Theoretically, there is a technical justification for this suggestion; but if the suggestion were adopted it would be extremely difficult to apply in practice and at the same time keep the practice within proper legal bounds. Furthermore, it is very doubtful that many banks would be willing to comply with the requirements necessary to en-title them to the advantages of this suggestion.

Where a check technically is received for collection and credit the transaction does not give rise immediately to a general deposit liability on the part of the bank - i.e., the relation of debtor and creditor between the bank and its depositor. On the contrary,


164 X-4425

the "bank handles the chock as the depositor1 s agent for collection until it has collected the check and received the proceeds of the collection, whereupon it credits the amount to the depositor1s account and becomes the depositor*s debtor for the amount. Not until this has been done, •.loos the transaction give rise to a general deposit liability on the part of the bank. Up to this time the transaction has been a special deposit, and the Board has held heretofore that member banks need not carry reserves against special deposits. (July 1921 Bulletin, page 815.) But see addendum on page 9 of this opinion.

If the transaction clearly is a deposit for collection and credit, therefore, and this relation is faithfully maintained, the bank technical-ly should not be required to carry reserves against such deposit until the check actually has been collected and the proceeds credited to the depositor's general deposit account.

In practice, however, it often is extremely difficult to tell whether a given transaction is legally a special deposit for collection and credit or a general deposit. This results largely from the fact that, instead of deferring credit for checks until they actually have been col-lected, commercial banks usually give immediate credit in thq depositor*s general deposit account from which withdrawals are being made constantly. It is true that commercial banks frequently refuse to honor checks drawn against "uncollected funds"; but they also frequently honor checks drawn against deposits of checks on other banks which have not been collected*

Section 16 of the Federal Reserve Act requires Federal reserve banks to maintain reserves in gold or lawful money of not less than 35$ against their deposits and does not permit any deductions what-ever to be made from their deposits in computing their reserves. In a circular letter to the Chairmen of all Federal Reserve Banks, dated March 16, 1921 (X-3071), however, the Board ruled that while Federal reserve banks must carry reserves against all deposits immediately avail-able, including foreign Government credits, and no deductions would be permitted, yet no reserve need be carried against "transit items or other deferred availability credits which represent deposits not im-mediately available

It may be argued that similarly member banks need not carry reserves against deposits of uncollected checks which are not subject to immediate withdrawal but are received only for collection and credit. This undoubtedly would be true if member banks conducted their business in the same way as Federal reserve banks; but as a rule they conduct their business in a different manner.

Federal reserve banks carry two accounts on their books for each member bank- a deferred credit account and a reserve account. When checks on out-of-town banks are deposited with a Federal reserve bank the amount is not credited to the reserve account but is credited to


165 -5- Z-4425

the deferred credit account until the expiration of the time stated in the time schedule when it is presumed that such checks will have been collected and the proceeds received "by the Federal reserve bank. At the expiration of the time stated in the time schedule the credit for such checks is transferred from the deferred credit account to the reserve account and thus becomes available for withdrawal or to be counted as reserves. No withdrawals whatever are permitted from the deferred credit account and such account is not considered legal reserves of the member bank. In legal effect, the Federal reserve bank receives such checks for collection and credit and scrupulously maintains the relation of principal and agent with its member banks until the expiration of the time stated in the time schedule, when presumably such checks will have been collected and the proceeds received by the Federal reserve bank.

Member banks on the contrary usually carry only one account with their depositors to which all deposits, including deposits of out-of-town chocks are credited immediately upon receipt and withdrawals are permitted to be made from such account continuously. There is no segregation of credits for uncollected items from credits for collected items and, even if the bank contracts with its depositor that withdrawals will not be permitted from uncollected funds, it is difficult to ascer-tain what part of the total deposit balance represents collected funds and what represents uncollected Binds. It is only when the total balance becomes so low that the amount of checks drawn against it by the cus-tomer exceeds the amount of his balance representing credits for actual-ly collected funds that the bank can say that checks drawn by the cus-tomer are drawn against uncollected funds and can attempt to enforce its rule forbidding customers to draw against uncollected funds. Even in a case of this kind many banks are reluctant to enforce the rule if the customer happens to be a good one.

I asked Mr. Smead how he would compute the amount of a bank's deposits against which it should carry reserves if his suggestion were adopted, and he replied that he would simply subtract from the bank*a total demand deposits the total amount of "exchanges for clearing house, checks on other banks in the same place and other checks in process of collection." His theory was that the amount of such items would represent the amount of deferred availability credits which are not subject to withdrawal, if the bank has a contract with all of its customers forbidding them to check against uncollected ftinds. This would not be at all accurate, however, because the total of the abo.VB items would include, not only the amount of deposits against which the bank's customers would have no right to check, but, also items owned by the bank itself which give rise to no deposit liability (e.g., checks received in payment of notes due the bank or for the purchase price of securities sold by the bank.) Mr. Smead admitted that this would be true and that, therefore, the banks would be allowed greater deductions than they would be legally entitled to if his suggestions were adopted. He suggested that in order to obviate this difficulty member banks might be required to segregate their uncollected funds ac-


X-4425

counts in such a way as to show what portion thereof represented checks owned by them and what portion represented checks deposited by their cus-tomers and still in the process of collection. This woUld not be suf-ficient, however, because such items would include checks deposited as time deposits as well as checks deposited as demand deposits; and iz would be necessary to make another subdivision of the uncollected funds account in order to tell which of the uncollected items should be omitted in computing its time deposits and which should be omitted in com-puting its demand deposits.

It is very doubtful that member banks would be willing to make such radical changes in their accounting systems for the sake of ob-taining small reductions in their reserves; and, even if they did, it would be extremely difficult for an examiner to check up their accounts in such a way as to ascertain the correctness of the subdivision of the bank's uncollected funds account.

If Mr. Smead's suggestion were to be adopted, the only safe and practical way in which it could be applied would seem to be to require the banks to adopt the same practice as the Federal reserve banks and carry two accounts with each customer (a checking account and a deferred availability account) and forbid their customers to make withdrawals from their deferred availability accounts. It is very doubtful that the member banks would be willing to make such a radical change in their established methods of busi-ness, especially in view of the fact that such a change would be extremely unpopular with their customers who are accustomed to receive immediate credit in their checking accounts for all checks deposited, no matter on what banks they are drawn.

RELATION OF THIS QUESTION TO PASCAQOUIA CASE.

I fear that if Mr. Smeadfs suggestion were adopted at this time, it would seriously jeopardize our chances of winning the Pascagoula case, because a very similar question is involved in that case in connection with the demand of the Pascagoula bank for immediate credit, which in sub-stance is a demand that the Federal reserve banks absorb all the float for all member banks. Inasmuch as this would result in the absorption by the Federal reserve banks of something like $500,000,000 of float and would lead to tremendous expansion in bank credits, this is by far the most serious question in the Pascagoula case and nothing should be done to embar-rass Mr. Baker in the conduct of that case.

In the Pascagoula case our opponents argue as follows: Section 16 requires Federal reserve banks to receive all checks drawn on member banks" on deposit at par.11 They say this means that all Federal reserve banks must give immediate credit for such checks in a general deposit account immediately available for withdrawal or


-7- X-4425

to be Q^unted as reserves; and that the present practice of Federal reserve banks/giving deferred credit for checks deposited with them by their member banks is not a compliance with the requirement of Section 16.

One of our principal answers to this argument is that such checks are received on deposit for collection and credit and that such a transaction is a "deposit" within the meaning of Section 16.

How the only way in which Mr. Smead1 s suggestion could be adopted would be to say that where a check is received by a member bank on deposit for collection and credit such a transaction is not a deposit within the meaning of Section 19 and, therefore, member banks-need not"*carry any reserves against such deposits; and I fear that it would be extremely difficult to convince the Supreme Count that such a deposit is a deposit within the meaning of Section 16 if the Board should admit publicly that it is not a deposit within the meaning of Section 19. I fear,., therefore, that any such admission by the Board in an official ruling would seriously jeopardize our chances of winning the most important point in the Pascagoula case.

For this reason, I feel that the Board should not issue any such ruling, at least until after the Pascagoula case has been decided by the Supreme Court. If the Board has any doubt about the matter, I think it is only fair to Mr. Baker that he should be consulted before any such rul-ing is issued.

OTHER PRACTICAL OBJECTIONS.

In^view of the importance and delicacy of this question I feel that I should point out one or two other practical objections to the adoption of Mr. Smead1 s suggestion, without an amendment to the law.

In the first place, the adoption of Mr. Smead1 s suggestion at this time would effect a radical change in the method of computing re-serves which has been in practice over * ten years. Although the member banks which have no balances "due to" banks would gain by such a ruling a slight diminution of their reserves, it is quite likely that, instead of being grateful for this concession by the Board, they would feel that for the last ten years they had been cheated of something to which they were rightfully entitled; and it is possible that some of them might even go into court and attempt to recover from the Federal reserve banks interest on excess reserves which they have been required to maintain as well as a portion of the penalties which they have sbeen required to pay for de-ficiencies in reserves.


168 -8- X-4425

If such a modification of the reserve requirements were accomplished through an amendment to the law on the recommendation of the Board, however, the "banks would feel that they had gained something to which they had not been entitled heretofore and would be grateful to the Board for its recommendation. Furthermore, anyjamendmer-t to the law might be worded in such a way as materially to simplify the difficult practical and accounting problems mentioned above.

In view of the fact that Hr. McFadden has a bill pending in .Congress which he has announced his intention of pressing for en-actment at the next session, and in view of the fact that one of the principal features of this bill is a provision to permit member banks to carry less reserves with the Federal reserve banks, any attempt by the Board at this time to meet the demands of the smaller banks by a ruling which would change the established method of computing reserves might appear to be an attempt to forestall Congress by an administrative rul-ing and might adversely affect the Board's relations with Congress. On the other hand, if this modification of the reserve requirements were held in abeyance, it would constitute good trading material when the Board comes to deal with the Banking and Currency Committee with reference to Mr. McFadden's bill. The Board could tell the Committee that it believes Mr. McFadden's bill to be unsound but that it believes certain modifi-cations should be made in the reserve requirements and that it will recommend amendments to the law covering this and other modifications recommended by the Committee on.Reserves. This would give the Board a tactical advantage which might be of considerable value in defeating or modifying the second McFadden bill.

C O N C L U S I O N .

I agree with the Committee on Reserves that the present provisions of the law permitting deductions to be made only from bal-ances "due to" banks works an injustice to country banks because they have no such balances from which deductions can be made, and that some modification of the reserve requirements ought to be made to remove this inequality. For the various reasons pointed out above, however, I res-pectfully submit that it would be much better in every way for these modifications of the reserve requirements to be accomplished through amendments to the law rather than through administrative rulings of doubtful legality and difficult of application in practice.

Respectfully,

(signed) Walter Wyatt General Counsel.


-9- X-4425

ADDENDUM

On ps-go 4 of the attached opinion I cited a ruling of the Board holding that member "banks need not carry reservesagainst special deposits (1921.Bulletin, page 815.) Since writing the attached opinion, however, I have discovered a later ruling published on page 572 of the May 1922 Bulletin, wherein the Board laid down the broad general rule

ii*** that all funds received by a bank in the course of its commercial or fiduciary business must be treated either as deposits against which reserves must be carried, or as trust funds subject to the ordinary restrictions and safeguards imposed upon the custody and use of trust funds, and that whether a certain deposit falls in one category or the other must depend in each case upon the partic-ular terms and conditions under which it was made."

See also two rulings published on page 1435 of the 1921 Bulletin.


170

-10-. X-4425

Date Sept. 17, 1925

To Federal Reserve Board Subject: Proposed Deduction of Items in Process of Collection from

From Mr. Wyatt, General Counsel. Gross Demand Deposits.

Since writing my opinion of September 16th on the above ques-

tion, I have discovered in the files a letter addressed to Mr. Edwin

S. Schenck, President of tho Citizens National Bank of Hew York, under

date of October 20, 1919, which considers a suggestion the same as that

made by Mr. Smead. This letter was written by Mr. George L. Harrison,

then General Counsel to the Board, and was signed by Governor Harding*

The letter holds that if a bank wishes to avoid the maintenance of a

reserve against uncollected checks during the period in which such

checks are being collected, it should take sudi checks for collection

only and not for immediate credit, A copy of the letter is respect-

fully submitted herewith for the Board1s information.

Respectfully,

(signed) Walter Wyatt

Walter Wyatt General Counsel.

Letter attached.


—11— X-4425 171

October 20, 1919.

Mr. Edwin S. Schenck, President, The Citizens National Bank of New York, Hew York City.

Sir:

Your letter of October 15 relating to the construction of Section 19 of the Federal Reserve Act, has been received.

I am enclosing herewith a copy of an opinion (X-305) July 19, 1919, filed by Counsel of the Federal Heserve Board in July 1917, which discusses the points which you have pre-sented for consideration. Both the Federal Reserve Board, and the Comptroller of the Currency have approved this opinion and have been guided by it in all of their rulings relating to the maintenance of reserve balances by member banks. It is not believed that either the letter or the spirit of the law would justify an extension of the purpose or character of the deductions defined in this opinion.

With particular reference to your statement relating to reserves to be carried against a deposit created by the credit to a customer's account of the uncollected checks ;vhich are not payable until the deposited checks actually have been collected, I wish to state that any account which is credited 7/ith the amount of an item before collection is, as a matter of law, subject to check unless there is an express binding agreement to the contrary, and if it is intended that the customer shall have no authority to draw on an account credited in this manner, the bank should take the item for collection only and not for immediate credit. Even assuming, however, that the item is credited ioaediately subject to an agreement that it will not be drawn upon until the check is actually collected, deposit cannot properly be termed a time deposit because of the fact that it is not one "payable after thirty days" as defined in the Regulations of the Federal Reserve Board. Being payable "within thirty days" it must necessarily be termed a demand deposit and as such is subject to the reserves required to be carried against demand deposits^. If the bank wishes to avoid the maintenance of a reserve against deposits of this character during the period in which checks they represent are being collected, the bank, as previously stated, should take such checks for collection only and not for immediate crc&it.

Very truly yours,

(W.P.G. Harding)

Enc. Governor



172

WASHINGTON


X-4426

September 18, 1925,

SUBJECT: Holidays during October, 1925.

Dear Sir:

There will be no Gold Settlement Fund or Federal Reserve Note Clearing on Monday, October 12th, 1925, on ac-count of observance of Columbus Day, and the Bogxd's books will be closed. For your information, the offices of the Board and the following Banks and Branches will remain open for business as usual:

Richmond Atlanta

Birmingham Nashville Jacksonville

Detroit St. Louis little Rock Memphis

Minneapolis Kansas City Denver Oklahoma City

In addition to the holiday mentioned above, the fol*-lowing Branch Banks will be closed on the d?ytes specified:

Tuesday, October 6th, Detroit (Election Day) Friday, " 9th, Jacksonville (Farmers1 Day) Tuesday, " 13th, Birmingham (Fraternal Day)

The Detroit Branch, therefore, will not participate in the Cold Fund clearing of October 6th. Please include your credits of October 6th for Detroit Branch with those for October 7th in the Gold Fund Clearing. .

Kindly notify Branches.

Very truly yours,

J# C. N©ell, Assistant Secretary.

TO GOVERNORS OF ALL F. R. BANKS.


X-4428 1 7 3



For Immediate Release Sept. <35, 1925

CONDITION OF ACCEPTANCE MARKET August 20,1925, to September 16,1925.

Acceptances.

The acceptance market showed somewhat greater activity during the first

half of September than in August, following an increase in rates at the end of

the month. Dealers advanced their rates on all maturities by l/4 of one per

cent on August 28 so that 30 day bills were quoted at 3 3/8 bid and 3 1/4

per cent offered, 60 day bills at 3 l/2 bid and 3 3/8 offered, 90 dn£ 120

day bills at 3 5/8 bid and 3 l/2 offered, and the longest maturities at 3 7/8

bid and 3 3/4 per cent offered. The New York Federal Reserve Bank raised its

official buying rates on August 31 to 3 l/8 per cent on 30 day bills, 3 l/4

per cent on 31-44 days, 3 3/8 per cent on 45-90 day bills, 3 1/2 per cent on

4 months and 3 3/4 per cent on 6 months bills. Increased demand, chiefly by

local banks, was reported as a result of the higher market rates in New York,

Boston, and Philadelphia, with a smaller increase in supply, which was expected

to be augmented by the appearance of more cotton bills a little later in the

season. On September 16 New York dealers' portfolios had been reduced to the

lowest figure reported since the spring of 1923. The Chicago market was very.

dull throughout the period from August 20 to September 16 with a decline both

in the demand for and supply of bills as compared with the preceding period.


X-4429

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


For Release in Morning Papers, Monday, September 28, 1925.

The following is a summary of general business and financial conditions throughout the several Federal Reserve Districts, based upon statistics for the months of August and September, as contained in thv forthcoming issue of the Federal Reserve Bul-la tin.

Production of basic commodities declined in August to the lowest level of

the year but was considerably higher than during the summer of 1924. Distri-

bution of goods at wholesale and retail continued in greater volume than a year

ago. Seasonal growth in the demand for credit, arising partly from financing

of the crop movement, was reflected in an increase in the volume of commercial

borrowing.

Production:- The Federal Reserve Board's index of production in basic industries,

which is adjusted for seasonal variations, declined 4 per cent in August, but

was 15 per cent higher than a year ago. Output of steel and of bituminous and

anthracite coal and activity in the woolen industry increased in August, while

mill consumption of cotton and the production of flour and lumber decreased.

Employment and earnings of factory workers were larger in August than in July,

but continued smaller than in June. Building contracts awarded during August,

owing chiefly to large awards in New York, exceeded all previous records.

Crop reports of the Department of Agriculture at the beginning of September, ad

compared with forecasts a month earlier, indicated somewhat larger yields of

spring wheat, oats, barley, hay, and tobacco, and smaller yields of corn and

potatoes. The mid-September cotton crop estimate was 13,931,000 bales compared

with a forecast of 13,740,000 bales on September 1.

Trade:- Wholesale trade was 5 per cent larger in August than in July owing to


175 - 2 - X-4429

seasonal increases in the sales of dry goods and shoes, and sales of all lines

except groceries were greater than those in August, 1924. Sales at department

stores and at mail order houses showed less than the usual increases in August

hut continued in greater volume than last year. Stocks of merchandise at depart-

ment stores increased in August and for the first time this year were considerably

larger than in the corresponding nonth a year ago. Wholesale firms in all leading

lines except drugs and hardware reported smaller stocks on August 31 than a month

earlier.

Total freight car loadings were larger during August than in any month since

last October. Coal shipments, preceding the anthracite strike, were especially

heavy, ' less -than-carload-lot shipments continued to increase, and the movements

of livestock and grains were seasonally greater than in July, although smaller

than in August, 1924.

Prices:- Wholesale prices showed a further slight advance in August and were

near the high level reached in the spring of this year. Prices of agricultural

commodities, which in recent months have been above the average for all commod-

ities, increased further, while prices of other commodities declined slightly.

Between the end of August and the latter part of September prices of bituminous

coal, pig iron, rubber and cotton advanced, and prices of spring wheat, corn,

raw sugar and wool declined.

Bank Credit:- At member banks in leading cities loans chiefly for commercial and

agricultural purposes showed further seasonal increases during the first half of

September and at the middle of the month were about $275,000,000 higher than at

the end of July. Investment holdings remained in about the same volume as dur-

ing previous months, but loans on securities increased and on September 16 were

near the highest level of the year.


X-4429 1 7 6

A further growth in the total of reserve bank credit in use occurred dur-

ing the five week period ending September 23. Member tank borrowings increased

in the early part of September, and after a temporary decline during the

period of Treasury financing, increased to a larger total than at any tire

since the beginning of 1524. The seasonal growth in the demand for currency

during August was reflected in an increase of $65,00C,0C0 in total money in

circulation.

Money rates showed a firmer tendency during the last week of August

ana the first, throe weeks of September. The prevailing rate on prime commer-

cial paper remained at 4 1/4 per cent but there was an increased proportion of

sales at 4 \j2 per cent.


177


WASHINGTON

X-4430

September 25, 1925.

SUBJECT: Code Words to be used by the Federal Reserve Bank of New York in advising other Federal reserve banks of changes in the Bank Polski credit.

Dear Sir:

In order to reduce the phraseology in telegrams between the Federal Reserve Bank of New York and other Federal reserve banks in connection with advices covering changes in the Bank Polski credit, it has been suggested for such purpose that addi-tional code words be supplied from the Federal Reserve Telegraphic Code.

The Board has approved this suggestion and, effective October 5, 1925, the following code words will be used between the. Federal Reserve Bank of New York and other Federal reserve banks covering the transactions referred to:

JUSTLY: Have made further gold loan $ Bank Polski. Your participation now being $ please credit us $ to adjust. You should now accrue daily $ . interest.

JUSTNESS: Bank Polski loans reduced to Your participation now being we credit you $ to adjust. You should now accrue daily $ interest.

The code words indicated should be inserted in the Federal Reserve Telegraphic Code at the bottom of page 130 following the sup-plemental code word "JUSTIFY".

Yours very truly,

J• C. Noell, Assistant Secretary.

TO GOVERNORS OF ALL F. R. BANKS.

. ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD


178 ( COPY ) X-4431

July 8, 1924. Dr. Miller Administrative duty.of Board

re expenditures of Federal Mr. Wyatt Reserve tanks.

You have requested an expression of my views on the following questions:

1. What is the general administrative duty of the Federal Reserve

Board with reference to expenditures of Federal Reserve hanks?

2. What is the administrative duty of the Federal Reserve Board in

passing upon the specific question referred to the Board by the last Governors'

conference with reference to the propriety of the Federal reserve "banks paying

the Comptroller of the Currency $10 for each copy of a report of an examination

of a national "bank furnished to the Federal reserve "banks ,instead of $4.50 as

at present?

1. G-EEERAL ADMINISTRATIVE DUTY. '

In order to discuss this question intelligently, it is necessary, first,

to review certain provisions of the Federal Reserve Act.

(a) General Powers of Directors of Federal reserve "banks.

Section 4 of the -ct provides that each Federal reserve bank shall have

power:

"Fifth.. To appoint "by its "board of directors such officers and employees as are not otherwise provided for in this Act, to define their duties, require bonds of them and fix the penalty thereof, and to dismiss at pleasure such officers or employees.

"Sixth. {Do prescribe by its board of directors. by-laws not inconsistent with law, regulating the manner in which its general business may be conducted, and the privileges granted to it by law may be exercised and enjoyed.

"Seventh. To exercise by its board of directors. or duly authorized officers or agents, all powers specifically granted by the provisions of this Act and such incidental powers as shall be necessary to carry on the business of banking within the limitations prescribed by this Act." .


-2- X-4431 ± 7 9

Section 4 also contains the following provisions with reference to the

boards of directors of Federal reserve tanks:

"Every Federal reserve "bank shall be conducted ]mder the supervision and control of a board of directors.

"The Board of directors shall perform the duties usually appertaining to the office of directors of banking associations and all such duties as are prescribed by law.

"Said board shall administer the affairs of said bank fairly and impartially and without discrimination in favor of or bgainst any member bank or banks and shall, sub-ject to the provisions of law and the orders of the Federal Reserve Board, extend to each member bank such discounts, ad-vancements and accommodations as may be safely and reasonably made with due regard for the claims and demands of such other member banks."

These provisions clearly indicate that the power and responsibility of

managing each Federal Reserve bank and administering its affairs is vested

primarily in its board of directors, which is charged with all of the duties

usually appertaining to boards of directors of banking institutions including

the duty of exercising supervision and control over the affairs of the bank.

The powers of the Federal reserve banks and their boards of directors, how-

ever, are qualified in various ways by the powers of the Federal Reserve Board.

(b) General Powers of Federal Reserve Board.

The Federal Reserve Board is authorized to order or direct the Federal

recurve banks to do certain things, and certain Specific powers of the Federal

reserve banks are expressly made subject to review, regulation or approval by

the Federal Reserve Board. I shall not attempt to discuss all such pro-

visions of the Act but shall merely quote some of them by way of illustration.

It will be noted that the provision last quoted above is to the effect

that the board of directors of a Federal reserve bank shall extend to each

member bank such discounts, advancement and accommodations as may be safely

and reasonably made with due regard for the claims and demands of other member


180

-3- X-4431

banks, 11 subject to the provisions of law and the orders of the Federal Reserve

Board."

Section 3 authorizes the Federal Reserve Board to permit or require

5Meral reserve banks to establish branch, tanks.

Section 11(b) authorizes the Federal Reserve Board:

"To permit, or, on the affirmative vote of at least five members of the Federal Reserve Board to require Fed-eral reserve banks to rediscount the discounted paper of other Federal reserve banks at rates of interest to be fixed by the Federal Reserve Board."

Section 14 (e) authorizes the Federal reserve banks:

"To establish accounts with other Federal reserve banks for exchange purposes and, with the consent or upon the order and direction of the Federal Reserve Board * * * to open and maintain accounts in foreign countries, appoint correspondents, and establish agencies in such countries

It will be noted that these provisions give the Board power to order

or direct the doing of certain things by the Federal reserve banks and this

constitutes the greatest possible measure of control over these particular

actions. In respect to these particular matters, the Board is authorized to

substitute its judgment for the judgment of the Board of directors of the

Federal reserve banks and in a measure to direct the activities of the Fed~

eral reserve banks# It should ibe noted, however, that this power of the Board

is restricted to certain specific acts and does not relate to the conduct of

the general business of the bank*

Certain other powers of the Federal reserve banks are made subject to

approval or review by the Federal Reserve Board.

Thus, Section 14 (e) provides also that, "Whenever any such account has

been opened or agency or correspondent has been appointed by a Federal re-

serve bank * * *, any other Federal reserve bank may, with the consent and


-4™ x"4451 1 8 1 approval of the Federal Reserve Board, be permitted to carry on or conduct,

through the Federal reserve bank opening such account or appointing such agency

or correspondent, any transaction authorized by this section * *

Section 14(d) authorizes each Federal reserve banki

"To establish from time to time, subject to review and deter-mination of the Federal Reserve Board* rates of discount to be charged by the Federal reserve bank for each class of paper, which shall be fixed with a view of accommodating commerce and business."

Section 13 authorizes each Federal reserve bank!

"To make advances to its member banks on their promissory notes for a period not exceeding fifteen days at rates to be established by such Federal reserve banks, subject to the re-view and determination of the Federal Reserve Board.M

The salaries paid by Federal reserve banks are expressly made subject

to approval by the Federal Reserve Board.

Section 4 contains the following provision!

"* * * Any compensation that may be provided by boards of directors of Federal reserve banks for directors, officers or employees shall be subject to the approval of the Federal Reserve Board."

Section 12 authorizes the directors of the Federal reserve banks to

fix the compensation of members of the Federal Advisory Council, "subject to

approval of the Federal Reserve Board."

Two important facts should be noted with reference to those provisions

of the Act making certain specific actions by the Federal reserve banks

subject to approval or review and determination by the Federal Reserve Board:

(a) They apply only to the specific acts mentioned and, therefore, are

limited in their scope; but (2) they have the effect of making such action

by the Federal reserve banks contingent upon approval by the Federal Reserve

Board and, therefore, such actions are not valid until approved by the Board.

Another form of control vested in the Federal Reserve Board is the

power to prescribe regulations, limitations and restrictions with reference


-5- X-4431 4-8.2

to the exercise of various powers "by the Federal reserve banks.

Thus, t h e second paragraph of S e c t i o n 13 gives t h e Board t h e r i g h t to

determine or define the character of notes, drafts and bills of exchange which

are eligible for rediscount within the meaning of the Act; the third paragraph

makes the power of Federal reserve banks to discount or purchase sight drafts

"subject to regulations and limitations to be prescribed by the Federal Re-

s e r v e Board;" and the ninth paragraph provides that! •

"The discount and rediscount and the purchase and sale by any Federal reserve bank of any bills receivable and of domestic foreign bills of exchange, and of acceptances authorized by this Act, shall be subject to such restrictions, limitations, and regulations as may be imposed by the Federal Reserve Board.11

Likewise, Section 13(a) authorizes Federal reserve banks to discount

agricultural paper "subject to regulations and limitations to be prescribed

by the Federal Reserve Board"; and Section 14 authorizes Federal reserve

banks to purchase and sell in the open market cable transfers, bankers' ac-

ceptances and bills of exchange "under rules and regulations prescribed by

the Federal Reserve Board."

These are but a few of the many provisions of tho Act giving the Board

power to prescribe regulations, limitations and restrictions, but they serve

to illustrate the nature of such power. It may be stated generally that such

powers of the Board, like the power to approve certain actions by the Federal

reserve banks, are limited in scope and apply only to certain specific powers

of the Federal reserve banks; but when the Federal Reserve Board has pre-

scribed valid regulations, limitations and restrictions on these subjects

they have the force and effect of law and the banks must comply with them.

The Act also gives the Board y§?y bPQEvd supervisory powers over the

Federal reserve banks. While these powers are broader in scope than the powers

discussed aboyg, t&ey quite different in nature in that they give the


-6— X-4431 J L 8 3

Board loss control over the actions of the "banks.

Section 11(j) authorizes the Board in the "broadest possible terms "to

exercise general supervision over said Federal reserve "banks." This "broad

provision would seem to apply to all activities of the Federal reserve "banks

and every phase of their "business; but, as will "be shovm below, "general super-

vision" does not mean administering the affairs of the bank, nor does it con-

template the substitution of the judgment of the Federal Reserve Board for

that of the board of directors in conducting the every day business of the

bank.

In order to provide further for this general supervision over Federal re-

serve banks, Section 11(a) authorizes the Board:

"To examine at its discretion the accounts, books, and affairs of each Federal reserve bank * * * and to require such statements and reports as it may deem necessary."

Section 21 requires the Board to order at least one examination of each Fed-

eral reserve bank each year.

Section ll(i) also gives the Board general authority to make all rules

and regulations necessary to enable it effectively to "perform the duties,

functions and services specified in this Act." This is similar to the general

power given to any organization to prescribe rules or by-laws for the con-

duct of its business.

Thd various powers of the Federal Reserve Board over the federal re-

serve banks may be divided roughly into four different classes;

1. The power to direct or require the Federal reserve banks to do

certain things, which for convenience may be called the power of direction.

This gives the Board the greatest measure of control over the Federal re-

serve banks but is limited to certain specific acts.


184 -7- X-4431

2. Tho power to review, approve or disapprove certain actions of the

Federal reserve "banks, which power is limited in its scope to certain specific

actions "but gives the Board the next greatest measure of control over these

actions by making them invalid or ineffective until approved by the Board.

This may be called the veto power.

3. The power to prescribe regulations, limitations, and restrictions

governing the exercise of certain specific powers of the banks. This is

limited in scope to certain specific powers but gives the Board a great measure

of control over the exercise of those powers» For convenience this may be

called the regulatory power.

4. The power to exercise general supervision over, and examine into all

the affairs of* the Federal reserve banks. This power is broadest in its

scope but gives the Board the least measure of control over the Federal re-

serve banks. -"-t might be called the supervisory or visitorial power.

The expenditures of the Federal reserve banks for supplies or informa-

tion are not specifically made subject to the direction, veto or regulatory

powers of the Federal Reserve Board. They are, therefore, subject only to

the Board's general supervisory power. This makes it important to consider

more carefully the purpose, nature and extent of this general supervisory power.


1 -8- X-4431

(c) General Supervisory Power ;

It is customary in American law to vest in some board, commission, or

officer, the power to exercise general supervision over certain types of

corporations such as common Carriers, insurance companies, and. banks, which

are affected with a public interest. Farthermore, under American law all

corporations are chartered by the Government and have only such powers as are

expressly granted in their charters or in the laws under which they are in-

corporated and such incidental powers as are necessary to the exercise of the

powers expressly granted. It is well settled that by implication they are

forbidden to exercise any other powers. The State, therefore, is interested

in any attempt by a corporation to exceed its corporate powers and it is well

settled that the State is the one to complain of any ultra vires acts of a

corporation and is the only one which can institute quo warranto proceedings

to compel a corporation to cease performing iiltra vires acts. The duties of

boards, commissions or officers charged with general supervision over corpora-

tions affected with a public interest, therefore, are primarily to see that

such corporations dp not exceed their lawful powers and that they carry out

the purposes of their organization in such a way as to benefit rather than

injure the public, and to prevent or check any abuses of any character.

This power, in its general nature and purpose is quite similar to, if not

the same as, the common law power of visitation. A discussion of the au-

thorities on the subject of visitatorial powers, therefore, may throw some

light on the extent of the Board's duties and powers in the premises.

The visitors of eleemosynary and ecclesiastical corporations at common

law, however, frequently perforrad.all the functions and possessed all the

powers which are now divided between the directors of banks and the govern-

mental authorities having supervision over them; and it is important to keep


-9- X44.il 3 . 8 6

this in mind while reading the authorities quoted below:

Bouvier1s Law Dictionary. (p. 3404) discusses this subject as follows:

"Visitation. The act of examining into the affairs of a corporation.

"The power of visitation is applicable only to ecclesiastical and eleemosynary corporations. 1 Bla. Com. 480. The visitation of civil corporations is by the government itself, through the medium of the courts of justice. See 2 Kent, 240. In the United States, the legislature is the visitor of all corporations founded by it for public purposes; Dartmouth College v. Woodward, 4 Wheat. (U.S.) 518 4 L. Ed. 629.

* * * * * * * * * * * * *

"All eleemosynary corporations who are to receive the charity of the founder have visitors if they are ecclesiastical corporations; and if a particular visitor is not provided "by the founder, then the Ordinary of the place is the visitor; if they are lay corporations, the founder and his heirs are perpetual visitors; 5 Mod. 404e It is a necessary incident of an eleemosynary corporation; 1 Mod. 82; "a power to correct abuses and to enforce due observance of the statutes of the charity« "but not a power to revoke the gifts, to change uses or divest rights;" Allen v, McLean 1 Sumn. 276, Fed. Cas. No. 229, per Story, J.

"A visitor has the right of inspecting the affairs of the corpora-tion and superintending all officers who have charge of them according to the statutes of the founder, without any control or revision of any other person or body* except the judicial tribunalst by whose authority and juris-diction he may be restrained and kept within the limits of the granted ppwers, and made to regard the general laws of the land; in re Murdock, 24 Mass.303, Mo. appeal lay from a visitor unless he visits quo Ordinary, when an appeal lay to the Crown in Chancery. It was said by Lord Camden that visitation is despotism uncontrolled and without appeal; Grant. Corp. 534, See, generally Tudor, Charitable Trusts; Stephens, Statutes Relating to Ecclesiastical, etc. Institutions; Report of Oxford Commission (1852); 7 Com. Dig. 545; 21 Viner, Abr. 587• See 34 L. Mag, and Rev. 40, as to Oxford and Cambridge Universities.

"In Massachusetts it is held that the visitation of eleemosynary corporations according to the common law is in force except as altered by statute; In re Murdock, 24 Mass. 303; such statutes may vest visitatorial power in the courts, in the absence of a personal visitor, or even where there is one; In re Taylor Orphan Asylum, 36 Wis. 534; but where visitatorial power is conferred on certain public officers, the courts may not interfere unless such visitors should act contrary to law; Nelson v. Cashing, 2 Cush. (56 Mass.) 519.

"Even where a testator, in founding a hospital, directed that the trustees should annually report their acts to the court and give bonds, it was held that the court had no visitatorial power or other supervision;


-10- X-4431 1 8 7

Jenkins v. Berry, 119 Ky. 350, 83 S. if, 594.

"The visitatorial power of a court over a cemetery association does not authorize it to substitute its own business judgment for that of the association; Roanoke Cemetery Co. v. Goodwin, 101 Va. 605, 44 S. E. 769.

"Under the visitatorial powers of a state over corporations doing "business within its borders, it is competent for it to compel such corpora-tions to produce their books and papers for investigation and to require the testimony of their officers and employees to ascertain whether its laws have been complied with, and this power extends to the production of books and papers kept outside of the state, and a statute requiring such production does not amount to an unreasonable search or seizure or a denial of due process of law;. Consolidated R. Co. v. Vermont, 207 U. S. 541; 28 Sup. Ct. 178, 52 L. Ed. 327, 12 Ann. Cas, 658; Hammond P. Co. v. Arkansas, 212 U. S. 322, 29 Sup. Ct. 370, 53 L. Ed. 530, 15 Ann. Cas. 645. A corporation being the creature of the state, has not the constitutional right to refuse to submit its books and papers for an examination at the suit of the state, and an of-ficer of a corporation charged with criminal violation of a statute cannot pload the criminality of the corporation as a refusal to produce its books; Halu v. Henkel, 201 U. S. 43, 26 Sup. Ct. 370, 50 L. Ed. 652. A corporation is bound to furnish information when called for by the state, so far as reasonably possible, and state the facts which excuse them from answering more fully; State v. Express Co., 81 Minn. 87, 83 N. W. 465, 50 L. R. A. 667, 83 Am. St. Rep. Austin, 67 Kan. 208, 72 Pac. 850.

"It may be considered that, to a certain extent, railroad com-missions are the machinery created by law for the exercise of visitatorial -power.

"This power does not include the common law right of the share-holder to inspect the books of the coloration; Guthrie v. Harkness, 199 U. S. 148, 26 Sup. Ct. 450 L. Ed. 130, 4 Ann. Cas. 433."

In the famous Dartmouth College Case, 17 U. S. (4 Wheat) 517 , 672, Mr. Justice Story discusses the subject of visitors of eleemosynary corpora-tions as follows:

"To all eleemosynary corporations, a visitatorial power attaches, as a necessary incident; for these corporations being composed of individuals, subject to infirmities, are liable, as well as private persons, to deviate from the end of their in-stitution. The law, therefore, has provided, that there shall somewhere exist a power to visit, inquire into and correct all irregularities and abuses in such corporations. and to compel the original -purposes of the charity to be faithfully fulfilled. 1 Bl. Com. 480. The nature and extent of this visitatorial power has been expounded with admirable fulness and accuracy by Lord Holt in one of his most celebrated judgments. Phillips v. Bury, 1 Ld. Raym. 5; s.c. 2 T.R» 346. And of common right, by the dota-tion, the founder and his heirs are the legal visitors, unless the founder has appointed and assigned another person to be visitor. • For the founder may, if he please, at the time of the


- n - . x - 4 4 3 1 ± 8 8

endowment, part with his visitatorial power, and the person to whom it is assigned will, in that case, possess it in exclu-sion of the founderfs heirs, 1 Bl. Com. 482 * * * * But where trustees or governors are incorporated to manage the charity, the visitatorial power is deemed to "belong to them, in their corporate character» Philips v. Bury, 1 Ld. Raym. 5, s.c. 2 T.R, 346; Green v. Rutherforth, 1 Ves. 472; Attorney-General v. Mid-dleton, 2 Ibid. 327; Case of Sutton Hospital, 10 Co. 23, 31."

That the power to supervise and examine banks is a visitorial power

is indicated "by the following passage in Morse on Banks and Banking (5 Ed,)

Vol, 1 p. 44:

"A state may invest the supervision of banks in a bank com-missioner or other examiner, and grant to him visitorial -powers over banks and impose upon him the duty of examination of banks, the investigation of their solvency* and the winding up of their affairs if the protection of the depositors demands such action, % may examine the records of the bank, change the per-sonnel of the board of directors, and establish rules for the proper discharge of his duty. His power should not be unduly narrowed by construction, nor can he be removed by the governor,"

In Guthrie v, Harkness, 195 U, S. 148, a stockholder in a national bank

applied for leave to inspect the books, accounts and loans of the -bank for

the purpose of ascertaining the value of his stock. Upon refusal to allow

such inspection, he instituted proceedings to compel the officers of the

bank to permit him to examine the books. One of the defenses made on be-

half of the officers was that the common law right of the stockholder to in-

spect the books of a corporation is cat off as to stockholders of national

banks by Section 5241 of the Revised Statutes, which provides that "No

association shall be subject to any visitorial powers other than such as

are authorized by this title or are vested in the courts of justice," The

court held that the stockholder was entitled to examine the books of the bank

and that the officers thereof most permit him to do so.

-4r, Justice Day said: -

"But, it is; said, the right of the shareholder to inspect the books is cut off by section 5241, providing "no association shall be subject to any visitorial powers other than such as are


-12- X-4431

authorized by this Title, or are vested in the courts of justice. 'We are unable to find any definition of 1visitorial powers1 which can be held to include the common law right of the shareholder to inspect the books of the corporation. * * * *

* * * * * * *

"The meaning of this section was before Judge Baxter in the case of First Nat. Bank of Youngs town v, Hughes, 6 Fed. Rep. 737, and of the meaning of the term * visitorial powers1, as used in section 5241, that learned judge said:

1Visitation, in law, is the act of a superior or superintending officer, who visits a corporation to ex-amine into its manner of conducting business, and enforce an observance of its laws and regulations. Burrill de-fines the word to mean "inspection; superintendence; di-rection; regulation." 1

"At common law the right of visitation was exercised by the King as to civil corporations and as to eleemosynary ones by the founder or donor. 1 Cooley1s Blackstone, 481. 1 In the United States the legislature is the visitor of all corporations created by it, where there is no individual founder or donor, and may di-rect judicial proceedings against such corporations for such abuses or neglects as would at common law cause forfeiture of their charters.1 1 Cooley*s Blacks tone, 482, note.

"In the case before us the Supreme Court of Utah quotes from Merrill on Mandamus as follows:

1 Visitors of corporations have -power to keep them within the legitimate sphere of their operations, and to correct all abuses of authority, and to nullify all irregular proceedings« In America there are very few corporations which have private visitors, and in the absence of such, the State is the visitor of all corporations.1

"In no case or authority that we have been able to find has there been a definition of this right, which would include the private right of the shareholder to have an examination of the busi-ness in which he interested, and the right of discovery of the methods and means by which the agents of the corporation are con-ducting its affairs. The right of visitation being a public right. existing in the State for the purpose of examining into the conduct of the corporation with a view to keeping within its legal powers, Congress had in mind in passing this section that in other sections of the law it had made full and complete provision for investigation by the Comptroller of the Currency and examiners appointed by hin, and, authorizing the appointment of a receiver, to take possession of the business with a view to winding tip the affairs of the bank. It was the intention that this statute should contain a full code of


190 -13- X-4431

provisions upon the subj'ect, and. that no state law or enactment should undertake to exercise the right of visitation over a national corporation* Sxce-ot in so far as such corporation was liable to control in the courts of .justice, this act was to be the full measure of visitorial power."

The Board's power to exercise general supervision over Federal reserve

banks and examine into their affairs is quite similar to the corresponding

power of the Comptroller of the Currency over national banks, and it would

seem that the nature and purpose of the Board's power mast be practically

the same as that of the Comptroller's.

In the case of State v. Morehead. (Nebr.) 155 H.W. 879, the court in

discussing the right of the State Banking Board to refuse to issue a charter

to a savings bank said:

"When the general rule of a statutory construction is applied and section 16 is considered in connection with the other provisions, it must be held that the board is vested with authority not only to correct evils that may creep into the management of an existing bank, but to guard against dan-gers, that may threaten institutions about to be formed.

"'The power to compel, beforehand, co-operation, and thus, it is believed, to make p. failure unlikely and a general panic almost impossible, must bo recognized, if government is to do its proper work, unless wo can say that the means have no reasonable relation to the end.1

State Bank v. Haskell, 219 U.S. 104, 112, 31 Sup. Ct. 186, 188 (55 L. Ed. 112, 32 L.R.A.N.S. 1062, Am. Cas. 19121,487)'

ii * * * We think the intention of the Legislature was to vest the banking board with general control and with authority to do all things reasonably necessary for the -protection of de-positors throughout the state. The Board also stands in the nature of a trustee for this guarantee fund, and it is its duty to take such precautions as may be necessary to protect its in-

. tegrity. The terms 'general supervision and control' vest the banking board with duties of a very high order, and they are not to be -perfunctorily discharged, but to be administered with the highest degree of intelligence and discretion.•

"It is customary for Legislatures to grant to administrative bodies of this character the power to adopt rules, by-laws, and regulations reasonably necessary to carry out the purpose for which they are created, and this grant is not an improper delegation


1 9 1 -14- X-4431

of authority. Blue v. Beach, 155 Ind. 121, 56 N.E. 89, 50 L.E.A. -64, 80 Am. St. Rep. 195 and cases cited. This is held generally to be the rule in matters coming within the police power of the state. That the banking business comes within that power is no longer an open question.

"'The police power extends to all the groat public naeds (Camfield v. United States, 157, U. S. 518, (17 Sup. Ct. 864, 42 L. Ed. 250))and includes the enforcement of commercial conditions such as the protection of bank deposits and checks drawn against them by compelling cooperation so as to prevent failure and panic.' (Eoble State Bank v. Haskell, 219 U. S. 134)

"The business of banking coming within the police power of the state, the same rule of construction may be applied to banking acts as to rales and regulations established by banking boards as applies to acts creating other administrative bodies coming within the police poorer. The Supreme Court of Judicature of Indiana, in discussing this phase of the question, in Blue v. Beach, supra, says:

•While it is true that the character or nature of such boards is administrative ohly, still the powers con-ferred upon them by the legislature, in view of the great public interests confided to them, have always received from the courts a liberal construction, and the right of the legislature to confer upon them the power to make... reasonable rules, by-laws, and regulations, is generally recognized by the authorities*111

The case of Great Northern Railway Company v. Snohomish County. 48 Wash

478, 93 Pac. 924, involved, the construction of a State statute requiring

the State Board of Tax Commissioners to exercise "general supervision" over

assessors and county boards of equalization and the assessment of taxable

property in order to secure equality in taxation. % e case turned upon the

proper meaning of the term "general supervision"- whether it authorized the

Commissioners to act merely in an advisory capacity or whether it authorized

them to classify inter-county railroads and fix the value thereof for the

purpose of taxation. The court held that the statute authorized the Com-

missioners to classify inter-county railroads and fix the value thereof for

purposes of taxation; that the words "general supervision" imply something


192 -15- X-4431

more than a merepower to advise and suggest; that they confer authority

to oversee and review the acts and correct errors of those over whom the

right of supervision is granted. In the course of the opinion the court said:

"While these several provisions hear more or less directly on the question under consideration, the case turns principally on the meaning of the term 1 general supervision* in the act de-fining the powers and duties of the state "board of tax commis-sioners, * * * The state hoard of tax commissioners is given/§SpIf -vision over assessors and county hoards of equalization to the end that all taxable property shall he placed on the assessment rolls and equalized as between the different counties and municipalities, so that equality of taxation shall "be secured according to the provisions of law# What is meant by 1 general supervison1? Counsel for respondents contend that it means to confer with, to advise, and that the board acts in an advisory capacity only, ^e cannot believe that the Legislature went through the .idle formality of creating a board thus impotent. Defining the term *general super-vision1 in Vantongeren, v. Hefferman, 5 Dak. 180, 38 H.W. 52, the court said: 1 The Secretary of the Interior, and under his direction, the Commissioner of the General Land Office, has a general "super-vision over all public business relating to public lands." What is meant by "supervision"? Webster says supervision means "to over-see ior direction; to superintend, to inspect; as to supervise the press for correction." And, used in its general and accepted meaning, the Secretary has the power to oversee all the acts of the local of-ficers for their direction, or, as. illustrated by Mr. Webster, he has the power to supervise their acts for the purpose of correcting the same; and the same power is exercised by the Commissioner under the Secretary of the Interior. It is clear, then, that a fair con-struction of the statute gives the Secretary of the Interior, and under his direction, the Commissioner of the General Land Office, the power to review all the acts of the local officers, and to cor-rect, or direct a correction of, any errors committed by them. Any less power than this would make the "supervision" an idle act - a mere overlooking without power of correction or suggestion.1 Defining the like term in State v. F.R. & M. V, E.E. Co., 22 Nebr. 313, 35 N,W. 118, the court said; 1Webster defines the word "supervision" to be "the act of overseeing; inspection, superintending." The board therefore is clothed- with the power of overseeing, inspecting, and superintending the railways within the state, for the purpose of carrying into effect the provisions of this act, and they are clothed with the power to prevent un.iust. discrimination against either persons or places. It seems to us that the term 1 general supervision* is correctly defined in these cases. Certainly a person or officer who can only advise or suggest to another has no general supervision over him, his acts or his conduct."

Similarly, it would seem that the Board-s power to exercise "general


193 -16- X-4431

supervision" over the Federal reserve banks would include the power to

require the Federal reserve tanks to carry out the purposes of the Act and

to correct any errors which they nay have committed by deviating from the

terms of the law.

On the other hand, there are some cases indicating the limitations on

this power of general supervision.

One of such cases is that of State v. Bronson, (Mo.) 21 S. W. 1125. '

The constitution of Missouri provides that "The supervision of instruction

in the public schools shall be vested in a board of education whose powers

and duties shall be prescribed by law". The legislature passed a law

creating a commission to purchase the books necessary for use in the schools.

This law was objected to by the directors of a school district as being un-

constitutional on the ground that it was in violation of the powers vested

in the board of education by the constitution.

The court held that the selection and purchase of the school books does

not come within the fair meaning of the words "the supervision of instruction"

and the law does not violate the constitutional provision. In so holding

the court said:

"With such a general system of public schools it mast be evident that when,the constitution says the supervision of in-struction shall be vested in the state board of education, it docs not mean that this board shall enter into the details of giving instruction or carrying on the schools. All this is and inay b e left to subordinate officers. It means no more than a general oversight over the matter of instruction."

In the case of Roanoke Oemetary Co. v, Goodwin, 101 7a. 605, 44 S.E.

769, the lower court had reviewed the reasonableness of regulations pre-

scribed by the cemetary association for the conduct of its business and the

fees charged for opening graves arid had issued a decree whereby the court


-17- X-4431 1 - 9 4

undertook to proscribe its own rules and regulations for the management

of the affairs of the company, even going to the extent of determining the

fund out of which the salary of the superintendent should be paid. The

Supreme Court of Appeals in Virginia held that the decree exceeded the power

of the court and said:

"*t is not permissible for a court to thus substitute its ovm- business discretion and judgment for that of the company; its visitorial powers have no such scope. 1 Clark & Marshall, p. 547."

Similarly, it .xdght be said that the authority to exercise general

supervision over the Federal Reserve banks does not carry with it the duty

to enter into the details of operating the banks nor the authority for the

Federal Reserve Board to substitute its own business judgment and discretion

for that of the directors.

In my opinion, the Board's power to exercise general supervision over,

and to exaaine into the affairs of, Federal reserve banks includes the power

and carries with it the duty to see that Federal reserve banks do not exceed

their corporate powers; that they do not discriminate in favor of or against

any class of the public or any member banks; that they preserve and protect

the banking reserves of the country with which they are entrusted; that they

do not do anything which may endanger their solvency or the soundness of

their currency; that they carry out faithfully the purposes of the Federal

Reserve Act; and that they comply in all respects with both the letter and

spirit of the law. I am further of the opinion that this power carries with

it the power to require the Federal reserve banks to cease doing anything

;-7hich is ultra vires, and to correct irregularities abuses or dangerous

practices of any kind in which they may engage. As stated in State, v. Moreland,

supra, 11 The terms 'general supervision and control1 vest the banking board


-18- X-1431 195

with duties of a very high order, and they ore not to "be perfunctorily

discharged, but to he administered with the highest degree of intelligence

and discretion." On the other hand, I sun of the opinion"that this power does

net carry with it either the duty or the power to interfere in the details of

the operation of the Federal reserve "banks or to substitute the Board's own

business judgment and discretion for that of the Directors of the Federal re-

serve banks.

The above is not intended ap a precise definition of this power but

merely a general expression of my views on the subject.

(d) Provisions Regarding Expenditures>

The only provisions of the Act which specifically give the Board con-

trol over the expenditures of Federal reserve banks are those quoted above

which make the salaries paid by them subject to approval by the Federal Re-

serve Board.

The most important provision,regarding the expenditures of Federal re-

serve banks is contained in Section 7 which reads, in part, as follows:

"After all necessary expenses of a Federal reserve bank have been paid or provided for, the stockholders shall be en-titled to receive an annual dividend of six per centum on the paid-in capital stock, which dividend shall be cumulative.

After the aforesaid dividend claims have been fully met, the not earnings shall be paid to the United States as a franchise tax except that the whole of such net earnings, including those for the year ending December thirty-first, nineteen hundred and eighteen, shall be paid into a surplus ftind until it shall amount to one hundred per centum of the subscribed capital stock of such bank, and that thereafter ten per centum of such net earnings shall be paid into the surplus.

"The net earnings derived by the United States from Federal reserve banks shall, in the discretion of the Secretary bo used to supplement the gold reserve held against outstanding United States notes, or shall bo applied to the reduction of the out-standing bonded indebtedness of the United States under regu-lations to be prescribed by the Secretary of the Treasury. Should a Federal reserve bank be dissolved or go into liquidation, any surplus remaining, after the payment of all debts, dividend requirements as hereinbefore provided, and the par value of the


stock, shall "be paid to and become the property of the Unitod States and shall be similarly applied,li

The first paragraph says in substance, that after paying or providing

for "all necessary expenses", paying their dividends and transferring certain

portions of their net earnings to their surplus funds, the Federal reserve

banks' shall pay the remainder of their net earnings to the United States as

a franchise tax. This gives the United States a contingent interest in the

earnings of the Federal reserve banks and makes it important that their ex-

penditures and their accounts shall be scrutinized by some representative of

the Government, in order that the Government may not be unlawfully deprived

of any part of its franchise tax. There is no specific provision in the

however, providing special machinery for the performance of this function

and it would seem that this duty must devolve upon the Federal Reserve Board

as part of its duty to exercise general supervision over the Federal reserve

banks. In my opinion this makes it the duty of the Federal Reserve Board

to examine into and to supervise in a general way the expenditures of the

Federal reserve banks and to make sure that such expenditures are within

the corporate powers of the Federal reserve banks, are reasonably necessary

for the conduct of their legitimate business, and are never made for the

purpose of unlawfully depriving t$e United States Government of its fran-

chise tax or for any other unlawful purpose.

It may be remarked in passing that the Federal Reserve Board apparently

performs this duty through its examining force, which calls attention in its

reports of examinations to any expenditures by the Federal reserve banks

which appear to be unwarranted or questionable in any way.

There are certain other considerations which might be pointed out In

connection with this duty of the Board:


-20- X-44?l 1 9 7

(1) The purpose of the provision, that the excess earnings of

the Federal reserve hanks shall he paid to the Government as a franchise

tax was not so much to provide a source of revenue for the Government as

it was to take away from the Federal reserve banks the temptation to con-

duct their operations with a view of making large earnings, in order that

they night regulate credit and conserve the hanking reserves of the country

without being influenced by the desire to earn money.

(2) Section 7 also provides that the funds derived by the United States

from the franchise tax shall be used only for two specific purposes;

(a) To supplement the gold reserves held against outstanding United States notes, or

(b) To reduce the outstanding Ainded indebtedness of the United States.

This is important in this connection because it negatives any argument

to the effect that the purpose of the law is not frustrated if the earnings

of the federal Reserve Banks are used to defray the expenses of any depart-

ment of the Government, Any unwarranted payment by a Federal reserve bank

to any bureau of the Government may serve indirectly to divert money from

the two purposes specified abbve &nd apply it to a purpose different from

that contemplated by Congress,

(e) Conclusions as to Board's General Administrative Duty.

A consideration of the above provisions of the Act and principles of law

leads me to the following general conclusions:

1, That the primary duty of administering the Federal reserve banks

is vested in the board of directors of each federal reserve bank and, there-

fore, they have the primary responsibility of seeing that all expenditures

are proper both from a business and a legal standpoint.


198 -21- X-4431

2. It is the duty of the Board to examine into and supervise in a

general way the expenditures of the Federal reserve tanks, to the end that

they shall be kept within the corporate powers of the Federal reserve tanks,

shall "be confined to such as are reasonably necessary to the legitimate

operations of the banks, shall not improperly reduce the franchise tax paid

to the United States and shall not be made for any unlawful purpose.

3. This does not impose upon the Board the duty of passing upon the

reasonableness of every minor expenditure of the Federal reserve banks,but

it does impose upon the Board the duty of being constantly on guard to check

any unlawful, improper, unwarranted or unreasonable expenditures.

4. The -^oard is not required to approve expressly any expenditures ex-

cept those for salaries.

5. Inasmuch as the franchise tax is to be paid into the Treasury and

to be used for specific purposes, it is equally as improper for the Federal

reserve banks to make unwarranted payments to any department or bureau of

the Government as it is to make such payments to private individuals.

6. On the other hand, the Federal reserve banks have a right to

pay any bureau of the Government any bona fide, reasonable amount for -apy

service which that bureau may" render to them and which they may actually

need in the conduct of their business.

7. In determining what is a reasonable amount, both the" Federal re-

serve banks and the Federal Reserve Board, in my opinion, are primarily

concerned with the value of the services to the Federal reserve banks and

what it would cost to obtain such services from some other source.

8. In my opinion, the Board should see that any payments by the Fed-

eral reserve banks to any bureau or department of the Government, as well as


-22- X-4421 1 9 9

any payments made to any private individual or corporation, should bo

r.iadc solely with the view of obtaining necessary services at a reasonable

cost and without any purpose of subsidizing each bureau, department, or

person.

II. DUTY OF THE BOARD II THIS SPECIFIC CASE.

If this question had not been referred to the Board by the Federal re-

serve banks I doubt that it would be necessary for the Board to inquire es-

pecially into it or pass especially upon the reasonableness of this expendi-

ture by the Federal reserve banks, because Federal reserve banks obviously

are justified in obtaining this information in some w/Exy and the expense

clearly is less than the value of the information to them. The fact is,

however, that the Governors of the Federal reserve banks at their recent

conference referred this question to the Board with the understanding that

the Board would confer with the Comptroller of the Currency and arrive at an

understanding as to what charge should be made by the Comptroller for furn-

ishing the Federal reserve banks with copies of reports of examinations of

national banks; and these circumstances would seem to impose upon the Board

the duty of passing upon the reasonableness of the amount to be paid by the

Federal reserve bank for this service, which is primarily a question of

policy or judgment rather than a question of law.

In my opinion, the Board should consider this question from the stand-

point of the Federal reserve banks» and the primary considerations are:

1. Whether the amount proposed to be charged is reasonably commensurate

with the value of the service to the Federal reserve banks under all the cir-

cumstances; and

2, Whether such charge is in excess of what it would cost the Federal


200 -23- X-4431

reserve banks to obtain such information from socio other source without

causing undue embarrassment to then or unnecessary burden to their member banks.

I think, however, the Board may properly consider the broad question

whether or not the payment of such charges by the Federal reserve banks would

in effect constitute a subsidy to the Comptroller's office, an unwarranted as-

sumption by the Federal reserve bonks of part of the expenses of examining

national banks, or any other violation of the purpose of the law. If the

Board should decide to inquire into this question I think the Board should

bear in mind the following considerations:

(a) The fact that the Federal reserve banks are authorized by law

to obtain this information without any expense to themselves, by making

special examinations of their member banks and assessing the costs thereof

against the banks examined.

(b) The question whether or not making their own examinations of

member banks would cause the Federal reserve banks any unnecessary embar-

rassment or would result in an unnecessary duplication of work or an unnec-

essary burden on the member banks,

(c) The fact that such information has in the past customarily

been obtained from the Comptroller of the Currency, first, free of cost, and

later upon the payment of a fee of $4.50 per copy.

(d) The fact that the Comptroller is not required by law to furnish

this information to the Federal reserve banks, and the banks can obtain it

from him only on such terms as he sees fit to prescribe.

(o) The fact that the Comptroller has stated his intention of

raising the charge to $10 per report, which carries with it the implication

that he will not Airnish it for less,


301 -24- X-4431

My own personal opinion is that a fair consideration of all these

elements would justify the Board in reaching the conclusion that the purchase

of this information "by the Federal reserve "banks from theComptroller of the

Currency and the payment of the price or charge fixed "by the Comptroller is

not an unwarranted or improper expenditure "by the Federal reserve "banks.

I do not consider it to "be the duty of the Board to inquire into the

method adopted "by the Comptroller in arriving at the amount to "be charged

for his service nor the disposition which he intends to make of the proceeds,

these "being matters pertaining solely to the internal administration of his

office. If, however, the Board decides to go into thdse questions, I think

the following additional considerations should "be "borne in mind:

1. The Comptroller has recognized the fact that the law requires him

to assess the total cost of examining national "banks against the "banks

examined, and that he has no right to require the Federal reserve "banks to

hear any portion of such expense.

2. On the other hand, he has argued, and I think correctly, that he

has no right under the law to assess against the national "banks anything

more than the actual costs of making their examinations, and, therefore, he

would "be doing the national banks an injustice if he should add to the

costs of such examinations the cost of furnishing information to the Federal

reserve "banks. In other words, as I understand his position, it is that

he must assess the total costs of examining the national banks against the

national banks, but no more; and that if he furnishes any information to the

Federal reserve banks he most require reimbursement from them for all ad-

ditional expenses to which his office is put in furnishing such information.

3.. He also states that this expense includes more than the bare cost

of nn.iring additional carbon copies of the reports of examination, and that


203 -25- X-4431

it is extremely difficult to arrive at the precise amount it costs his

office to furnish such additional information to the Federal reserve banks.

4. The Comptroller's administrative problem is to determine what pro-

portion of the total costs of (a) examining national banks, and (b) furnishing

Federal reserve banks with copies of reports of such examinations, together

with such other information as they desire, should properly be assessed

against the national banks as expenses of making examinations, and what pro-

portion of such total sun should be paid by the Federal reserve banks for the

information furnished to them.

If the Board decides to go into the last question and it is found to

be impossible or impracticable to determine precisely the proper apportion-

ment of these expenses, I an of the opinion that the Board would be justi-

fied in approving the payment by the Federal reserve banks of any flat

charge which in its opinion is a fair estimate of their proper share of the

total expense of obtaining this information and furnish!it to then; and

I do not think that the Board could be criticized justly for failing to in-

sist upon a precise mathematical formula for determining this amount.

Respectfully,

Walter Wyatt, General Counsel.



WASHINGTON

ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD

X-4432

September 29, 1925.

SUBJECT: Election of Class "A" and "B" Directors.

Dear Sir:

This will confirm my telegram to you of this date advising that the Board has designa-ted November 17, 1925, as the date for opening the polls for the election of Class "A" and "B" directors and that no change will he made in the group classifications which have governed in these elections for the past several years.

Very truly yours,


TO CHAIEMAH OF AIL F.R.BANKS.


204

X-4435

TRJ:~p SUPY :rJLi::l}_f.CI.!l?;J·'J' Office of t~e Secretary

W.ASHING~·ON October 6, 1925.

The Govnrnor, Fed.c:re..l Reserve Board.

Sir: You a:ce horeby advised that th8 Dcpartrn.:mt has raferr8cL to the Disbursing

Cle::-k, 'l'rsa.su..:'.'y Depe.rtme:nt, for paym:mt: the account of the Bu::es.u of Engraving 11Jjd Printing for y;rs:;?a.dng Federal reserv0 nctes during the ;p.a:dod Sdpternber 1 co Septelliber 30, 1925, amounting to $112,300.00 as follows:

Naw Yo:".:"k ?hiladul:?hia C1eveland Chlcago K.stnsas City I'allas Sa..'1 Francisco

400,000 200,000 300,000 600,000 200,C0G· 100 ,,:-·~(.,

_j_OCl, DOG ----· 2 J 100,000 .

400,000 100,000

80,000 200,000 10:000

400,000 680,000 61..0,000 6ou,o0o 200,000 100,000

lvO,vGO 10,000 410,000 --- . ---' -----,uv,OGG 380,000 20,000 j,OOO,OOO

3,C.{J0,000 sheets at $37 .~0 per M ••..•......... $112,800.00

The charges against tha several Fed.eral Reserve Banks are as follows:

C~ilj?Crl- Plate --·---She5~ts sation Printing :Ma:t erie.ls 2-'ot.:~l

New York . . . . . . . . . . . . . . 4oo,ooo $ 7)080 • $ 3,280 $ 4,630. $15 ,o4o. oo Philad.el:phia . . . . . . . . . . 680,000 12,036. 5)576. 7) 956. 25,563.00 Cleveland • I I I I o I I I I I to • 610.)000 10)797. 5 ,002. 7) 1_3 7 . 22,9.36. 00 Chicago I 1 o o 1 o o o o o o o o o I 600,000 10,620. 4, 920. 7;020. 22,560.00 Kansas City ........... 200,000 3 ,5i+O. 1, 6~-0. 2 ,3l+O. 7)520.00 Dallas • • • • • 0 •••••••••• 100,000 l, 770 • 820. 1,170. 3,760P00 San Francisco • 0 ••••••• 410,000 _L0_]_. -~_0,32. L;., 7Cj7. 15,ln6.oo

.. ..LI--

3,000,000 53,100. 2 ,bOO. 35,100. 112,300.00

The Bureau appropriations will be reimbursed in the above amount from the indefinite ap:propriat.on "Preparation and Issue of li,ederaJ. Eose~·re Notes, Reimbursable", and it is requested. that your board cause such indefinite appropriation to be reimbursed in like amount.

Respectfully, R. Vl. Barr,

J .. cting Deputy Com'TdsslonGr.




WASHINGTON

X-4437 October 15, 1925.

SUBJECT: Expense Main Line, Leased Wire System, September, 1925.

Dea,r Sir:

Enclosed herewith you will find two mimeograph statements, X-4437-a and X-4437-b, covering in detail operations of the main line, Leased Wire System, during the month of September, 1925.

Please credit the amount payable by your bank in the general account, Treasurer, U. S., on your books, and issue C/D Form l, National Danks, for account of "Salaries and Expenses, Federal Reserve Iloard, Special Fund", Leased Wire System,

sending duplicate C/D to Federal Reserve Board.

Yours very truly,

Fiscal Agent.

(Enclosures)

TO GOVERNORS OF ALL :DANKS EXCEPT CHICAGO

205


From

X-4437-a

REPOFT SHOWING CLASSIFICATION .AiJD NUI\:-·ER OF WORDS TILA.NSMITTED OVER MAIN LINE OF THE FB:CEF.AL RESERVE LEASED WIRE SYSTBIV: J!uR T:TJ£ MO}~J:I O:f.i' SEPTEMBEil., 1925.

Fed. Res. Jank Business

Per cant of Tctal Bank :Sus in es s ( *)

Trea.sury Dept.

llu.s ire e s s

W<J.r Finance Corp.

business

206

Total

-------------------------------------------------------------------------------------Boston 26·;:149 3·27 N·::w York 15 7, 7.26 19.70 Philadelphia 33 1065 4.13 Cleveland 66' 731 (). 34 Richmond 4o ,399 5·05 At1~mta 58,629 7·32 ChiC"l.gO 92,422 l~·a~ St. Louis 67,861 . ()

Minnaapolis 32,616 4.07 K<msas City 69,468 G.63 Da.llas 56,194 7.02 SBn Francisco 9'j,l79 12.39

'rota1 suc,462 1J).uO%

Ilo.'l.rd 272,i:)92

To tB.1 1,073,354

Percent of Total 89.93%

4::n4 j0,..2.63 r 166,620 8,,1.&94

4,366 37,454 5,485 72,216 4,336 44,735 6,687 65,316 8,289 25 100,736 5,464 73,325 3,258 35,574 5,186 74,6 5lr 2,914 ., . 59,108 . ~, ...

108,609 9,lt30

.Gs, 423 25 868,910

51,466 213 324,571

119,089 233 1,1~3 ,4sr::-•·

..... ~q·

10 .c5·% .02%

( "') Th0t>e i;ercentat;es used in calcu1atir.g the pro rEta sl1n.N of leAsed wire expenses as shown on the accompanying statement (X-4-LI-3 7-b)


REPORT OF EXPENSE MAIN LINE

Fl:DERAL RESERVE LEASED WIRE SYSTEM, S.EPTE!vTBEI~, 1925.

X-4437-b

-----------------------------------------------------------------------------------------------------------------------

N2me of L8Ilk Opers.tvrs'

Sala.ri es Operators' Wire Overt irr,e Ben tal

Total Expenses

?ro Ea.ta ShA.re of

Total Expen.::;es Credits

Payable tc Federal Reserve Board

-------------------------------------------------------------------------------------------------------r---------------

::_<est en s 250.00 $ " $ 250.00 $ 656.34 A 250.00 -} 4:6.34 't y tt) 'I'

lT C"N Yc:rk 1,071. 32 1,071.32 3,954.08 l ,071. 32 2,8b2. 76 Phi la.dulJhio. 216.66 216.66 Q r")r7 05 216.66 61:2.2'9 0~0.""'

CltlVelrmci 2GO. 33 2GJ.33 1,673·96 2<30.33 l,3J3.G3 r~ i '~r: xc.n ~1. 212.50 212.50 l,Olj,61 212.50 ( # )l , \)0 5 · 7G Atlsr. ta .-,.-.:-- 225.;::c 1 ),(.9 '"'3 225-00 1,2L~4. 23 c:.c:.)•'-'v J ''"- • c. ChjcPgl') (*) 3,637-<:12 3,037.92 2,)15.29 3,637·32 ~-\·· '""' '6 &j.i.,)J.'j.v St. Lcu::.s 2-'-"C. CC 22::· .JC 1, 7G2.0b 200.00 1,502.06 :\1inn.:;apvli s 1&3.34 lS). 34 Gl6.91 , "'3 311- 633 ·57 ..1.. (,...) • -

K<'''D sns C:i.ty •275.64 275.64 1,742.20 27).64 1,466.56 Dctlln .. s 2)1. ((, 251. ·JG 1,409.02 251. (jC 1,158.(,2 San Fr::mcisco 1G0.c~,., l3C.~O 2,4s6.s6 1GO.OO 2,306.56 ] 1 ::.1 d :3 ! .. ~-1.:~ ~i.e s c:r~te I'0'3.rd 15,337·31 15,337·31 --------------------------------------------------------------------------·---------------------------------------------To tal $ - $2v ,C7l.4G

({/:) (*) (&) (a)

(b)

IliClu.':Gs t2C4.67 for brsnch !line bets:ineJs transmitted. ever r:E.i..'1 line circuit. Incl-;_F>s S'1.laries of iN.3.shingt:on opera.tors. Crcd:~ t Received $7.32 from War Finance C0rporation and $2,242.22 from tLe Treasury

Dspart'Tient ccvering business for the month of Septeniber, 1:125· J.rnom1t rein.bur::;a.ble to Chicago

$t,9l3.71 $14,6::.2.D (b)1,3lj.o6 $13 '292.4-4


ADDRESS OFFICIAL CORRESPONDENCE TO

THE FEDERAL RESERVE BOARD


WASHINGTON

October 19, 1925.

Su"bjcct: IIolid..."Lys duri:.-,[; Novcn'bcr, 1925.

Dear Sir:

X-4438

On Tuescl.ay, Novcnbor 3rct, tho f~llordnc Federal Reserve :Janks D.J."'lc1 :DrJ.nchos \7ill "Jo closed account Election Day in their respc:ctivo Stntcs: !Jew York, ::Uff'J.lc, Philadelphia, ?it tsburgh, :Llicrnond and Detroit.

Please include credits of Noven'ber 3rd for New York, Fhiladol:phin., Ric:hnond. :::md Detroit in your Gold Fu:1d Cloari!lC of the follovrinc: d::ty and r..oke no shipeeuts of Federal Rcsorv..; notes, fit or ur..fit, on that dn.tc, for account of tho Hoe:.d Offices 1:1cntioncd.

On Wedl1esck"ly, Novcriber 11th, .Arnisticc D:ly, there will be :10 Gol,:l Fund or },odcr."ll 3.cserve Note Clearing c::nc:. tho boo3::s of tho :Jon.rd will be closec"!.. For your infoiT.lD.tion, t:1o offices of t:1o Joarcl a:1d the follovline :J[uil:::s and. ::rr·nc:-,es \7ill be ope::1 f::r business as usual: !oston, Ncr: Yorl:, :uffalo, CleveLm:::l, Cincinnati, .Atlc..:1ta anrl Dctroi t.

On Thu:csday, Uovcnbor 2Sth, Thanl::sr;iving Day, there will be no Gold Fund. or Fodoral Reserve ~;otc Clearing, ccnd the books of the :oard rrill bo closed.

Vory truly yours,

J. c. Noell. Assistant Secretary.

TO GO'IJ'E:RlJORS OF ~\.LL F. Il. :D.UTI".S •

208


20~3

X-4440

FEDERAL RESEP..7E BOARD

for Release in l'orning Papers, ITednesGay, Octo1er 28, 1925.

The follo,~line; is a SU'TILa.ry of r.;eneral business ~~rd fir.ar~cia::. cond~.ti:ms throu;hcut the several Fericra:. Rus;;;rve Distrlcts, basccl. upon statistics for t 11,:; c:Ln th2 of Se:ptC>r;;·oer .<>.nd October, as conta:bed in tl-10 forthcoming issue of the :F'ederal Reserve 3nlJ.etin.

Production in basic industries nnd factory employ:nent increased in Sep-

te01.ber. [lt

Distribution of cow.oodities, bot!J. e.t ·~·holesale and./retail, continued

in l.al'C0 volume, and the level of prices rer.:airled practically unchanged.

The Federal Rcs::rvc }?)t:l-rd.l s ir:dex of }·Jrolluction advanced 2 per cent in

September, not·.-ri t:hstanding the suspension of anthracite mining. Tho vo lu.,.'Tie of

out:;;m.t increased ccnsidorab:.y in tho iron and steel, bituminous coal, and tex-

tile industries, while tno d.ccreasos v;!-1ich occr .. rrco. in some other industries

WOl'e relatively small. AutomobiJ.e production was l;~rsor than in August, but

continued to reflect the effects of curte.ilr:ent incioeTtc:.l to changes in models.

Eun.ber of e::1pbyees on factory p:1.yrolls in Ee})temter was larger than in Aut:,'Ust

in nearly all :ceporting indl'_st::·ies. :Euildir•g contracts awarded during September

did not oqu,<>,l the record level of August, but continued large as compared with

\.:arlL:r :~1o:r..:hs. Total contracts awnrdcd d.uring the first nine months of this

year were ncGrl:" as l[:'·.rgc as for the entire year 1924.

Crop condi tiorls, as reported by the Dopartm..;nt of Agriculture, showed con-

sid.crablc i;-Jprovc;nor.t in Soptember, and tho indicated yields of cotton, corn, oats,

barley, and hny were larger thon a raonfh earlier, while forccat:ts of wheat and

tooacco :?reduction were slightl~r sr:::caller. Marketing of crops increased further

in Septe .. :ber, but '"as scaller than last year.


- 2- 21.0 Trado.

sales in c.ll li .. !CS cxct."-pt dry G"Ois .roro la.rg.:~-r tbrul a :~eo.r O.f!.O. So.los of ·

O.e-,urtme:.1t stcro a..ld ue.il orC.er h~ltsco sl!cwod c::1oid~rnbly &:Oro tr.a.:t t'!le usual.

il:.croo.so in September and wore ll\rser t~ a yct'r t'$<). St-1ck.s of mercnt'..ndise

l't dcpnrtnont stor~s a.lso i:1cr~rs~d. i:J. September nora thl..n usur.J. a.:1d o.t tho end

of the mouth were 4 per cent greater tha.'"l a yev..r c.go. 'i'lholesale firms in all

leading li~os except groceries r~Jorted umsller stoCks on September 30 th~ a

uonth t-arlier. :!:l<.'l

Tot':.'~/ :10rc;anuise :!rcit:nt car locdit:gs in Septea..:bor wore lar£'8l' thon

~in.g tho sc::&o r.o:t:th of any prev!.ot:.s y\lar. Coal shipments were smollor then

in Au,;u.st, cn:i!lf; to t'!lc ~t!ll'a.ci to striko, t'.nd sh:pmonto of coal and of grain

pro~~cts we~o amnller than in September of last yver.

Pr1££!.

Th..) lovol of l'rholesc.lo prices, ne :.:c~su.rud by the indox of the Burea.u of

labor Statistics, declined slic;htly in September. .Aniong .groups of commodities

grains, woolen b()Oc!s, ant:. f'C.l'lli turo Ghowod price decl i:1os, mile p ricos of

con.l nnd bu'lld-t.ng Detorio.ls e.dvrulccd. Ir. tho i'irr;t hal! of Octobor pricoo of

grains, vool, a.z:d rubber i.J.cr\W.sed, r.hll& )rict.s of shOe]), hogs, sugar, rod

cotton doclinod.

At oe:nbor ba:llts in leadi:1g cities tho volume of loans, both for cocnorcinl

purposes a:J.d on socuritics, incret.sod. futhor be~wea::t Scptombor 16 and October

14, a.'"ld n.t tho mid<ile of October tct:ll loa.ns of those bcnke were !lOo.rly

$650,000,000 lo.r.g\lr thc.:1 at t~o end ::-f Jul:r. Du.:oine t~e samo period demnd do-

p?si ts of these bn:Jcs i:lCroc..seC:. b;- 1-jout $360,000,000, lnlt wore below the level

of tho bcgi:oi:-.g of the yeo.r, while the voltm10 of their b:>rrowings o.t the ro-

sorve ba.Jks increased b7 ab~ut $200,000,000 to the big::test p~int of tho yer.r.


.. . - 3-

!otnl voll.'"::lO ot rocor:o i:o.nl: crod! t eut:tta..cll.'& -:;n.s lar~r i:1 OCtober

then at e::r:1 oth.:r t".n.o \lUring 19£.5, re:.:l~.:ti.:c,- i:-ct~c.•a.ocs e.uring tho two pro

cudi-t? ;.o:'ltbs bt>th in di s.:::m.J.ts fc..r t:.lDb.3r bnr.ks a:ld i::. nccoptm:cos 'bollbht in

,po::. r:-.rkot. Thif.' ;;r:nrth l:as boon cno pri.mo.::'ilr to the socsonel incroo.so dnr

ing tho poriod of about $1U>,OOO,OOO in curr\}~C7 i:1 circul.:..tion tmd t~oro hns

nls., bo\)r c. c.>~a:&.oorl:'.blo .i.=-croM<' .1!\ 411Cmbor 'bank rcls..,n-lll Lcla.nct~s, ncco::&p~nt;

3 &rowth in their deposits.

In October tho mtw on prbe cot::10rcie.l p39cr r.ero fimer c.nd tho r"nor.nl

r .... t? O!l coJ.l lcanP n.veraged hi&}ler tba:l in Sopta:btn-.


212

X-4441

FEDERAL RES~RVE BOARD

STATEMENT FOR 1HE PRtSS

For Immediate Release. October 28, 1925.

.Accen ta:1.ces.

_90lWITimJ OF ACCEPTAL'l"CE lviA.c't:KJJ.;T S~te::1ber 15, 1925 to October 21, 1925 •

The acceptance market during the five week period ending October 21

was characterized by an increasing supply of bills wi til a moderate demand

which resulted in a growth of dealers' portfolios. ~his was particularly

true of the New York market, for a more active dcma:1.d was reported from

Boston and Philadelphia, while t."lc Chicago market continued dull on both

tho supply and demand sides. The increase in the total vollli~O of bills in

the market was attributed in part to seasonal drawings against cotton and

in part to firmer money conditions. The only cha~ges in bill rates in

New York were an increase of 1/8 of one per cent in dealers 1 rates on 120

day and lo:1gcr maturities, and an increase in the New York Federal Resorve

Ba:1...1{: 1 s minimum buying rate on bills of 45 days or shorter rnaturi ties from

3 1/8 to 3 1/4 per cont. On October 22, rates were quoted in the Now York

market as 3 3/8 per cent bid and 3 1/4 cffered for 30 day bills, 3 1/2 bid

and 3 3/8 offered for 60 day bills, 3 5/8 bid and 3 1/2 offered for 90

day bills, 3 3/4 bid a~1d 3 5/8 offered for 120 day bills a~1d 4 bid and

3 7/8 per cent offered for 5 and 6 months bills.


21.a

FOfu'"'EITtJrl: Oi' CHARTER OF NAT!Ol!AL Il.A:TI{ FOR VIOLATION OF LAW.

The Comptroller of the Curro~cy early in 1921 requested the Department of Justice to i~stitutc suit to forfeit the charter of the First Nntiono.l :Bank of Hagerstown, Hagerstown, Maryland. This nctio:1 was trucon pursuant to the provisiQ~s of Section 5239 of the Revised Statutes and Sectir,n 2 of the Federal ~eserve Act, because of continued violations of law by the r.ational barJ.::, among them being failure to maintain the reserves rcquirud by law. In order to comply with tho requirements of Section 2 of tho Federal Reserve Act that such proceedings be instituted upon direction of tho Federal Reserve 3oard, the DoQrd upon request of representatives of the Department of Justice passed a resclution authorizinG and directing the Comptroller of the Currency to institute suit in his name to forfeit tho charter of the First National Daru~ of Hagerstown for violation of stat~te. Tho United States District Attorney at Dal tir:1ore thereupon filed suit in the United States District Court age.inst the First National JJank of Hagerstown alleging a number of violations of tho liational :Sank Act and tho Fedoral Reserve Act by this bank and its officers and praying tho Court to appoint a receiver to protect tho depositors of the bailie. The Court granted the prayer and a receiver v;as appointed. A fer1 days after the proceedings were instituted tho bank was reorganized and new officers placed i~ charbe and, with tho consent of the Comptroller of the Currency, the receiver was discharged and the bank reopened. JL~ appeal was truccn by the bank, however, to the United States Circuit Court of Appeals from the action of tho District Court in appqinting a receiver. This Court dismissed the appeal without exprossly passing upon the question whether the receiver was lawfully ap?ointod, but inQicated in no uncertain tcrrr.s that it co~sidercd the course which had been followed entirely proper under the circumstances. A copy of thu opinion of the Circuit Court of Ap::_Jeals is attached hereto.


..

214

X-4...:43

]'!Ii.ST ~T.AT. B.A.lTK C:? H.AG:::::lSTO"ff~T et o.l. v. ChiSSilTG&,, Comptroller of Currency,

( CirC'lit Court of .Appvtls 1 F>ur'Gl'. Cu~'Uit. Murch 1, 1922.)

Appeal fl'Or.l the District Co~.u·t of tho Unitod Sto.tos for the District

of llfu.rylo.nd, 'J.t Bal. tir:tora; J,)lm C. RosG, Judgo.

Suit l)y Daniel R. Crissinger, as Co.r;ptroller of the Currency of the

United Stat.~s, against tho Fi~~:;t 1Iational :Bo.nk of Hagorstown, o. national

oaru{ing corporation, and others. Froo .::u.~ order o.;r,>poin ting o. rccci vcr

for the h"l.nk, dcfend&'1 ts ap:pce.l.

E. F~ Winc;ert a.nd Miller WL1.gort, both of Ho.gor~ltovm, Md., for

appelb.nts.

Robert R. Ccroo.n, U. s. Atty., of Ba.lti:noro, Md., for ap:polloo.

Before IGWP and WADDILL, Circuit Judges, c.nd McDOWELL, Dictrict

Judge.

W.A!>DILL, Circu.i t Jud:~_;o. On the 28th of Sopter:1bor, 1921, the

appellee 1 De.niol E. Cri ssint;·Jr, Co::t;?trollor of tho Currency of tho United

Stat()f.' of ~boricn., acting on l1is mm initiative, o.nd o.t the insto.ncc of

t:1e F0dorc.l z;,·:servo :So2rd of tho United State~·, filed the oill in ::::guity

in this cause against ·tho :Fi:i.·st Hationa.l :Ba11l;;: of Hagerstown, Md., its

officers and. directors. Tho puryone of the bill wa.s to bring nb0u.t

the forfeiture of tho ba.nk1 s ch!lrtor, 1.rr.der soctionB 9786 and 9831 of

tho .bu.:J.k of certain provisions of tl'.e Fedor,ll :r-o~e:rvo n.'1Ll the :~ti0r~al

b:;~.nking la·;'1s of tho United StF. ... tos •


215

-2-

In the bill of complaint the officers an<l directors of the bank,

and the bank itself, are charged with failure to establish and maintain

the reserve required by law; making now loans without uaintaining the

resEr vc required by 1...-.w; :po.yi:1g cash di vidonds when the reserve \73.S

below legul requiromon t; m:..:.ki.:.1g oxcessi ve loa:::.s, including loa..."1.S to tho

cashier, officers, ru1d directors of said bar~, as well as other persons,

firms, anQ corporations; mcki"~ excessive loans to corporations in

which officers of the bank ':'icre financially interested; m..'"lldng excess-

ivo loans to the relatives of the officers and directors of the b~"lk;

entering into an agreement with another bruiking institution with the pur-

pos~ of covering up violations by it of tho banking laws of the United

States; lending money, taking as security therefor tho bank's own stock;

purchasing for investment, sha::"cs of tho CLI.pi tal stock of private cor-

porations; e~loying and. koe:;>ing in the crr~;loy of the brull:, a cashier

known to the directors to be engaged in cxtonsive speculative trons"'!

actions in stocks ~"ld bands.

Sections 9786 a':ld 9831 of the Com ... nlcd Stntutcs, referred to, are

as follows:

"Should an~r national banking association in th3 U:n.i ted States no·:• organized fnil uithin one year after the nassage of this act to become a member bank or fail to comply with ~1y- of the provisions of this act applicable thereto, all of the rights, privileges, and franchises of suCh associ~tion granted to it Ul1Qer the National Bank Act or under the provisions·of this act shall be thereby forfeited. ~\ny noncompliw1cc with or violation of this act shall, however, be determined and adjudged by ~"1.Y court of the United States of co~ctent jurisdiction in a suit brought for that purpose in the district or territory in which such bank is located, ~"1.dcr direction of tho Federal Reserve Board, by tho Comptroller of the Currency in his own n~ before the association shall be declared c.issolvcd. * * *" Colll!?• Stat .• S.ec.9876, subscc. 6.

"If the directors of any national ~~'l!:ing association shall knowingly violate, or l:no~ingly ~orrr.it 011y of the officers, agents, or servants b! tlie association to violate any of the provisions of this


"':"3- X-4443

title all t:1e rig~1ts, :pri vi11)ges and fra:1chises of the association shall oe thoro-by forfeited. Such violation shall, however, be determilwd nnd adjudged by a proper circu.i t, district, or territorial court of the United States, in a suit brought for that purpose by

216

the Comptroller of tho Curr<.:ncy, in J.1is own name, before the association shall be declo.red dissolved.. And in cc>sos of such violation, every director who participated in or asse:1ted to the same shall be held liable in his personal and individual capacity for all damages which the association, its shareholders, or any other person, shall have sustained in consequence of such violation.n Comp. Stat. Sec. 9831 (liational :Banking Lm:).

Section 9826 of the U~1ited States Compiled Statutes (Act Ju..Yle 30,

1876, c. 156, 19 Stat. 63) provides that upon the ascertainment by the

court that tho facts warrant the forfeit"L:.re of tl.1e ·oank1 s charter,the

Comptroller may appoint a receiver to close and wind up tho affairs of

the bank.

The complainant in this cause does not allege insolvency of the

ballk as a reason for the forfeiture of the bank's charter, but relies

solely upo:::t the irregu.lari ties charged and set forth in tho bi 11 as the

necessity for so doing, and complainw1t particularly c~Utrged that, upon

the filing of the bill, it would be necessary and imperative that a re-

ceiver should be appointed to hold ~~d preserve the assets of the bank,

pending the hearing of the cause on lts merits, as otherwise the mere

institution of such a proceeding would result in large numbers of the

bank 1 s depositors, and especially those conveniently at hand, or early

hearing of the actioj1, wit}J.drawing or dema..."'lding immediate payment of

their en tiro deposits, which would operate to the serious diso,dvantage

of tho remaining creditors of the bank, as well as the owners thereof, .

and in the end render the institution unable to pay its remaining ob-

ligations. Prayer was accordir~ly made for the appointment of a re-

ceiver.


217 -4- X-4443

Tho bill rms duly vc:ri:fi(JG.. by :J.ffidavi t, [G1d upon the filing of

the same, the court. on the 28th day of September, 1921, certified U1at

in its j1.l.dgment it was necessary o.nd irrrporativo·;.: and for the best in-- ,.

torest of all l;arties concerned, th:1t a temporary recci ver slwuld ·oe

choso11, to hold and preserve the assets of tl1e bank Ulltil su.ch time as

tl1o hearing could be· had upon the bill of com1)laint and a:1S\70r thereto,

and appointed Robert D. Garrott as sucl1 recoi vor, who il:C1.'YleG.iately u:;;1on

executing tho bond, in the penalty of $50,000, roqu.irod of l1.im, possessed

himself of all the assets, effects, llild o state of tlw ba.'1k.

On tho 6th of October, 1921, t':J.O con;plo.ine::1t filed a petition in

tho cause, reciting as follows:

"First. Tr.nt since the filing of tho ·oill o'Z ccm],ilaint in this case and tho a:ppointnon t of a receiver for the dofenc.apt bank by this honorable court the defendants Henry F. Wingert and Miller Wingert, together with their brothers, Willia.r.:J. WL1gert and Lewis P. Win{~ert, and their sisters, M.~rtha A. Wingert o .. nd Julia :E. Reamer, and the cashier of said bank, J. Edgar Young (hereinaftor called tho vendors), have entered into a CO:::l.tract "i'Ti t:1 Messrs. AloxaJ.dor Armstrong, W~ Bladea Lownclos, Emory L. Coblen, Cyrus Floc:::, <Jnd Har:.blocio:l & Company (hereinafter called the :mrchc.sors), whJrcby the scid vo::-:.dors bave legally bound tnomsol ves to tr~lsfer to the said purchasers' for a co:lsideration, all of the crq_Jital stock of tno dofc'1da...!t bnri!.: 0'\7ned by tho said voadors, a;nou:1ti:1g L1 all to fifty-five hu::drod (5,500) s~mros, tho sru,1C con .. ztit·:tti:.;l~~ c. 1.:1ajori ty of tho authol'izod and outstanding ca1Ji tal stock tJ:1."1'00f • II

The petitioner further <.::.verred that, b~: the agroemont sot forth in

the above-quoted rocital, tbc :::)resent officers of the bank, the dofoadant

directors a:1d the cc.s11ior, would forthvri th te~1der t:wir rosig:v:~.tio:.1s to

take off oct iv.:;::~odin tel;y, n..1d furt~1.er alleged t:1a t he was familiar with

the tcr~:1s of said al;roew.on't referred to in ··aragraJ7h 1 of the petition

as aforesaid, and arproved the sa.:~c; tmt it \las his belief and opinion

that the :::·mrchasers of tho stocl::: of t:t:e ban~: w"der the :10w agreeoent were

OXlJerionccd rod capable be.r..:::ing r::ten, rrho would in all respects cor:rply


21.8 ' -5- X-4443

with the lo.'l7s of the United St:1teu rcgul:1ting the ma.nageme!'lt o.nd

control of nationo.l banks, nr:..d. he a3kt:d and prayed tl-.at the said re-

ceivership proceeding bo disc<LtL.uo::'., t?-.c o.ssets of the bank returned

to it, and. the suit disr.J.issed, upon the com:tnr; in of the receiver's

report showing his tr&""lsactions in tho nrer.1ises.

On the day of the filing of this petition, to wit, on the 6th of

October, 1921, B..L""l order was c:1tered recitin1:; that it was expedient so

to do, m1d that the discontinuance of tho receivership would not work

injury or dav.age to t!:,e bank or its creditor~, the receiver was withdrawn,

and f0rthwi th ordered to release and restore to the 11ank the assets in

his posso:rJsion.

The '-'ilP';lla:lts herein, at this time, upon the entering of the order

disco:J.ti:ru.ing tho roceivers~lip, made known to the court their intention

to tal::e an appeal from the docroe of the 28th of September, 1921, an-·'-

:pointi::1g the receiver; but they took no steps at the tir:1o to that end,

or to stay fu.r thor pr1J ce odi:1gs ::;:end.ing the appeal, until the 14th day of

October, 1921, whe:1 they presented their petition and assign.tnent of

errors, <:J.:~d secured a.r.1. a.p!)ea.l, wit~:co"'J.t suspension or supersedeas. In

the r::.oan time, a..'1d thereafter, the court :proceeded in tl:o ~ause;as con-

te~lated by section 129 of the Judicial Code (Comp. St. Sec. 1121), and

later on, on the 28th of November, 1921, on r:1otion of the complainant,

and with the consent and c.pj1roval of tl:J.B bank as then constituted, a.p-

:proved the action and doine:;s of tho receiver, and directed the bill dis-

::1issed.

T~1e cause is now 1:lefore the court solely upon the aflpeal froo the

order appointing t.he receiver; the single assignment of error being t..l1a.t


-6- X-4443

such .::x)pointncnt should not hnvc been rJL:tdo in tho absonco of an avor

nont that the bank i7as insolvent.. The cor:rplainant and the defendant

ba:1k each nove to disniss the ap::;eal, because the sa;:~e :presents only

a noot question, a~d that the appellants have no further interest in

tho subjcct-natter of the litigation.

(1) Tho disposition of tho case upon the notion to disuiss nakes

it unnecessary to pass upon the nerits of tho original appointnent.

Without noaning so to do, we r.ny say, in passing, that it appears to

2:.1.9

the court that the action taken in the cir~umstances of this case was

not only in the discretion of the chancellor, but that the exercise

thereof was wise and prudent. F~moroy 1 s Eq. Jur. (2d Ed., 1919), vo1.4,

Sees. 1537, 1541, 1542. No loss wo.s sustai:1ed by the appointr:1ent of

tho receiver, and it certainly resulted in averting serious consequences.

The contrary course wic;ht r...:we ;:roven nost disastrous, from a financial

viewpoint, to the bo.Zlk and all parties i:1 interest.

(2) The Dation to disr:1iss the appeal r.1a.J.ifestly should be granted.

There is no longer any justiciable ,controversy betueen the parties; the

receiver has been appointed, has acted, ond been discharged. He re

turned and SQrrendered to the bank all of the prop8rty and estate co~

ing into his possession and subject to his control, and his action hns

been fully m1d finally approved by the court appointing hiD. The con

pl~inant no longer seeks the intervention of the court for any purpose,

but, on the contrary, approves what has been done; and the defendants

in in teres~, the ban];c, its directors, ond officers, as now constituted,

have no cause of co:oplaint, and concur in the action taken..


2 ()0 f., ..

-7- X-4443

(3) Tho o.ppol1.·1nts socking to prosecute tho uppeal have no nannor

of intorost in tho sa"bjoct-;:mt;ter of tho H tic;ation. Having sold and

part:;d -:;ith thoir l:olC.incs in the ba:ikl~ondonte lito('± Coil?• J-;rr. 575,

and cason· ci tod), thoy crumot a.."ld should not be heard to dictate and

control li tieo.tion in whic:i1 others alone o.ro in to res ted.

The [~peal will be dis~isced at tho cost of tho O.]pell~"lts.

Dis::1issed •

..



ADDRESS OFFICIAL. CORRESPONDENCE TO

THE FEDERAL. RESERVE BOARD

WASHINGTON

SUBJECT: Revision of Oath of Office of Class B Director.

Dear Sir:

X-4445

November 7, 1925.

The Federal Reserve Board has revised the form of tha oath of office to be executed by Class B Directors of Federal reserve banks so tr~t it will set forth the occupation in which the director was 11 actively11 engaged at the time of his election.

A supply of these forms is enclosed herewith.

(Enclosures)

Very truly yours,


TO .ALL C HAIRMEN OF F. R. BANKS •

2 ':J1 l.:c~./ •.


222

X-4446

F:EDER.lL RESERVE :JOJ.ED

S T.Ar:':"~~GNT FO:i TEE P:aESS

For immediate release 4.00 o'clock p.m., November 9, 1S25

The Federal Reserve ]oard announces t~~t the

Federal Reserve :Bank of J3oston hn::> established a redis-

count rate of 4 per cent on all clanl;es of paper of all

maturities, effective November 10, 1925.


•

The Governor

TR~ SUEY DEP . .t'IRTI'ffil\JT OFFivE OF THE S~CRETARY

WASHING':!.:· ON

x-4447

November 6, 1925.

Federal Reserve Board. ~r:

You a.re hereby advised that the Department has referred to t!:J.e Disb-r:.rsi rg Clerk, Treasury Department, for :pa;yment, the account of the Bureau of En.gr3. ving and Printing for proparing Foderal res-.;rVv not3C during tbe perio:.l October 1 to October 31, 1925, amounting to $126,524.00, as follows:

Fed0ral Renerve i2 ll~

Boston 1co_.coo New York 3GOJOOO Phi1a.d.elphia 100,000 Cleveland 4oo,oco 300,000 Richmond 100,000 Atlanta 200,CCJ Chicago 6co,coo lv1i nne apo 1 i s 200, CCC; Dallas 30C,CC:J Sdli -Fr¥.~.cisco _0c~cc.:., 2:J(} J ··~~:__.

2,350,CCJ 700,__;oc

NotesJ Series 1914 $20 ~52

100,000 5,000 100,000

5,000

10<J_, oz;c s,oco jvU ,Ot)C 15,0GO

Tots,l ----100,0()0 3005()1)0 100,000 305,000 200,000 200,000 6C':)' 000 205,000 3G0,GOO

. 555,000 3,365) 000

The charges ag:1inst the sevaral Federal Reserve Banks a.re as follows:

Boston Hew York PhiladeJ.phia. Cleveland Richmo:1d. AtLmta Chicago iv1i nne apo 1 i s Dallas San Fr-a.nci sco

Total

Campen- Pl~te Sheets s,;,tion Printing M~toriaJ.s Total

lCG,i...iJO $1,770.00 $ 320.00 $l,lJO.CO $3,760.00 3C0,Cvu 5,310.V:, 2,460.00 3,5JJ.OO 11,230"00 lCv,GO:J 1,770.00 820.00 1,170.00 3,760.00 805,000 14,248.50 6,6Cl.CO 9,418.50 30,268.00 200,000 3,540.00 1,640.00 2,340.00 7,520.00 200,000 3,540.00 1,640.00 2,)40.00 7,520.00 600,000 10,620.00 4,92C.GO 7,020.00 22,560.00 205,000 3,625.50 l,o8l.OO 2,353.50 7,7J8.00 300,000 5,310.0v 2,4EG.OC 3,510.00 11,280.00 '5S:h_OO:J 9,8£3,50_' ___ 4,j:..:~- C0 ___ 6,:_,.~2_:__5C1 20,368.00

3,365,000 $59,560.50 $27,553.00 4339,)7<).50 $126,524.00 3,365,000 sheets ~t $37.60 perM ....... $126,524.00

The Bureau app:.:-01•riations will be reimbur sod in the <::.by;·e d!IlOu.nt from the iYJ.definite aprJropri<:J.tion HJ?reJJarution and Issue of Fede:::-.J.l Resarve Notes, Reioburea.ble 11 , a::::.d. it is reqTl.Osted th9.t your bo1rd cc.u;e such indefinite appropriation to be reimburs0d in like ~~o~~t.

K.::s:pectf-ally, (signed) s. R. Jacobs

Deputy Commissioner.


- ..


WASHINGTON



Novenber 13, 1925.

SU::JECT: Expense Main Line, Leased Wire Systor.1. October, 1925.

Delli' Sir:

Enclosed herewith you will find two oioeograph statenonts, X-~9-a and X-~1~9-b, covori~g in detail operations of the rm.in lino, Leased Wire Systcc, during the nonth of October, 1925.

Please credit the acount payablo by your qpnk i~ the ge~eral account, Treanurcr, U. S., o~ youi' bocks, and is suo C/D Foro 1, Natioru:tl J.:mks, for o.ccount of "Salaries a'Vld Expenses, Federal Reserve ~oard, Spo~iul Fundtt, Leased Wire Syst~. sending duplicate C/D to Federal Resprvo Joard.

Yours very truly,

Fiscal Agent.

(Enclosures)

TO GOVEmJORS OF .ALL !31V"J::S EXCEPT CHICAGO.


- .. x-~9-o.

REPORT SHOWING CLASSIFICATION A11D lTOl!JER OF WORDS TRA?JSlHTTED OV.h!d l~nr LINE OF THE FEDERAL RESERVE W..3ED WIE:: SYST::M FOR THE MONTH OF OCTOJER~ 1925

Per cent of Treasury War Fed. Res. Totnl ~nk Dept. Fi:tc.'Ulco Corp.

Fron 'Junl-: Jus inos s :3usinoss(*) Jusinoss Business Total - - - - ------- - - - - - - - - -

Joston 29,625 3!46 2,400 32.025 Nm• York 160,573 18.75 4,036 164,609 Philadelphia 35,168 4~11 2,8G4 38,052 Cleve1a...."ld 73,134 8.54 2,560 75,794 :l.iclm.ond 43,344 5.06 2,139 45,483 Atlanta 66,096 7.72 3,094 69,190 Chicago 98,792 11.54 4,630 103,422 St. Louis 72,819 8~50 3,145 75,964 Mine1eapolis 38,974 4.55 1,377 38 40,389 Kansas City 71,790 8.38 2,828 74, 62"5 Dallas 64,793 7.57 1,271 32 66,096 San Francisco 101,221 11.82 5,023 106,244

Total 856,337 100.00% 35,487 70 891,894

:Board 274,663 26,601 114 301,378

Total 1,131,000 62,088 184 1,193,272

--~

r

Percent of Total 94.78~ 5.2~ .02% 100.00~

(*) These percentages used in calculating the pro rata share of leased wire expenses as shown on the accompanying statement (X-4449-b)


REPORT OF EXPENSE MAIN LINE ~4449-b.

FEDERAL RESERVE LEASED WIRE SYSTEM, OCTOBER, 1925 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Name of Bank Operatora 1

Salariee-Operators' OTertime

Wire Rental

Total Expenses - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - -

Boston $250.00 $250.00 New York 933·32 933·32 Philadelphia. 216.66 216.66 Cleveland 280.33 280o 33 Richmond 175.00 175.00 Atlanta 225.00 225.00 Chicago (f) 3,817.93 6.uo 3,823.93 St. Louis ro:.;.oo a;>G.JC h.iilmeapolis 183·34 183-34 Kansas City 275.64 275.64 Dc~la.s 251.00 251.00 San FraHcisco 380.00 380.00 Federal Reserve Board $15,345.69 15,345,69

Total $7,188.22 $6.00

Pro Rata. Share of

Total Expeneea -------$739.15

4,005-52 878.01

1,824~38 1.080.96 1,649~;;!) 2,465"26 1,~a5.s4 972~01

l, 790" 20 1,617.16 2,525,08

{&) Includes $204.67 for branch line business trensmi tted over main line circuit. (#) Includes salaries o:f Washington operators. (*) Cradit. (a) R3ceiv0d $4.35 from War Fin~ce Corp. and $1,172·79 from Treasury Department,

covering business for the manth of October, 1925· (b) Amo~~t reimbursable to Chicago.

Credi t•


------- ------$250.00 $489.15 933·32 3,072.20 216.66 661.35 280-33 1,544.05 175.00 (&) 1,110.63 225.00 1,424.20

3,823.93 {•) 1,358.67 zoc.oo 1,615.84 183·34 788.67 275"64 1,514.56 251.00 1.366.16 380.00 2,145.08

$7,194.22 $15,731.89 (b) 1,358.61

$14,373·22


X-4450

FEDER.lL RESERVE BOARD

S T.AT.cil~ill'"T FOR T:a:El P~SS

For :i.mmediate release 4. 00 or clock p.m •• 1Jovember 16, 1925

The Federal Reserve Board annou:r..ces that the

Federal Reserve Bank of Cleveland has established a rc-

discount rate of 4 per cent on all clc.sscs of :paper of

all maturities, effective November 17, 1925.

2 ')1-1 1"<..-1(


Released for publication in the morning papers of W'::JdnPqd.·J.y, N0vHr.ob•~r 18th~ 1926.

S:peal:ing before the Cor:lillercial Club of Boston Tuesday

evening, Uovember 17th, on the operation of the Fr;deral Reserve

System, Mr • .A. C. !Ailler, member of t:ne Fedoral Reserve Board,

took occasion to point out how the scope, influence 8.J'.d im;_Jortanco

of the Federal Reserve System under present credit a~d business

coned tions bad increas ;d since the establishr:r.e"1t of the System

eleven years ago.

"Originally- concoivod a~; a syf.lton of o:astic ta:'lk :1otc

issues and reserve creditt~ to ovc<rCO'!lO the cJ.isabi li ties from which

our banking system fo:·mcrly suffered because of the rigid nrovisions

governing reserves anJ. rostri cting note issues, the Fedoral Reserve

Banks, by forc0 of tho unp:rccedc"1 ted conditions growing out of the

World War that have shaped their devol opme:1t along broader lines

almost from tho day of their establisl'..:nm:ot, have :Jad to form a

larger conception of their fu.nction in the country 1 s crcd.i t and

economic system - one best to be defined to bG to stead;>r credit

conditions, to give at all times a firm basis of r.trensth a::"d he:1lth

to the country's credit organization so far as it lies in tho :power

of tho Federal Reserve, and through the wise and intelligent exercise

of this fu~ctior" to give steadiness, sto.Cilit;)r and. stre:::gth to

underlying business conditions. It is mere widely recognized now

than e~er before what a vital and shaping influence credit is through-


X-H51

- 2 -

out the whole economic system. The good fl.IDctioning of trade,

agriculture and industry, experience has demonstrated, ca~ be

greatly aided. by good functioning of the Federal Reserve S;;rstem.

Tho good fu.i:J.ctioning of the Federal Rescrvo Syr?tem moans that

the curre:Dt rroductivo inc1.u.stry of the country shall be at all

• times su:p:plied with all th'3 crodi t it :1oods from tho Federal P.eservo

Ba'lks to meet its le,:;i tirnate operating roqu.iromcmts on the lowest

terms consistent with econoeic safety. This statement needs no

extended. are:--,umcnt. But the k.1erican p~.iblic does not yet fully under-

stand that at times whe11 bd:u.str;;r and trade through excessive optinis:n

or spec'J.lative enthusiasr;; are getting i::::to a sta·iie of feverish activity

they must not cet the credit facilities of tho Fed .. ~ral Reserve Banks

on too easy terms ; .... J.. • - cna., lS, on terms so low as to encourage needless

barrowing :md invite i:1.flationE:ry developments. vr.n.ile crodi t wisely

extendecl ca.n do ;nuch in a. heal tb.ful way to stimulate, the dangers of

ovcrstimulatior:. cun novor safely be lost sight o.f. 11

i 1This, briefly stated, ncontinuedMr, Miller, 11 is tho

prlilosophy of variable discount rates . 11

11 There is a prejudice of long ste.nJ.ing in t:1e United States"

said Nir. lLiller "against variable disco1:!.llt rates. This prejudice con-

stitutes one of the difficulties in tho administration of the Federal

Reserve Banks. The discoullt rates of Centr~l banks arc made to be moved.

':rhis is well <L'1derstood in Engl.<,.md, where the :Banl-: of England for

decaues hn.s employed t!1c changeable disco·un t rate wi t'-1 marvellous effect


X-44S'j_

in giving st<:J.bility to the British bar.Jdng r>nd. credit s:rstem. The

banking 3Ild business public tl1erc, before tho World '.~;ar, UYJ.derstood

very accurately tho basis of the :Ba.."'lk of E·1gland 1 s diBcOu."'lt policy

a;:1d tho meanin,c; of changes of the :B3r1k 1 s official rates. There re-

sul ted from this a cooporatio:1 between tr.o Iiank and. the busi:J.:JSs public.

Tho success of the Briti::h 'ban1dnc a"1d cro.:li t systcn was la.rgely du.o to

this intellit_.;ent coo-poraUo::,. 11

11 'We :nay expect Ln.t i:r,_ time o. similar si tUD.tion ;7i 11 exist L:1

the United States. Ar:. the Federal Resel'Ve Syste:n itself more fully \'/CH' cl

o-..1t its guiding cn6. operating principles and as these come to be unclerstocd

and. accepted by the business public, we ma:J expect to see the prejudice

agai!l.st changes of discount rate O.!l.d ot~er methods of credit control over-

come and the good functioni:r1g of tho Federal Reserve System promoted by

intelligent cooperation betwecm the Federal. Reserve Banks and the general

busL1ess public. 11 Mr. Miller expressed the L:ar, however, LJet 11 u~1til

this result is attained we are likely to su:ff'er from he:::.i tc:.::.t or tardy

action in the matter of Federal Reserve dif:;co::nt pJlic~.r. 11

11 Time is of the essence of success in n-.a.tter;~,~ of credit and

currency regulation by Central or Roserve oa:.1ks. ThE::re arc ti:Jes on an

upward trend of industry when tho L1terve~1tion of the Federal Roserve

System by sui table discou.nt policy cc::u."l stimulate a forward movement in

industr;f by maintaining a lo11 rate; a.:1d later on by an a.dv~mce of rate

restrain the s:peculati•re exter.sion of ircdustry and thus serve to maintn:i::-1

a. good con.dit:i.on of adtivity and prosperit;'/• The function of rate :,_.:;Hey


23~ X-4451

-4-

is thus at times to accelerate the flow of reserve credit by a rato that

invites borrowing and at other times to retard it by a rate that discourages

undue resort to the facilities of· the Federal Reserve Banks. On a downward

trend of industry when the thing most to be feared is hasty lj.quidation

under the pressure of fe~r of monetary stringency, Fe~eral Reserve Banks

through their rate policy can do much to ~ake the inevitable liquidation

gradual and orderly by lowering the terms upon which their credit is made

available.

"Action by the Federal Reserve Banks on the all important

matters of disco~~t policy and open market operations to be competent

must, of course, be basad ~pan insight into the economic factors govern-

ing the state and trend of industry, trade and credit. Without such

knowledge there can be no real conviction and, CJnsequently, no real

policy. But more than conviction is necessary to make Federal Reserye

action effective. Such action when tal:en must be rightly timed

and be prompt. Hesitation and delay are tho deadly causes of

miscarriage and failure in the matter of central banking administration.

They have beset central banking administration in all countries.

To ·Overcome them must be a primary concern in the development of

our Federal Reserve System. As yet our System lacks tr~t

high degree of initiative essential to its most effective operation.

This is in part due to the co~lex c11aractcr of our Federal Reserve

organization and the resulting wide distribution of authority


-5- X-44.5ll ·.

n."ld responsibility fer its rtn.rdlg&ment. :But it is also due

to the fact that th0 l<xger economic ~d credit problems with

which tLe Federal Reserve Syste1:1 is called on to d.eal are lEl.ck

ing in the definiteness of character which makes for definiteness

of action. Tha processes of inflation -:vith which o"J.r Federal

Hcserve Syster;;, like other cuntrD.l ba.!1ki:1g systcrr:s, is collod

upo::1 at times to copEJ are i::1sidicu.s in their cbaracte:c. In::::la-

tion does not an::-:,ounce its comi:1g in ~dva..."1ce. It is not born

full-fledged. It begins as expansion. It beco::-es inflation when

expansion bas gone beyond the lir:.i t of eccnor;;i c safet;,-, that is

when furt.her additions to tne c:mntry's s~.:.p'•ly of credit cn:n not

be digested by tile bod;{ economic in alimx"ting nrocluctivo indus

try. The excess goes to fcJd the appeti to for speculation, and

that appetite, more them ::1ost a:ppeti tes, grows by wLat it feeds

on. Thus inflation makes ra~idly for more inflution Llllless its

incipient stage is clearly perceived by those responsible for

the maintenance of .1. hoaghy creciit an.d business situation and

sv..bjected to appropriate restraining inf1uence. 11

Turnine to the present situation in the United States

Mr. Miller pointed out tho various evide::1ces of the high state

of activity of the cou:1try's productive industry and trade.

"We are in the midst of a vcr·J considerable industrial expansion

with ma!y of the factors that m~e for prosperity gP~ning in

momentum. Productiont trade, employ;;:ent a.:1d pa;;-roll


.. X-·:1451

- 6 -

disburseuents n.ro all in materially greater vol-;]1018 tbm a ~·ear aDO·

T.:1ero ctu"L bo no do-s:bting thn.t we o.ro alren.rl;:r in rm era of pros:peri tJ.

~he yen.r 19::;5 has brought o. e:;re!:lt ma.ny new co: ... structi VG factors

into pla~· L:. o1rr OCCilOr::ic sit111:-1.tion. Of tl;cse, the LOst L":portant

very great importance also is the mS~.:~kell economic reco·;er~r of

Ecrro:pe in the ~)ast two ~·en.:·s. Tl1.e leading industries of Western

Europe aid fair before long to be on a normal basis of productivity.

Our export trade will benefit. Tho atmo:;;phore of the world at large,

:no:reover, h<-::.s become more conducive to economic adventure by reason of

the settle::-tGnt of r.J.a:ny of the pm:ploxing econor.1ic end ?Oli tical

yroblems left n.t the end. of tho vrar. .Ar:J.One; tl1.ose, of particular

interest to the ULited States aro the Da•:;os Pl~;.:1. of rC})arr:.tior. 1)ay-

ments 2nd the progress made in arra:ngi;:tc f;.mding terms of r3.~lllts

owed to the United States. The outlooi<: has never bee:1 so trlc;ht

since the close of the war. Vl"hether t::1e prosr1e1·ity vi:1ic':1 oocko:1G

ic to bn s~cort-li ved or of long duration will depend. lar~Scly upon

the wisd.om and skill with which we ha..'1dle ourselves h1 the United

States. The business community of the Unl ted st·.atos learnEd. sev-

eral groat lessons :ror::t tho :iisr;.strous criGes <:4'1Cl d.c:prossion of

1~20-1922. It has d.evolch)Cd in roccLt ;/C[.;.rs :.'. Cccp:wi t;r :for oco-

nordc self-government, tho.t :.ohouLl go far tow<::.rd i:"1suring preserva

tion of business s.:.u1i ty c.nd tho avoida.ncc of the extravagances and


-7- X-4451

execs sen tln t incvi ta.bly cub1inn.te in prosperity l::ooms. The

Federal Reserve also has a very groat responsibility for the

:rm,intenance of sou..-·1d conditions to the exton t at least that this

c::m be helped or uccom;:>lishcd by r..aintaining the credit situation

henlthy.

HThe floati:J.s supply of credit in the United States

h'".S ~.ever -~ec:1 so l':lrgo as at tr.Lo present tL1c Dnd never so much

in excess of curron t a:1d prospective roquirenonts of com::J.crce,

a.gricul turo a"'ld industry. The principal factors that ha70

contribu.ted to this result o.rc (1) t:r.;.e hrr;e L1fhL"'C of gold in

recent years; (2) econony in the u~~e of croC.it reS'J.lting fron

the sr:mller voluno of credit rcq1::.irod for cnrryir•; i!WCntorios be

c.:msc of in:proved. trar;.spcrto.tion conditions ar.d the prc::rptness

with which plant facilities in all leading lines of industry

are able to respond to increased der~nds for th0ir products;

(3) the thawi:ag out, largel;r as a result of i;:rproved ae:,--ri~l

tural conditioLs in this ~~d the last crop season, of credits

tln t becam.e fro zen after tl:o crisis of 1920; and, finally, to

rnpic seasonal liquidation this autur.w. These factors ac-

cou:1t for tho corapo.ratively slight growth i:n tho volur..1o of credit

taken for ccc1'ncrcial uses from1 the ba.."'lks of the country in the

course of the last year • The great grcwth in the loan account


X-4451

- 8-

of the banks of the col.llltry has not been in the commercial loan

acc.)unt but in the collt1.tcral loan account. .A..."1d the great growth

in tilis branch of banking operations hl d"U..e mainly to the huge volume

of credit absorbed by the call market in the country's great specula-

tive center since the opening of the year. This condition, along

with the considerable volume of credit absorbed by land speculation in

some parts of the country and speculative build:.ng operations constitute

the danger spots in our present situation. There is evidence that a

section of tbo public· is los in,:; its bearings and being d:rawn in to the

arena of thoughtless speculation. Cheaper and more abundant credit

than the country has ever known on so extensive a scale are giving them

aid and encoura:::;ement. It is time for a halt lest a speculative fra.'1le

of mind s:h.ould be engendered w111ch mit;;h t in time invade the field of

legitimate trade and industry.

11 It is not the du:ty of the Federal Reserve System to under-

tako to ret,"Ulate stock or other speculation or to interfere unnecessarily

in the affairs of their member banks. But it is well to reca~l that the

Federal Reserve System was not established to provide a life preserver

for the speculator. It was set up as an aid to industry, agriculture and

commerce. It is a system of liquid productive credits. The use of

Federal Reserve credit for speculative or inw~ stment purposes is precluded

by specific provisions of tho Federal Reserve ..\ct. It is clear, there-

fore, that no bank has a proper status as ru1 applicant for Reserve Bank

acco~'1lodation, which is S~??lying credit for speculative uses. It is the

duty of the Federal Reserve Banks to hold true to: the course plotted for

them in the fund&'1lontal provisions of the Federal Reserve ActJ 1




.)•.


WASHINGTON

Noveobor 17, 1925.

SUBJECT: Bank Salaries.

Dear Sir:

In accordance with previous practice and in view of Section 4 of the Federal Reserve Act,

-X-4452

which provides that any compensation that may be provided by boards of directors of Federal ~eserve bariks for directors, officers or employees shall be subject to the approval of the Federal Reserve Eoard, it is requested that you prepare and forward to the Eoard on or before December 10 schedules, in accordance with the sample forms attached hereto, containing the names and salaries of all officers and employees of your bank. It will be noted that the schedules are to show the present and proposed annual salaries of all officers and of employees receiving in excess of $2~500 per annum, and the salaries at the beginning of 1925 and those proposed for January 1, 1926, of employees receiving $2,500 or lese. Separate schedules should be submitted for the Head Office and each Eranch.

Will you also kindly accompany your salary recommendations with a statement showing salaries paid to officers and to employees during 1925 (December est~ted), and the estimated salary requirements for officers and employees during 1926, classified by functions in accordance with the enclosed for.m.

Very truly yours.

Walter L. Eddy. Secretary.

Enclosure.

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

N'.AMES .A1:D SAI.d\.RI:ES OF O:F:B':CERS 01! :D:E;C:m;J3:SR 1, 1925.

(Includes only the positions list'3ll in Fch~erel Reserve J3oard 1 s letter X-3532 of Oct. 5, lS22)

Federal Reserve :Bar~ - Branch

Name

--------------------Functions

Title su~ervisod ~~~------------

Total, ____ officers

P!l:osent ann'lk"ll salary

Proposed salary Jan. 1,1926

..


X-4452-b

NUMBER .AliD SALARIES OF EMPlOYEES RECEIVING MORE TF.AN $2,500 PER Jc\NNOM.

(Em.ployccs recommended for salaries in excess of $2,500 should also be included in this report)

Federal Reserve :Sank - :Branch. ________ , Dec. 1, 1925.

Functions to Present N~_an_.e_· _____________ ~T~i~tl~e~----------- which assigned annual

·salary

Total, er:rployees

Proposed salary Jan. 1, 1926.


2a~3 X-4452-c

N'O'MilER AATil SALARIES OF EMPI01"'EES RECE!VING $2,500 OR LESS PER A.h'NUM.

(Er:1ployoos recor..nended for salaries in excess of $2,500 should not bo included in this report).

Foclcro.l Reserve :Bank - :Branch ----------------• Dec. 1, 1925.

Nnmo ;__ ______ _ Title

------------------

Totn.l, ____ onployoes

Salary on Jan. 1, 1925*

function

Proposed salriry Jan. 1, 1926

lmTE: Enployees should be grouped according to the functions given in the functional expense report, forn E, and totals shown for all functions. An onployee assigned to norc than one function should be listed in the function to which he devotes the greater part of his tine, with a note indicating in what other functions he is enployed. ~ne report should not include extra help or tenporary anployees, but it should include all regular eL~loyees whose salaries are reiobursable to the bank either in whole or in part. In the case of enployees who are on a per dian or hourly basis, the esti.oa.tedtotal annual compensation should al~o be shown.

*If hired during 1925, please show the initial salary.


2~:10 X-4452-d

SALAli.I:SS* PAID D'J"'RilJG .1925 AJ.JD ESTIN!ATED PAYlEEHTS Du.dilrJ: 1926

Federal Reserve Bank (including br:mches)

---·----...-,----------·

]'unctions ·--~(Form E classification)

Goneral Ovorheo.d Provision of Space Provision of Personnel General Service Failed :Ba:nJ:s Loans, Rediscounts and Acceptances Securities Currency and coin Check collections Non-cash colloctions .Accounting Fiscal . .\.goncy Legal Auditing Bank Relations Federal Reserve Note Issues Bank Examination Statistical and Analytical

Total

Paid Juring 1925 Estimated payments (Dec8mber estim_a_t_e_d~)--~~~_d_1lrin~l~9~2~6~--fficors j ErnpJoyces : Officers l Er;tployees

----==-================

*Includes extra help, overtime and supper mo!1ey.


ADDRESS OFFICIAl. CORRESPONDENCE TO

THE FEDERAl. RESERVE BOARD


WASHINGTON

24:1

X-4453

November 17, 1925.

SUBJECT: Closing of Books on December 31, 1925.

Dear Sir;

In considering resolutions for the payment of dividends by the Federal reserve banks at the end of this year, and requests for authority to charge earnings with depreciation allowances, reserves to take care of probable losses, otG., the Federal Reserve Board will follow the procedure &~d rule~ adopted last yoar, as outlined in the Board's letter St.4333 of November 26, 1924, a copy of which is enclosed. It is therefore requested that the di-ridend resolution of ycur bank be accompanie(l with statements similar to those requested in that letter, and that the resolution and accompanying dc:;.t:-1 be mailed in time to reach the Board not latar then recember 10, 1925, in order that it may have rurrplc time to pass upon all charges to current net earnings which ;your bank proposes to make when closing its books at the end of the year.

TO .ALL CHAIRMEN

Enclosure:

Very truly yours,




WASHINGTON

November 26, 1924. St. 4333 •.

stffiJEC'r: Closing of Books on December 31, 1924..

Dear Sir:

In order tha~ t~ Board may bave anple time to pass upon all cha.tSf:ls which your b~ propo sea to me.ke aga.inst ourren~ earnings when tho booJts are closed on recen.ber 31, 1924, for depreciation allowances, for reserves to take care of probable losses, and for otller extraordinary purposes; it is requested that t.be dividend resolution of your :Board of Directors be mailed in time to reach the Board' a offices not later than Deoember 10, 1924.

b diVidend resolution should be accompanied w1 th statements , showing the folloWing inforruation:

1. Estimated gross earnings, current eJCpenses, proposed charges to current net earnings, zd net earnings available for surplus and framhisa tax, for the calendar year 1924.

2. Unpaid indebtedness of failed or suspended 'oanlts to Federal reserve liank, giving tbe na:r.es of the banks, indebtedness of each on November 30, character of aecuri ty, if any, and estimated losses. -=:-

3. Indebtedness to Federal reserve bank of 1bember banks 71hiob are considered to be in an unsafe concli tion, giVing the names of the banks, indebtedness of ea.on on November }0, charaotler o1' seouri ty, if any, and probable losses.

4. A statement in the form outlined l'elow, shoWing separa•ly for each property acquired for Banking Bouse purposes, (a) the cest, al0012ltS charged off, net book value, mel eetims.ted market value of land owned; (b) the coat to NoV9mbsr JO, amounts.cbarged off, reserves carried, net book va.lue, s.nd estil!.ated replacement cost of buildings, exclusive of fixed a.aohinery and equipment, either con.pleted or in course of construott.on; (c) the cost to Noven.ber 30, aroounts charged off, l'Qserves carried, a.nd net book. va.lue of fixed maohinery and e.quipment.


'-. - 2-

LAND -Cost to lJovon.b\lr 30

.Amount c~r~d off Book value {nat) Esti:r.a.ted market v~ue

BUI LmNG INCUJDING VAULT Cost to llovetr.ber 30 Amount charged off Reserves now carried Book value (nat) Esti:natao replacement cost

FIXEr .M!CHINEP.Y .&"'D E9UIP!4ENT Cost to Novamoer 30 Amount charged off Raaerves now carried Book value (net)

243

t ------

In the case of land on wnich a new building .nas been or 1 s to be constructe(! ths cost of the lancl (tui!ding site) should agree with the amount reported agg.inst item 6 of q1:artarl;r ba.W: pretr.i ses rc,port (Federal Reserve Board Fonn St. 2810). In case of buildings purchased and occupied as bank quarters, the reported cost of land should represent its fair market value at time of purc:.se. The Ja.lanca of t~ purchase price should be considered as the cost of the building.

The following rules have be!n approved by the Federal Reserve Board for the gllidanoe of the Federal reserve ba:lK-s in subnd. tting requests for permission to make special charges against current net eamings, and for closing of books on Decembar 31.

1. 'Banlt Premises. (a) Land. No charges against current net earnings Will be authoriiecJ by the Fed!ral Reserve Board to cover depreciation on land Where the estimated market value of the land is equal to or in excess of its net book value.

(b) Buildings. In passir.g upon requests to set up depreciation reserves on bank buildings, the. Board Will in general penni t a c·:-.arge against current nat eamir.gs of not emeedir..g 2 per cent of estimated replacement cost, including vaults but excluding fixed n.achinary and equipnent. In case the net book· value of a. building is in excess of its estimated replacement cost., the Board will consider requests frorr. Fe~era.l reserve banks for permission to write off a depreciation ~barge not exceadi.:1g the an:ount of such e.xoess.

(c) F!xed n.a.ol:inery and equipment. A reserve should be set auide each year to cover depreciation en fimc:l machinery and equipment, such as boilers, engi.-les, dynanos, motors, power pllll!ps, elevators, heating, plunbing, lighting and ventilating systems, pneunatic tubes, refrigeration plants, automatic fi t'e sprinkler equipn.ant, and vacuum cleaners. JDnual adc:li tiona to this reserve should b9 based on the estimated life of the


- 244 . - .... J ...

·-..... ~~nt, but itt nc caa-' s!':.ou.ld tha a.nr.ual cha.rge emeed 10 per cent-o1' cost. Replacan..ents of Fi:mt.l Machinery and Equipment sltould ae charged to this reserve.

(d) Estimates of the market value ofland and of the replacement cost of buildings ei t:':.er cOllq)lated or in course of construction sho~d be obtained from the best available authorities. A copy of the estimates thus obtained should be enclosed with your request for autbority to charge current net earnings With depreciation on bank premises un:i.ess similar estimates have \een previously oubmi.tted to the l!ederal Beserve l'oa.rd. For the purpose of tbi s report the· estimated replaoer.ent cost of buildings including vSul.ts, but excluding fi19d machinery anc1 aquipnont, may be arrived at by deter.nining tte mean of two amounts, namely; (1) the total actual cost of constl"U.Ction, and (2) the estimated cost of construction based on the lowest prices that have eXisted during the fifteen 39ars preceeing t:he com-pletion of construotion.

(e) Whara properties ha.'l/e been purchased With the intention of razing existing buildings and of erecting new banking quarters tao Board Will consider requests for permission to deduct from current nat ea...-nings an amount equal to the diffarence between the cost of the property ano the market value of the building site exclusive of improvemants.

2. Furniture and a guip:r!!?nt. Requa s ts w charge off the ~a.laroe r~ning in the Furniture and Equipment account on Decomber 31 should be accoq>a.nied w1 th an i te:ui zed 11 sv of all Furniture and Equip:nent carried on the books as of the date your reqt"~est is submittad a.nd also With a list of addi tionaJ. furniture, if any, that it is proposed to puroh9.88 during the remainder of the year.

3. Depreciation on United States sacurities. A reserve amounting to 3 per cent of tbe par value of u. S. conversion bonds :.f 1946-47 n.a.y be set aside to cover depreciation on such bonds. In case tlie present reserve for depreciation is in excess o1' actual depreciation as a.Dove determined such excess should )e cradi ted to Profit and Loss.

4. Surplus and franchise t~s. After all current e~en'les, dividends, depreciation allowa.roes and other extraordinary charge-offs authorized by the Federal Reserve Board have l·een provided 1'or, any remaining net earnings shall be distributed as 1'ollows:

(a) Transfer to surplus account all available net ea.ritings prov-iding tne total surplus will not as a result exceed the bank's &bscribed capital, in which case only such amount shall be transferred as is"' necessnry to inorease the surplus account to an amount equu to the bank's sub scri beci capital.

(b) Of the balance of mt earnings, if any, 10 per o.ant shall be trans1'erred to surplus a)COunt, and 90 per cent peid to the United States Govennent as a franchise tax.


.. 245

- 4 ...

Instrt10tions 13.6 to th"' tin.a and rna t.hocl of pa.~nt of tbe franchise tax will as usual be issu3d at a later date by tbe Treasury Department.

TO OH.AIBMEN OF ALL PEDERAL RES.&llVE B~'«S.

Walter L. Edclv • Secretary.

.,





WASHINGTON X-4454

Uovember 18, 1925.

SUBJECT: Termination of .Membership by Withdrawing Uember Bank .

Dear Sir:

The Federal Reserve Board }...a.s been requested to rule upon the question whether a State member bank which has given si.x: r:wnths 1

notice of its intention to withdraw from the System, but fails to withdraw immediately at the end of the si.x: months' period is onti tled to interest at tho rate of one-half of 1% per month from tho date of tho last dividend to the date upon which its Federal reserve bank stock is actually surrendered or 1nercly up to the date on Which the six months• period CA~ired.

As the Board has stated in connection with other rulings

246

on similar questions, notice of intention to withdraw is a prerequisite of withdrawal from the System but is not any part of the actual withdrawal itself. At the tetmination of the six months 1 period following notice of withdrawal a State member ba.nk does not automtitically cease to be a member of the Federal ReserV'e System. A bank which has given such notice but has not acted pursuant thereto, continues to be a member of the Federal Reserve System for all purposes and is entitled to the privileges and is subject to the obligations of membership in the System. A state member bank, therefore, which has given notice of its intention to withdraw but does not consummate the withdrawal at the termination of the six months' period by surrendering its Federal reserve bank stock must continue to maintain the reserves regularly raq_uired by the Federal Reserve Act, and when it does withdraw fror:1 the System by surrendering its Federal reserve bank stock it is entitled to interest at the rate of one-half of 1% per month from the date of the last dividend, if earned, to the date on which the stock is surrendered and membership is terminated.

In order to be entirely accurate it should also be stated that the amount refunded is in no event to exceed the book value of the stock at tho time, but ·this requirement is of little practical importance under present conditions •

. As explained in tho Board's letter of September 20, 1923, X-3841, a notice of withdrawal does not rer!lain effective indefinitely but only for a reasonable time after the e:>..'})iro.tion of the six months 1


-2- X-4454 24:7

period. In all cases of this kind arising hereafter the Board will consider two r..onths as a reasonable time for the consummation of withdrawal after the six months' period has expired; so that if the stock is not surrendered within eight months from the date upon which notice of intention to withdraw is received, the notice becomes void and a new notice will be required before a voluntary wi thd.rawal will be permitted. If the circumst~~ces are unusual and seem to require a longer period for tho withdrawal, the :Soard will consider a~ extension of time provided that application for such extension is received by the :Soard within the two months' limit. You are requested to bring this matter to the attention of all bnnks which have notices of withdrawal now pending and in the futuro to advise any ba:nk from which a notice of withdrawal is received of the Board's ruling as to the time permitted for withdrawal.

By order of the Federal Reserve :Soard.

LETTER TO ALL FEDERAL RESERVE AGENTS.

Very truly yours,



248

F ED E R·A·L R E S E·R V E B 0 A R D

STATEIV'J.ENT FOR THE PT?.E."SS

For immediate reles.se 4.00 o'clocj.<: p.m., J'~ovsr:,ber 19, :1.925

The FeC.eral Reserve Board armounces that the

Federal Reserve Bank of Phila.delphi"~. hM es t~.bl:ishcd tJ.

redisc.oun t rate of 4 p8r cent- ·on all cl.a.sses ·of pa.per

of all rr,D.turi ties, effec t:i.. ve November 20·, 1925.


X-4458

FEDER.AL RESERVE :BO.ARD

STATEMENT FOR TIEE PRESS

For imoodiate release 3:00 o'clock p.m., November 21, 1925

The Federal Reserve :Board announces that the Federal

Reserve :Bank of San Francisco has estaolishcd a rediscount

rate of 4 per cent on all classes of paper of all maturities,

effective November 23, 1925.





WASHINGTON

250

X-4459

Nov~mbcr 24, 1925.

SUBJECT: Christmas Holiday.

Dear Sir:

On Christmas Day, the offices.

of the Federal Reserve Board and all Fed-

oral Reserve Banks and Branches will be

closed.

This is tho only holiday which

will be observed during tho month of De-

camber.

Very truly yours,


TO GOVERNORS OF ALL F •. R! BANKS


251.

X-44:60

F E D E R A L R E S : R V E B 0 A R D

STATE1.3NT FOR THE PRESS

:Tor RolcaDe in Horning Papers, Saturd.a.y; Nover.:.ber 28, 1925.

Tbe following is a sunliTlai';'y' of general business and financial conditions tbrour;hout tbe several Yederc;._l Ressrve Districts, based upon statistics for the months of October and November, as contained. in the forthcominG issJ.c of the }i'edcral Reser7e :Bulletin.

Industrial activity and tha volurne of 1Nholesale and retail trade increased

in October. Wholesale prices declined sowewha t to the lev·el prevailing at mid-

year.

Production.

The Federal Reserve 3oarcl' c:; index of production in basic industries,

which m3.kes allowance for seasonal changes, rose by about 4 per cent in Octo:. ,;T,

reflecting increases in tho output of most of the 22 commocli ties included in

the index. Particularly largo increases in activity wore sho\711 for tho iron

and stool and textile industries, and the output of bituminous coal and of lum-

bor was in large volume. Production of 8.utomociles in Octooer 1;·o.s the largest

on record. Pe_yrolls at factories, including industries not covered o;y tho pro-

duction in1ex, increased in @Jctober to the highest level since ca.rly Ln 1924:.

Tho V8.lue of b11ilding contracts awarded declined further in October, contrary to soasJn'J.l

the usual/tonduncy in builcling activity botvveen September and October, but tho

total Has considerably 1r~.rgor than in the corresponding month of n::1y othor year.

Estimates by the Dopart:ncr:t of Agriculture i'!.1 I;ovcmber indicate a corn crop

of 3,013,000,000 bushels and a c'Jtton crop of l5,2S8,or;o buleo, compared with

2,437,000,000 bushds and 13,628,8(;0 bales in 19~;4. llarkoting of crops vvas scaso'!.1-

ally larger in October than in Sopt•3mber but averaged nearly 10 per cent loss t~,an

a year ago.


-2- X-4460

252 Trade.

Wholesale trade, according to the :Fcdoral Reserve J3onrd' s combil'wd inc ox

of sales in six loadL1g lines, roached a seasonnl peal::: ic1 October and i7as in

larger volume tha:1 for e:.ny month of the past five years. Sales at dcpnrtmcnt

stores and mnil order houses, owing partly to favorable weather co;:;.di tbc:.:.,,

showed co;:;.sidorablY.' more than the usual increase in October and were the

largest on record for that m:mth. Stocks of dr;)'goods I shoes, and hardware

at wholoso.lc firms r:ere SiUc" 1.lcr at the end of October than on September 30,

but stocks of groceries were larger. Merchandise stocks at dc~partmont

stores shoYied slightly more than the usunl increase in October, and wore sor::e-

';;hat ln.r&:;or than at the end of October a year aco.

Freight cG.r loadi.:igs roo.ched a seasonal peak in october and totaled

nore them in o,ny previous month, notwithstanding reduced shipments of a::1thra-

ci to and of crains and e:;r<.:in products.

Prices.

T..11c Bureau of Labor Statistics index of 1:.-rwlcst:tlc ;:>rices, after remain-

ing relatively constant for throe months, declh:eli from 160 in September to

158 in October, reflecting declines in the prices of agricultural products,

particularly grains, livestock, meats, cotton, and sugar. Since November l

prices of grain::;,, wool, s?-gar I pig iron, and rubber have increased.

Bmlk credit.

J3ctvicon the niddle of October and the mid.dlo of }Jove1~ber, loans f6r \ .... ·t

cornr::lcrcial c~1d industrial purposes at mer;1ber barJcs in leading ci tics con-

tinued in a volune about $450,000,000 larger than at r:lid-sur::u::er. Loans on

securities increased further and total loans on November 11 wore about

$1,000,000,000 larger than at the opening of the year. Dor.k:nd deposits in-

creased. further during October and early Novm:1ber to a level near tho hit;h


-3-

poin.t of last Jn'::uo.r;r.

At the reserve banks total bills and securities in Novaober ~ere in tho

largest volun.c for the year and about $200,000,000 larger than a year ago.

! Mcr::bcr ba:1k borroYiings declined sopcvthat fro:o the high point reached early. in

October, while acceptance holdings continued to increase and on Nove.nber 18

were larger than at ar~ previous tine for the year. The growth in reserve

bank credit since ~id-sunrner was chiefly in response to the seaso~l increase

of nonoy in circulation, which on Novenbcr 1 was about $180,000,000 lc.rf:or

than on August 1.

Duri!lf; the latter part of October and early pc.rt of Nover.lbcr open narket

rates for cor::r:ercial paper and ba:"U:ers acceptances rer.:o.i~1cd substantially

uncha.nsed at the levels ree.ched during the enrly autur.n. Discount rates at

tho Federal reserve banks of Boston, Clcvela~d, Philadelphia, a~d San

Francisco r1ore advanced fron 3 1/2 to 4 per cent during Novcnbcr.


X-4461



November 25, 1925 For Immediate Release.

CONDITION OF ACCEPTANCE MARKET October 22, 1925 to November 18, 1925 •

.A.cccptances.

An increased supply of bills was reported from the New York and Boston

acceptance markets duxing tl-}e last week of October with a light demand which

resulted in an increase in dealers' portfolios. Later the demand in !Jew

York increased and at the close of tho reporting period, on November 18, the

market was quiet with demand a~d supply about equal and only moderate offer-

ings to tho reserve bank. ~10 average weekly turnover of bills by reporting

dealers in that city was about the ssne during tho four weeks ending Novc~hor

18 as during tho five v:eoks ending October 22, and their aggregate portfolios

were nearly equal on these two dates. In Boston the market was characterized

as fairly active in November with a moderato supply end licht demand for bills,

so that offerings to the reserve bank were subGt~~tial. The Chicag9 market

was very quiet during the whole ~iod, the average volurne of business re-

ported by dealers being considerably smaller than during tho proYious five

weeks. Rates remained unchanged in all ~~kets. On November 18 they were

quoted in New York as 3 3/8 per cent bid a'1d 3 1/4 offered for 30-dc::~.y bills,

3 1/2 bid .:md 3 3/8 offered for 60-day bills, 3 5/8 bid and 3 1/2 offered for

90-day bills, 3 3/4 bid and 3 5/8 offered for 120-day bills, and 4 per cent

bid and 3 7/8 offered for l~l and 180-duy bills.


255

X-4463

WEY SEC'l'IOlJ 9 SHOULil ~E STRICKl'N 00::£ ...

1~. L. T. McFadden, Chairman of the Com~ittee on Banking and Currency

of the House of Representatives~ in his contribution to the November issue

of the American Bankers .Association Journal, entitled 11 Why Section 9 is

Necessary to the National :Bank :Bill" declares that the only opposition to

this section comes from "a small but influential group of state member banks 11

in one state, California, and from "one or two Cleveland state member banks,

which desire to continue to establish branchcl!l in the suburbs of Cleveland. 11

It may be that the only organized opposition to this section comes from

the groups mentioned, but it is nevertheless true that the section affects

banks in no less than twenty-four states. It sets up a now standard of

eligibility for membership in the Federal Reserve System, a standard not

related to safety of management or sound banking policy, but solely to the

question whether banks have branches or offices (the bill d$fines all addi-

tional offices as branches) outside of "the corporate limits of the munici-

pall ty in which tr.e parent bank is located. 11 '!ihore were in June 1924

(Federal Reserve Bulletin December, 1924, page 933) 245 such non-member banks

located in twenty-three different states as follows:

A.r izona . . . . . . . . . . . . . • . 4 .A.la. "ba.r:13. ............... , 4 . .Arlr..ansas • . . . • • • . . • . . . • 2 California •......••••• 5a Delaware ••. -. • • • • • . • . • • 4 Florida. , . .• . • • • . . . . . . . . 1 Georgia •.............• 10 Indiana • . . • • • . . • • • • . . • 1 Louisiana. •..•••••..••• 21 Maryland ••.••••.•••.•• 15


-2-

1vfni~1C ...... ~ ~ ~ ••••••• 20 Mich:i..cc.1~ .. 1 • ~ ~ ~. ~ ••. ~. 3 M.n.ssacln::::etts •....• 6 Missit:.tiiiJpi ..•.•••• 8 rTor~'IJ. CJ.rolina ••.• < 34 Now Jersey ••...••.• 4 0:1i 0 • • . • • • • • • . • . . . • 8 Pcmns;yl vnnia • ~ ••.• , 9 South Carolina ••... 4 Rhode Isla~d ····~·· 2 Tennessee •••..•••.• 14 Virginia •.••.••..• ~ 18 Washington~·······~

Total •...• Z45

X-4·463

25()

This :..ist of states should have included New Hampshire from which state

a bank with two branches outside "the corporate limits of the municipality

in which the :;_Jarent ba."lk is located" ( Ccnwc.y) htJ.s since been admitted to the

Federal Reserve System! Of state banks maintaining such outside branches 245

are non-members and only 55 are r.1embers of the Federal Reserve System. This

cont:east of figures nlone sh.)uld convince any unprejudiced student of the

subject that Section 9 ca~not possibly accomplish what its proponents expect

of it. Instead of strengthening the Federal Reserve System it will weaken

it, in my opinion, by excluding from membership many well managed ins ti tuti ons,

and by preventing any further additions of branches under any circumstances

by member banks.

As to the unwisdom of such an iron-clad prohibition of all further ex-

tension of branches by membe.r state banks I have only to cite the ~ecent

establishment of a branch of the Citizens and Southern Bank of Savannah,

Georgia, in Athens, Georgia,. This branch was established with permission of

the Federal Reserve Board in August at the earnest request of the directors

of the Federal Reserve Bank of .Atlanta and at the request of the citizens of

Athens. One of the leading citizens of Athens has recently written me that

the establishment of this branch 11 has been of incalculable valu.e in creating


257 -3- X-4463

confidence nnd stabilizing co::.:ditions gmcrally in the city and commu."lity .. :"

Now what good reason is thoro for prohibiting by law the rendering of

such a service to a stricken co~~ity? If National banks can't be permitted

to render service of this kind because of prejudice against branches w~

should we say to a state that its State banks cannot render such service and

remain in the Federal Reserve System? The Athens case does not stand alone.

There have been several others during the past year, and more during the two

or three preceding years.

Sect Lm 9 will do nothing of consequence to strengthen the Na. tional

Banking system, and if branch banking is as alluring as its opponents appear

to think it is it will do nothing of consequence to prevent its spread.

Section 8 purports to give city National :Ba.."lks the right to establish branches

within municipal limits, where state banks have that privilege, a right which

the National Banks are already exorcising with the concurrence of the Co~

troller of the Currency. Section 9 denies to country banks the right to es

tablish even neighborhood bronchos. It should be remembered that of the 310

banks ope:tating br·anches outside mw.1icipal limits 239 are located in

towns or cities with a population les·s tmn 25.ooo,· and 129 of them in

municipalities of less than 2,500.- Some of these bariks ha.ve operated branches

successfully for upwards of thirty years.- Is it likely that Section 9 will

cause them to give up their branches or will ci:ilerce the States in which they

are located into a change in their law~ relating to the subject?

If Section 9 does n0thing of consequence to strengthen the National

Banking system another section of the McFadden bill will do much to weaken

it. I ·.refer to Section 7 which repeals an Act which bas been a part of the

National Banking Law since 1866. This repeal will prevent ba.nks with branches


258 -4- X-4463

beyond rm.uiicipal limits from becoming national banks and retaining their

branches. Section 7 is doubtless resarcJed as an essential accompaniment

of Section 9 and stands or falls v;ith it. b:..•tea.d of prohibiting these banks

from becoming National "banl:s the National Bankjng system would be greatly

strengthened if such banks as the Grenada Ba::.1k of Grenada, Mississippi, the

Tennessee Valley B~~k of Deca~r, Alabama~ the Citizens and Southern Bank

of Savannah, Georgia, the Wachovia Bank and ~rust Ccrnpany of Winston-Salem,

North Carolina, the Industrial Trust Company of Providence, Rhode Island,

tho Merrill Trust Company of Bangor, Maine, and many others that I could

mention could be induced to t:ili:o out n3.tional charters. I have not mentioned

the bra~ch barking institutions of C~liforr.ia because they are so well known,

and because my purpose is to show that California and Cleveland are really

only a sl.I'.a.ll part of tho picture.

(SIGNED) EDMUND PIATT


c 0 p y

ET T'.dE UlTITED STATES CIRCUIT COURT OF .APPEALS

For the Ninth Circuit.

. FE::::JERU. RESERVE :BMW. OF S.AN FRA1TCISCO, e corporation,

Plai~tiff in Error

vs.

IDAHO GRIL1.~ ALFALFA SEED GR01'iERS ASSOCIATION, a corporation,

Defendant in Error.

) ) ) ) ) ) ) ) ) ) )

259 X-4464

ITo. 4560

Upon Writ of Error to the United States District Court for the

District of Idaho, Eastern Division.

Before GILBERT, HUNT, and BUDKIN, Circuit Judges.

RUDKIN, Circuit Judge: During the period herein mentioned, the

Idaho Grimm Alfalfa Seed Growers Association was a farm marketing asso-

ciation organized under the laws- of that State and was engaged in the busi-

ness of cleaning and marketing alfalfa seed produced by its members. When

alfalfa seed was sold, a draft was drawn on the buyer for the purcha~e

price with a bill of lading attached. Up to about a year prior to November

28, 1923, all drafts thus drawn were deposited with D. W. Standrod and

Company Bankers, for collection only, and the Association was not permitted

to draw against the amount of the drafts until payment was actually made to

the Standrod Bank. But in the fall of 1922, this arrangement was changed

through an agreement between the Association and the Standrod Bank, and

thereafter the Association was given immediate credit for the amount of the


260

-2- X-4464

drafts when doposi ted, and wc.s pcrmi t.tcd to draw against them to the full

amount, if it so dcsi rod. If n draft was not paid '7hon presented, tho amount

was charged back to the account of tl1e Association, and if paid, the Asso

ciation was charged with interest on the amou_~ts checked out before the draft

was \actually paid. 0~1 Nove;nber 23, 1923, the Association drew a sight draft

in the sum of $10,848.80 on Teweles and Company for the purchase :price of a

carload of alfalfa seed shipped to that company. The draft was made payable

to the Standrod Eruik, had attached thereto a bill of lading for the shipment,

and was accoinpanicd by a letter of instructions, stating trot payment might

be deferred Ulltil the arrival of tho car. The draft was then forwarded by

the Standrod Bank to the Federal Reserve Bank at Salt Lake for discount and

was there discounted and the amount placed to the credit of the Standrod Ban£~.

Two sLmilar drafts were drawn by the Association on November 26, 1923, for

substantially similar amounts and these drafts took the same course. It might

be said in this co~~ection, however, that tho general manager of tho Asso

ciation neglected to sign one of the last mentioned drafts nnd the defect was

not discovered until the draft roached the Federal Reserve Bank at Salt La~e.

The Standrod Bank was then notified of the defect over tho telephone and an

other draft was substituted in its place.

Tho Sta~drod Bank was open for the transaction of business for the

last time on November 28, 1923, and on November 30, 1923, its affairs were

taken over by the Banking Officers of the State. On the latter date the

St~~drod Bank had an overdraft with the Federal Reserve Earu~ in the sum of

$47.96, and the Association had a balance to its cheCking account, on the

books of the Standrod Bank, in the sum of $32,295.20. On December 1, 1923,

the Association notified the Banking Officers of the State that the Standrod


26~

X-4464

Bank was insolvent at the time of the receipt of the drafts and that its

officers and agents know ur had cause to believe that it was so insolvent, and

the Association made claim to the drafts or, if collected, to the proceeds

thereof. A copy of this notice was mailed to the Federal Reserve Bank on

the same day.

The present action was then instituted by the Association against

the Federal Reserve Bajk, the Standrod Bank, and the Banking Officers of the

States to recover the amount of the three drafts or their value. The com

plaint contains six causes of action in all, or two causes of action based

on each of the three drafts. The causes of action on each of the three

drafts were identical in form however, so that for persent purposes reference

need only be made to the first and second causes of action based on the draft

of November 23, 1923. Speaking generally, it was alleged in the first cause

of action that for upwards of a year prior to the date of the receipt of

the qraft in question the Standrod Eank was insolvent; that its directors

and managing officers, and the managing officers of the Federal Reserve Bank

were at all times fully aware of its insolvent condition; that the draft was

forwarded to the Federal Reserve Bank for collection; that the amount there

of was collected by the Federal Reserve Bank after the close of the Standrod

Bank, and that the Federal Reserve Bank refused to account for the proceeds

thereof. In the second cause of action it was alleged that the draft was

deposited with the Standrod Bank under an agreement between the Association

and the Bank that the draft and the proceeds thereof should be and remain the

property of the Association, and that the title thereto, or to the proceeds

thereof, should not become tho property of the Standrod Bank. At the com

mencement of the trial tho Federal Reserve Bank moved the court to require


262 X-4464

tho nlnL1tiff to elect uho thor it vrould proceed or:. the first 1 third and fifth

causes of ac ti o:1, '\71lich it claimed were of oqui table cognizance, or on tho

second, fourth and sixth causes of action 7rhich it clo..irnud ~wro cognizable at

lo:;r. This motion wo..s denied. The motio:1 was rO:i.10Wed at the close of the

testimony on the pc~rt of the plaintiff but wns again denied. A motion for a

nonsuit ',"TaS then grc:nted to the second, fourth ond sixth causes of action,

but denied as to the rern..'1.ining causes of o.ction. The Federo.l Reserve :Sank

then moved the court to discharge the jury o.nd transfer the co.use to the cqui ty

side of the court. Tho court took this motion under advisement ond directed

the trial to proceed in tho rneantLne. The cause was thereafter submi ttcd to

the jury under instructions to vrhich no exccptionswere tnkon, and the jury

returned a verdict in favor of the plaintiff in the sum of $32,692.12. Some-

time after the verdict was returned the court filed a memorandum on the

motion to discharge the jury and transfer the cause to tho equity side of tl1e

court in which it said:

"While the point is not o:ltiroly free from doubt, upon consideration I lk~ve concluded that the complaint was properly entertained upon tho law side of the court.

"The further question of iThother or not, if tho verdict be taken as advisory only, it should be apiJrOvod and adopted, I answer in the affirmative."

The court then added:

"Counsel for the plaintiff \7ill prepare a judgment in the ordinary form of a judgment upon the verdict, incorporating therein, at tho proper place, the additional clause, in substance, 'which finding of the jury is approved and adopted. '"

Judgment was thereafter en tored upon t be verdict, as directed by

the court, after making certain deductions for moneys checked out by the

plaintiff before the close of tho Standrod Bank. The judgment thus entered

has been brought here for review by '\7ri t of error.


263 -5- X-4464

Tne first assignment of error is based on the refusal of the court

to require the defendant in error to elect whether it would proceed on the

even or odd numbered causes of action. In answer to this assignment we need

only say that the granting of the nonsuit as to the even numbered causes of

action necessarily compelled the defendant in error to proceed on the re

maining causes of action and, conceding for the p11rposes of this case only,

that it was error not to require an election at an earlier stage of the trial,

the error was plainly and manifestly without prejudice.

Tho next assignment of error is based on the refusal of tho court

to discl~rge the jury and transfer the cause to t~e equity side of the court

after the nonsuit had been granted as to tho even numbered causes of action.

Again, if we concede that the action or actions were of equitable cognizance,

no error can be predicated upon the action of the court in submitting the is

sues to a jury in an advisory capacity because that practice is always per

missible and its adoption is a matter of discretion with the court. And

when the court treated tho verdict as advisory only and Dpproved the findings

of tne jury it asserted all the powers and assuned all the responsibilities of

a Ch~cellor. This was the utmost consideration to which the plaintiff in

error was entitled and it is in no position to complain of mere matters of

procedure resting in the sound discretion of the court. We might say in this

connection, however, that it does not appear to us that the defendant in

error was seeking to enforce a trust or to follow trust funds. It proceeded

upon the theory that the diversion of the proceeds of tho drafts by the Fed

eral Reserve :Sank, with knowledgE:l that the Standrod Bank uas i:::J.solvent, and

with knowledge that the drafts uere not the property of the Standrod Bank,

was a tort or wrong for ~hicl1 a court of law has always afforded a full,

complete and adequate remedy.


264 -6- X-4464

Nurr.orous errors hc .. ve been assigned on the adnission of testimony

over ob.jcction. Tho defondo..'1t i::l. error offorod in evidence a compilatioa ln...'l.de

by ono of tho \7i tnosses from tho books of tho Ba'1k, showing i:1 dota.i 1 the re

sources and lio.bi li tics of the :Bank O:\t the clJso of business on November 28,

1923. Tl1is compilo.ti on or su.rnrnnry was tclce:.1 from books o.lroady in evidence;

its corroctaess ilao o.t no time questioned and is ~1ot questioned :1ow. Thoro

V!as no error in this ruli:r..{s• San Pedro Lumber Co. v. Reynolds, 53 Pac. 410;

Jordan v. Warner's Estate, 83 N.W. 946; State v. Brady, 69 N.W. 290.

The liquidating officer of the State, who 1~ charge of the affairs

of the Standrod Bank since its close, was permitted to give the amount col

lected or realized from the assets in his charge during tho preceding ten

months, and to state whether, in his opinion, any equity re:rnained in tho

pledged bills receivable of tho Bank after payment of tho loans secured by

the pledges. As already stated, tho witness had been in charge of the affairs

of the Bank for about ten months; it was his duty to collect ond distribute

the assets in his cmrge and he had devoted his entire ti:ne a."1.d attention to

that object. He had consulted with the collecting agent of tho Federal Re

serve :Ba..'lk a...'ld. was more familiar w'i th the assets of the :Bonk o....'1d their probable

value than any other person, except perhaps the managing officers of the Bank.

He ~as co~~etent therefore to express an opinion on the question submitted,

a"1d the fact tho.t his opinion was based on the value of the sccuri ties some

time after the close of the Ba.:'lk \Vould go to the t1cight of his tcstimo:n.;;r, not

to its competency. State v. Cadwell, 44 N.W. 700; Campbell v. P~rk, 101

N.W. 861.

The plaintiff in error moved to strike the testimony of one of the

witnesses, based on a. compil~tion prepared from tllc books of the Standrod

Bank in evidence, showing tho number of overdue notes hold by tho Sta.'1drod Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

265

-7-

Eaa}: .:.1nd ho-;; lone; ovcrd·J.o, rmd t:w du:i:'ici.oncy ur excess of reserve o:.1 dG"~losi t

·cri t:1 tho Federal Reserve llo.:1k o:• difforont d.atos. There ;.ms :;10 orr or in this

rulin,.-; for :tonsons olready stated.

Undor date of November 10, 1923, or eigh.toon clnys before the close

of tho Bank, tho vicc..'-:rrosidont a:'ld. il'D.nagor of tho Standrod. :Ba:~ addressed a

lettt'lr to the rrnnag;int,:; officer of tho ]'odcral Rosorvo Bank stating tl:.at :he had

found it ne c.essary to t::U':o o.c:vantage of the offer of thG latter ~o handle a

note of $10,000; that he was enclosing the note therewith, :payable ten days

from l!ove:nbor 13, oodin€;.;: 11 This will tide us ovor. 11 The manager of the Feder::J.l

Reserve Bank answered this letter under date of Novcmoer 14, 1923, stating

that the discount co~~ittco of the Federal Reserve Bank :U~d declined to accent

the note for discount, and further thnt the directors of tho Federal Reserve

Bank r1ere of opinion that tho Federal Reserve branch had advanced o. sufficient

sum to provide for tno ordinary needs of the Standrod Ba~~, and that con

sidering all tho fea.tures entering in to tho security pledged as col1.:1 teral to

its obligation now owing to the Federal Reserve :s~:uk, it rrcs only proper that

the directors c.:.1d stockholders of the Standrod Banl-: should ;;rovido fu!lds out

of their perso:1al resources of a suff:l.cicnt amount to prG]?Crly rc:lo.bili tato

tho Ba..'1k n.'ld fu.rnish it with a large enough ro • .-munt of worki!lg CD;?i tal to have

the baak function in a proper manner. Error is assigned i~1 tho a<'lr!lission of

these two letters, but. tho assignment is without merit. Tho letters clearly

tended to show the desperate condition of the Standrod Baril-e on that date and

knowledge of that condition on the part of the Federal Reserve Ba:c1k.

Under date of September 9, 1922, the assistant manager of the Fed

eral Reserve Ba.nlc addressed a le ttor to the prosiden t of tho Standrod Bank

stating that the harvest season was on; that he desired to impress upon the

officers of the bank the necessity of sb£1ping their affairs so that after the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

-8- X-4464

' roriod of liquidation \7C\.S ov,.;.r tho bnnk ·.-:auld sho\1 a decided illlJ?rovomont in

its conditio!1; that at thc.'l.t time tho lo:c.ns of tho institution npproximated

$1,700,000, while tho deposits were less than one half that nmount, or in the

neighborhood of $785,000; that these figures spoke for the;nselves a::ld. called

for :q.o comme:::1t; th:lt if the StD.ndrod Bank expected to continue to receive as-

sistanco from tho Federal Reserve Ba~~, a determined effort must be put forth

by its officers to the end that a proj_)er ratio between loa:1s nnd. deposits

might be shown; and the president of the Standrod Bank was directed to bring

the letter to the attention of the board of directors and furnish the Federal

Reserve Bank with a letter over the signature of each, outlining what tho

Federal Reserve Bank might expect in that regard. This letter was a1~wered

by t4e president of the Standrod Baril~ under date of September 11, 1922. In

this letter he stated that they expected to reduce their loans to $1,200,000

that season; that with this reduction there would no doubt be a corresponding

increase in d~posits; tr~t the officers of the Stru1drod Baruc realized that it

would ta~e another year to put everything in shape, where there would be no

borrowed money; that in a great many cases they lmd loaned money to farmers

and stockmen and it was absolutely necessary to make further advru1ces in order

to secure liquidation on their present indebtedness. This letter uas a:1swered

under date of Se~tember 12, by the assistant manager of the Federal Reserve

Bank, by n second letter, stating that the letter of the president of the

Standrod Bank was unsatisfactory for two ro~sons: First, because a comnruu1i-

cation over the signature of each of the directors setting forth what might

thenceforth be expected from the bank ¥vas not furnished as requested, and

second, while tho Federal Reserve Bank was not in a position to know how

great a reduction in loons should be made, it believed that the policy of the

Standrod Bank should be to bring about the greatest possible liquidation, to

the end that it might again resume a position more "1early bordering on the


-9- X-4464

2 6r-l ~- '

sound and norm:::tl. IJ?hese letters 71nrc objected to for tho like reasons as

tho letters already co~sidercd, but, in our opinion, they ~ere competent for

the same reasons. They· tended. to shorr the condition of the Standrod Bonk and

Y-~o~lodgo of that condition on tr£ part of tl~ Federal Reserve Bru1k. True,

tho letters were wri tton a little more than a year before tho ban..< closed,

but other testimony in the case shows t1Ja t t~~"ero uas ~1o substantial cho..~go in

the condition of the bank from tlmt date ur.til the time it cloaed, except -;JG:t-

haps for the worse, as the disparity between loans c.nd deposits was even

greater when the bank closed than when these letters were wri tton.

It o~ly remains to co~sidor the question of the insolvency of the

Standrod Bank; knowledge of that insolvency on the part of its officers m1d

the officers of tho Federal Reserve Bank, and the effect of such insolvency

and kno·.1ledgo, if proven. .A bnnk is said to be solvent when it has enough

assets to pay, uithin a reasonable time,all of its liabilities through its

own agencies, and is insolvent when unable to meet its liabilities as they be-

come due in the ordinary course of business, or, in shorter terms, when it

cannot pay its deposits on demand in accordunce ~ith its promise. 7 C.J. 727.

Measured by this rule we think the court and jury were amply justified in

finding that the bank was insolvent, if indeed it was not wholly and hope-

lessly so.

When the Eank closed, its deposits were approximately $500,000, m1d

its loans and discounts approximately $1,300,000. It had borrowed from the

plaintiff in error tho sum of a1~roxi~~tcly $700,000; from the United States

National :Bank of Portland approximately $85,000; a.nd from the National :Bank

at P;ocatello, Idaho, $20,000. It had pledged with tho plaintiff in error, ~s

security for its loan, bills rccoivanl.o of tho face value of approximately

$900,000; with tho United States National Ilanlt of Portland bills rccei vable


268 -10- X-4464

of the fa.ce va~~e oi a.pproximately $175,000; and wit~ the bank of Pocatello

bills receiva.blo of tll.e face value of c.:pproximately $30,000. And v7G tl1ink

it fairly appears from tho testimony that thoro was no equity in tho bills

rec0ivable thus pledged, after the payment of the loans which they were

pledged to secure. Thoro was left wi tl1 tho banlc to meet its ordinary demands

from day to day m1d to pay its depositors, bills receivable of the face value

of approximately $275,000 C4'1d a small amount in stocks; bonds, warrants and

overdrafts. During tho ton months which had elapsed since the bank closed

its doors, tho liquidating officer of the State had been able to realize but

$40,000 or $50,000 from tho assets and resources t~~t crune into his hands.

In the sum~or of 1923, the board of directors considered the proposition of

forming a holding company to tc.ke over three, four, or five hundred thousand

dollars in face va.lue of the uncollectible p~er of the bank, but the vice

president a.;.1d manager did not think that this would suffice.

During July and August, 1923, tho Pacific Joint Stock Land :Bank

forwarded two checks to the Standrod :Bank aggregating the s~~ of $11,000,

with instructions to obtain releases of liens against pro:;!ort;;,· a::J.d turn the

proceeds over to borrowers fron the Joint Stock Land :BXJ.lc:. Tl·~e releases

were not retur~ed and several letters passed without satisfaction. A repre

sentative of the Joint Stock Land Bank was then sent to tho St~'1drod Bank

to inquire into tho matter. He there discovered tba. t the money had been

misapplied and was inforr:1od by the vi co-:presidont and roo.nager thr.1. t the de

mands upon the bonk were ratter large and. unus'-l.D.l, and that omng to low re

serves he was not in a po£itio:1 to repay the money. He asked for further

tim~, but this ~s refused. Several r.:.1oetin,ss of the board of clircctors fol

lowed and finally, about two days later, the representative of the Land :Bank

rec~i ved a draft on the Wal:Jr...er Brothers Bank at Salt W.ke City for the amount.


269 -11- X-4464

We- have already referred to the refusal of tl1o loan of $10,000 a few days

before the close of tl~ bank to tide it overo As against this the only testi

mony offered by the plaintiff in error was some testi::10ny tending to show

that the officers of the Standrod Bark had no knowledge of its insolvent con

dition. While the testimony had that tendency, if creQitcd by the court and

j~'y, it likewise had a strong tendency to show tr~t the bank was in fact in

solvent. It 3ppeared from the testimony of one of the directors that M;c.Tly

a.ll the loans had been outstanding since the close of the war; that th:!".e

was no money in the country; that the bank wn.s unable to IlUlke collections;

that its deposits had decreased from a million and a half to about half a

million dollars; trat the directors of tho bank had pledged their personal

cradit to raise money for the bank, in short, that the condition of the bank

was all but desperate. Under these circumst~~ces it is idle to claim that

the finding of the court and jury on the question of insolvency was not

justified by the testimony.

The claim that the directors ond managing officers of the Standrod

Bank had no notice or knowledge of the existing condition is equally un

founded. The directors, called as witnesses, derived their knowledge of

the condition of the bank, in most part, ,fro~ reports ~~o to them by other

officers of the bank, and it is a significant fact that such other officers

were not called as witnesses. True, they might have been called by the de

fendant in error, but officers who receive deposits in an insolvent bank

are guilty of a fraud, if not a crime, and a third party who u.~erttikes to

prove the fact of insolvency cannot be expected to call the perpetrator~ of

the fraud as witnesses. Furthermore, the insolvent condition of the bank

had so long continued and was manifested in so many different ways, that a

finding of knowledge of insolvency on 1he part of the managing officers of


270 -12- X-44G4

both banks '\7CLS fully jut1 ~ificdn If this to trno, ell tho nuthc..ri ties agree

t:rn t tho receipt of a d.epc..si t "J·.i c.n insolvo:1t bo.11::.-: is a fraud on tho de-

posit0r; that title to t:1o deposit docs not pass, end trk'"'..t the deposit ~.ny

be followed so long as it can bo identified. A fraud was thus perpetrated

on the defendant in error by tho officers of t:L1e Sto.ndrod. :Bar.Jr:, o.nd, >.it-

tingly or unwittingly, tho Federal Reserve Bc.nk became o. rJarty to the fro.ud..

It is lastly co:1.tc~1ilcd tln t t:1e plo.intiff in error is a bo:no. fide

purchaser before :r.nturi ty nnl that its ti tlc cannot be assailed. :C1.· .. t. tr"o

Federal Reserve Balli~ had notice that the drafts were not the property of the

Standrod :Bank, in too vm.ys: First, because it uas apparent thD.t the Stanclrod

Bonk bad no funds with which to purclnse the trafts; and second, beco.use tho

applications for discount stated on their face that the drafts were the

property of a depositor. With this knoulodgo, a finding of mala fides on

the part of the plaintiff in error was justified, and the plea of bonn fide

Durchaser caru1ot prevail.

The judgment is affir::J.od.

(ENDORSED:) Opinion. Filed Nov. 9, 19?.5 F. D. Monckton, Clerk, by Paul P. O'Erion, Deputy Clerk.


( c 0 p y

FEDE3..AL RESERVE B.ANK

Of San Francisco

John Perrin, Uovember 18, 1925. Chairman of the Board and Federal Reserve .Agent.

Federal Reserve Board Washington, D. C.

Sirs:

271.

X-4464-a

During 1924 the Idaho Grimnl .Alfalfa Seed Growers .Association, an organization of far~ors engaged in tho production and sale of alfalfa seed, brought an action against the Federal Reserve Bank in the state courts of Idaho for the recovery of $32,692, loss alleged to have been s-;.1-s tained through the failure of D. W. S t:;.ndr od & Co. , Bankers , Blackfoot, Idaho. This case was removed by the Federal Reserve Bank from the State Court to the United States District Court sitting in Idaho. Plaintiff 1 s claim was predicated upon the following facts:

The Seed Growers Association, for some time prior to the failure of the Standrod Bruik on November 30, 1923, had been a depositor in that bank. Tlwy had entered into a special arrangement with the Standrod Bank vrh0reby they were privileged to deliver to the Standrod Bank sight drafts drc~n to the order of the ba~~. with order bill of lading attached, representing tr~ purchase price of seed sold by them to eastern customers, and for these drafts the St~~drod Bank gave the Association full and immediate credit. The Association was then allowed to treat the proceeds as part of their general checking account and to usc the funds represented by tho drafts without restriction, even· before the drafts could possibly have been collected. For some time prior to November, 1923, the Standrod Bank had been in an extended condition and this fact was known to the Federal Reserve Balli~ and to the officers of the Standrod Ba~~. Duri:1g the early part of November, 1923, tho condition of tho Standrod B~1k was such that the Federal Reserve Bank of San Francisco felt that it was not warranted in making any further advances to the Standrod Bank and so notified that bank. During the last week that the bank was open for business, th<': Seed Growers Association deposited with the Standrod :Bank three sight drafts with bills of lading attached, aggregating over $30,000, receiving immediate credit therefor, and against the credit thus created the Seed Growers .Association immediately commenced to dra.'ii. These drafts were negotiable in form and bore no evidence of any attempt on the part of the Association to restrict their negotiation. Im..rnediately upon their receipt by the Standrod Bwik, that bank transmitted them to the Salt Lake City Branch of this ·,;o.nk, accompanied by the usual form of a:p:plication for discouu~t. Credit of the Association being good, and the paper being eligible and entirely acceptable, the drafts vrere immediately discounted


-2- X-4464-a

by this bank and tho proceeds thereof passed to the reserve account of the Stnndrod Dank. That bank immediately proceeded to avail itself of the reserve credit thus established ~~d between the date of the credit and the date on which the bank closed its doors used all of its reserve f~nds and failed with an overdraft of a. small amotL~t. Upon the delivery

272

of the drafts to tho Federal Reserve Bank they were immediately forwarded to the eastern points at which they were payable for collection. Proceeds from the collections had not come into the possession of the Federal Reserve Bnnk when the Standrod Bank closed its doors. As soon as the Association received notice that the Standrod Bank had placed its affairs in the hands of the State Commissioner of Finance, the Association notified the Standrod Bank and the Commissioner of Finance that the drafts had been deposited for collection only, that title thereto had not passed to the Standrod Bank and that the Association would claim as its own any funds representing the collection of said drafts. Tho Association also claimed at this time that a fraud had been committed upon it through the receipt of the drafts by the Standrod Bank at a time when it was insolvent and when such insolvency.was known to the officers of the Standrod Bank. A cppy of this notice was served upon the Federal Reserve Bank after the Standrod Bank had closed. Subsequently, long after collection of the drafts had :h.eeli ·m:aaa·; ·f11e Aesaociation demanded that the Reserve bank reimburse it for 'the amount :'o<f'"'-i ts deposit in the Standrod Bank at the time of failure, aggregating over $30,000. This demand was refused and the action above referred to was commenced.

Tho case was tried in the United States District Court at Pocatello before a jury consisting of eleven farmers and one ex-policeman. The complaint consisted of six causes of action, two on each of the drafts involved. The first cause of action as to each draft was predicated upon the theory that the Standrod Bank was insolvent when the drafts were received, tl~t this insolvency was known to its officers and to the Federal aeserve Bank and tlat the failed bank, as well as the Federal Reserve Bank. was liable to the Association for the unused portion of the deposit repre~euting the face value of the drafts. Tho second cause of action in each instance was predicated upon the theory t~~t the drafts had been deposited for collection only and that, title having been retained by the Seed Growers Association, no purchaser of the drafts could acquire title good as against the Association. Upon the trial this bank contended that there was no evidence to ~pport the theory that the drafts had been deposited for collection only and that inasmuch as the Federal Reserve Bank did not know and t~d no means of knowing the status of accounts as between the Association and the Standrod Bank, it patently could not be charged as a party to the alleged fraud resulting from the receipt of deposits. The Court granted a motion for nonsuit on the three causes of action, predicated upon the theory that the drafts had boon deposited for collection only, but allowed the case to proceed on the i:1solvency theory. The case was voluntarily dismissed as against the Comr.1issioner of Finance, the Standrod Bank and the liquidating agent, leaving this bank as the sole defendant. A verdict was rendered for the full amount of the drafts, without any allowance for the amount thereof actually used by tho Association. The Court ~bsoquently required a deduction of tho amount cheCked out by th~ Association


-3- X-4464~a

and entered judgment for the balance.

The case was appealed by us to the Circuit Court of Appeals for the Ninth Circuit and was recently argued before that court. The judgment of the lower court was affirmed and it is the present intention of ~~is bank to ask for a rehearing before the Circuit Court of Appeals and if this is denied to take the matter to the Supreme Court of the United States.

There are many facts in connection with the case, favorable to our Dosition, wnich it is difficult to set forth in this letter. It may be said, however, that there is absolutely no evidence in the record whiCh even remotely tends to show tba.t the Federal Reserve :Sank had any knowledge whatever that the Seed GrQWers Association had not received a full, adequate and present consideration from the Standrod :Sank for the drafts. No att~mpt was made to prove that the Reserve :Sank knew that the proceeds of the drafts had been left on deposit with the Standrod :Sank. It was sh0wn that the Association might have withdrawn the fttll amount of the drafts in cash 0ver the counter of the bank, might have accepted exchange on the Standrod :Sank's correspondents for the amount thereof, or might have used the proceeds te pay a preexisting indebtedness to the Standrod :Sank and tl1at no lo1owledge of which of these three courses had been f0llowed was brought home to the Federal Reserve Bank. It was ~~~her shown that the Association itself was so well acquainted with the condition of the Standrod :Sank that about a month prior to the date when it closed the manager of the Association demanded from the Standrod :S&~k a prerequisite to further deposits that the bank should give the Asseciation a bond to protect its account similar to bonds furnished tQ indemnify public deposits. The manager of the Association also admitted that he had ln1own the Standrod :Sank was in an extended condition for two years prior to its failure. The Directors of the Standrod Bank all testified that they had no knowledge whatever that the bank was insolvent UL~til it was taken in clnrge by the Cocmissioner of Finance. Practically the only evidence of insolvency introduced was that gained from an examination of tho books of the batik after it had closed and from an appraisal of the value of its assets by the Deputy Commissioner of Finance who took ch~rge of the bank in November, 1923. The existence of a condition of insolvency is predicated solely upon inference and not upon positive testimony.

Yesterday the Executive Committee of this bank, feeling that this case involves a question of such vital import~~ce net only to this bank but to all other Federal reserve banks and banks generally, authorized the employment of Hon. Newton D. :Saker to assist in handling the case before the Suprece Court of the United States, provided Mr. :Saker was available. From the brief sumoary of the facts whiCh I have given it can be plainly seen that if tho judgment of the lower court, sustained by the Circuit Court of Appeals, is to stand, neither this bank nor any bank can safely disco~t for another institution, which it knows or has reason to believe is in an extended condition. :Sanks do nQt usually discount their customers' paper unless they are in need of :f'u.nd.s and the Court has said in effect that if the bank is in that condition, the discounting agency is p~aced on notice that there may be equities enforceable against innocent third partie's purchasing paper for value. The decision of tho Circuit Court of Appeals was evidently hastily prepared and is not supported by any citation of authorities. A copy of the opinion prepared by Judge Rudkin


-4- X-4464-a

is attached hereto, o.s well as a copy of our clos':ing brief.

I have taken the liberty of calling this case to your attention, not only for the purpose of acquainting you with the situation in relation thereto, but also for the purpose of suggesting that the case and its importance be brought to the attention of the other Federal reserve banks and, if &tgreoable to them, tha. t Mr. Baker's fco be prorated cmong all of tbo banks, as has been done in the past in relation to several other cases no more important and of no more universal interest than this.

I am informed tbat counsel for the Federal Reserve Board has been advised as to progress in tlus case and has been s~plied with copies of the briefs. A copy of the Opinion of the Circuit Court of Appeals is being forwarded to Mr. Wyatt.

Very truly yours,

( sigi:ed) JOHN PERRIN

Chairman of the Board.

Enclosures.


FEDERAL RESERVE BOARD X-4466 · . ..,·

WASHINGTON


THE FEDERAL. RESERVE BOARD December 5, 1925.

Dear Sir:

For your information, there is quoted below the entry made in the official journal of the Supreme Court of the United States for November 30th (p.99) with reference to the Pascagoula National Bank case:

11 No.242. The Pascagoula National Bank of Moss Point and Pascagoulo., Mississippi, appellant, v. The Federal Reserve Bank of Atlanta et al• Appeal from the District Court of the United States for Northern District of Georgia. Per curiam: Transferred to the United States Circuit Court of Appeals for the Fifth Citcuit, upon the authority of the act of September 6, 1916, c. 449• sec.3, 39 Stat. 727, and section 238 of the Judicial Code as amended by section 238 (a), act of September 14, 1922, c. 305, 42 Stat. 837; act of February 13, 1925; soc.l4; Heitler v. The United States, 260 u.s~ 438."

275

As you probably remember, tho pl~intiff appealed this case direct from the United States District Court to the Supreme Court on the ground that it involved a constitutional question. After hearing the argument of Counsel on behalf of the appellant, the Chief Justice stated that the Court did not wish to hear from Counsel for the Federal Reserve Bank of Atlanta and on the following Monday, November 30, the Court issued the above quoted order.

This means, of course, that the Court felt that the constitutional question raised by the plaintiff was not of sufficient substance to give the Court jurisdiction on a direct appeal and that, therefore, the case should have been appealed to the Circuit Court of Appeals in the first instance. This is tantamount to a decision that the provision of the first paragraph of Section 13 of the Federal Reserve Act, which forbids Federal reserve banks to pay excr...ange charges. and thus impliedly forbids member banks to charge exchange on checks presented to them by Federal reserve banks, does not deprive national banks of property without


due rrocesu of law within the moaning of the fifth amendment to the Constitution and, therefore, is not unconstitutional, as contended by the appellant.

X-4466

The Court's action was a disappointment to us, because it will result in a postponement of a final decision on the other points involved in the case. Counsel for both sides have agreed, however, that it is desirable to obtain a hearing in the Circuit Court of Appeals as soon as possible. The Circuit Court of Appeals will not sit in Atlanta again before next October and, therefore, Counsel for both sides have agreed to enter into a stipulation permitting the case to be heard in New Orleans or some other place in the Fifth Circuit. We hope to get the case assigned specially for argw~ent in the Circuit Court of Appeals at New Orleans sometime in January or February.

It is expected that the side which loses the case in the Circuit Court of Appeals will appeal it to the Supreme Court so that even·~ually a final decision will be obtained from the Supreme. Court.

Very truly yours,

Walter Wyatt, General Counsel.

276





WASHINGTON X-4467

December 9, 1925.

StiBJECT: Complimentary Copies of Federal Reserve Bulletin for State Bank Examiners.

Dear Sir:

Referring to the Board's letter X-417q of October 25, 1924, on the above subject, you are advised the Board has approved a similar arrangement for the year 1926. It is requested, therefor-e, that you send to the Board, not later than Decemoer 24th, a list of names of State bank examiners in your district to whom a complimentary copy of the Federal Reserve Bulletin should be forwarded during the year 1926.

Yours vety truly,


TO ALL FEDERAL RESERVE AGENTS.

277




WASHINGTON

278

X-4468

December 9,1925.

Su~JECT: Assistant Federal Reserve Agents, 1926.

Dear Sir:

On or before December 20th, the Federal Resorve Board will give consideration to the matter of the appointment of the Federal Reserve Agents and Assistant Federal Reserve Agents to serve during the year 1926. You are requested to send to the Board in time to reach it by the date mentioned the names of those vrhorr. you desire to be appointed a.s Assistant Federal Reserve .A.gents at the head office and the branches, if ~y. of your Bank.

Recorr.mend<ttions as to the salaries of .A.ssistant Federal Reserve Agents should be submi ttcd at the sa....-ne time as the salary recommendations for bank employees.

Very truly yours,

J. C. lToell, Assistant Secretary.


ADDRESS OFFICIAL CORRESPONDENC,E TO THE FEDERAL RESERVE BOARD


WASHINGTON

X-4469

December 9, 1925.

SUBJECT: Code word to cover new issue of Certificates of Indebtedness, Series TD-1926, in telegraphic tra.J.sac tions.

Dear Sir:

In connection with telegraphic transactions in Government securities between Federal Reserve :Banks, the code word 11 Belongeth11 has been designated to cover the new issue of Treasury Certificates of Indebtedness dated December 15, 1925, Series TD-1926.

This word should be inserted in the Federal Reserve Telegraphic Code :Book, following the supplemental code word ":Belong", at the bottom of page 25.

Very truly yours,

J. C. l1oell, Assistant Secretary.

TO GOVERNORS OF ALL F .R.B.IUTICS.

279


':'he Governor,

TRE.i'i.S URY :!JEP "'\.FtT:.lRJ.'JT Office of the Secretary

WA5I.IINGTO.tJ

280 X-4471

December 7,1925.

Federal Reserve Board.

Sir: You are hereby advised that the Department has referred to the Disbursing

Clerk, Treasury Department, for payment, the account of the Bureau of Engraving and Printing for preparing Federal reserve notes during the period November 1 to November 30, 1925, ~nounting to $112,800.00, as follows:

Boston New York Cleveland Richmond Atlanta Chicago Minneapolis Kansas City Dallas San Francisco

The ct.argeli

Boston New York Cleveland Richmond Atlanta Chicago Minneapolis Ko.nsas City Dallas San Francisco

Federal Reserve Notes, Seri~~l91~

~j_ $10 $20 $50 Total

100,000 100,000 100,000

100,000 50,000

50,000

100,000 200,000 450,000 300,000 450,000 500,000 200,000 100,000

100,000 200,000 300,000 100,000 300,000 500,000 200,000 100,000 200,000 200,000

2,200,000 250,000 )50,000

_5 C LQ-,{;_(J __ _

2vv,UOO

200,000 ___ _,5_00' 000

50,000 3,000,000

3,0GG,OG0 sheets at $37.60 ~er M $112,300.00

a.gu.inst the severc.l Fedaral Reserve Banks are as follows:

Compens~= Plate Sheets tion Printing Ma. tori a.ls 'rota1

100,000 $1, no. uo $320.00 $1,170.00 $3,760.00 200,000 3,540.00 1,640.00 2,340.00 7,520.00 4)0,000 7 .. 965. 00 3,690.0:) 5,265.00 16,920.00 300,000 5,310.00 2,460. (;(; 3,510.00 11,280.00 450,000 7,965.00 3,690.00 5,265.00 16,920.00 500,000 3, 350.00 . 4,100.00 5, 3)0. 00 18,300.00 200,000 3,540.00 1,640.00 2,340,(;0 7,520.00 100,000 l, 770.00 320.00 1,170.00 3,760.00 200,000 3 ,540. 00 . 1, 640.00 2,)40.00 7,520.00 5uv,OOO 8,35_0.00 4,100.00 _22_§5Q_:_Q.Q__l3 ~00 ._gg

Total 3 , O<>v, 000 53,100.00 24,600.00 .35) 100.00 . 112,800.00

The Bureau apr)ropria.tions will be reimbursed in the ubova amount from the indefinite appropriation "Prepar.::..tion and Issue of Fed.erJJ. Reserve Notes, R'3-imbursable11, and it is ruq_uested thc.t your board ca.us0 sMh ir.defini ta appropriC~.tion to be reimbursed in like ::1Illou:nt.

Re sp3c tfully, S. R. J;;:.cobs_,

Dapu t y C orLwi s s ion3r .





WASHINGTON

X-·±472 December 15, 1925 •

• SUBJECT: Expense Main Line, Leased Wire System, November, 1925.

Dear Sir:

Enclosed herewith you will find two mimeograph statements, X-4•:172-a and X-~1,472-b, covering in detail operations of the main line, Leased Wire System, during the month of November, 1925.

Please credit the amount payable by your bank in tho general account, Treasurer, U.s., on your books, and issue C/D Form 1, National Banks, for account of 11 Salaries and Expenses, Federal Reserve Board, Special Fun~}1 , Leased Wire System, sending duplicate CJD to Federal Reserve :Board.

Yours very truly,

Fiscal .Agent.

(Enclosures)

TO GOVEfu~ORS OF .ALL BANKS EXC:EPT CHICAGO.

28_1


From

X-4472-n

REPORT SHOWING CLASSIFIC.t~TIO:tT .~-\ND NUUBER OF WORDS TRJJTSMITTED OVER UAr:; LINE OF 1'HE FEDERAL RESERVE LEASED WIRE SYSTEH FOR THE MONTH OF NOVZMEER, 1925.

Fed. Res. Ba:'lk Business

Per cent of Total Bank Business(*)

1"rcasury War De-pt. Finenco Corp.

Business Business

282

Total - ---- --- ~.- ~.~

Boston 26,390 Nc-.v York 135,870 Philadelphia 31,122 C1eve1o.i'1d 65,134 Richmond 39,364 i~tla.nta 54, <160 Chicngo 90,029 St. Louis 63,771 Minneapolis 33,991 Ka::1sas City 62' 557 Dallas 53,997 Sc.n Francisco 99,109

Total 755, 79•1

Board 248,663 Total 1, 004,"157

Percent of Total 94.2376

3.49 17.98

•1.12 8.62 5.21 7.20

11.91 8.4~1

~.50

8.28 7.H:

13.11

100.00%

2,508 3,964 2,520 2.220 1,902 2,253 ·1,572 2,670 1,037 2,693 1,086 4,411

31,836

29d?8 61,ll•:i:

r~ 7rzd/., ._.. "-"''/"'

-.

15

103

118

28,892 139,834

33. 64~; 67,354 41,26:3 56,713 9<1:, 61G 66.4•11 35,028 65,353 55,083

103,520

787,748

278,279 1,066,027

100%

( *) 'l'hoso }}erce:1tagos used in ca1C'.::.la tir"~ the pro rata share of loD.sed ·:riro o:x:pe:.:.scs as shown o~1 the occompo.nyi:1{; s ta temen t (X-4472-b)


Name of Ba.nk

Boston Hew York Philadelphia. Cleveland Ricllmond Atlanta. Chicago st. Louis Minnea.polia K!:'..ol1S.':l.S City Dallas San Francisco Federal Reserve Board

------ - - - - -Tctal

REPORT OF EXPENSE IviAIN LINE FEDERAL RESERVE LEASED WIRE SYST.E:l._. NOVEMBER, 1925·- · ..

Operator•' Operator•' Salariea Overtime

$ 250.00 $ 933·32 216.-66 280.33 212.50 225.0J

(#)3,742.17 20;) .. 00 183·34 275.64 251.00 380.00

------$7,149-96 $

Wire Rental

Total Expenael

$ 250.00 933·32 216.66 280.33 212.50 225.00

3,742.17 200.00 183-34 275.64 251.00 380.00

15,362.58

Pro Rata. Share of

To1&1 EJPenae•

$ 740.26 3,813.73

873.89 1,828.38 1,105.09 1,527.19 2,526 ·23 1,790.20

954.49 1, 756.27 1;514.46 2, 780.76

(&) Includes $204.67 for branch lino busL~aaa tra~smitted over main line circuit. (#) Includes salaries of Washington operators. (*) Credit

Payable to Federal Reeerve

Credita Board

i 250.00' $ 490.26 933.32 2,880.·41 216.66 657.23 280.33 1,548.05 212.50(&)1,097-26 225.00 1,302.19

3,742.17(*)1,215·94 200.08 1,590·20 133-34 771.15 275.64 1,480.63 251.00 l ,263~46 38C.CO 2,4o0.76

$7,149.96 $15,481.60 (b)l,215.94 $14,265.66

(a) Received $D.97 from War Finance Corp. and $1,290.62 from Treasury Dept. covering business for the month of November, 1925.

(b) .. \mount reimbursable to Chicago.


284 /

X-4475

STAT:Elrv::ENT FOR THE PR:;!';SS .

For I~~ediate Release Federal Reserve :So2rd .December 19, 1925.

The Board today appointed George DeCamp, of Pittsburgh,

as a Class 11 0 11 Director of the Federal Reserve Bank of Cleveland for

the unexpired term of D. C. Wills, deceased, and designated Mr. De-

C~ Federal Ros8rve Agent and Chairman of the Board of Directors

of t:1c Cleveland :Bank for the year 1926 • . _ .. ,....

Since 1918 Mr. DeCamp has been Manager of the Pittsburgh

Branch of the Federal Reserve Bank of Cleveland.





WASHINGTON

285

December 21, 1525.

SUBJECT: .A.SSESSMElfr FOR GE.I\f'Ji;RAL EXPENSES OF THE FEDEEAL RES;'RV:tG EOAHD, JMfUARY 1 TO J~E 30, 1926.

Dear Sir:

Confirming tel~fgraphic advice there is enclosed herewith copy of a resolution adopted. by the Federal ResGrve Board levying an assesBment upon the sovzral FGderal reserve banks of an ar.nount cqu::t.l to one,}lundrod two thous.:mdths of one per cent (.00102) of the tot~l paid in capital stock and surplus of such banks to defray th.J estimated gonGrd.l expensos of the Bo:J.rd from J~uary l to June 30, 1926.

Kindly daposi t one-half of the c>..rnount of your o.ssessInl:mt in the G:mera.l Account, Treasurer, U. S., on your books J . .nud.ry l, 1926, and ona-half M:...,rch 1, 1926, in each instance issuing a C jl) for credit of 11 83-L.,ries and Ex.:ponses, F3der;;1l Re~;c;rve Board, Speci:J.l Fund", ::ii.Ssessment for gun8ra.l expenses, and sending duplicc1ta C/D to the Fed.:;r.s.l Rcs.Jrve J30,Md, Also please furnish ~ statem0nt of your c~pitcl1 and surplus used as a b~sis for the assessment.

Very truly yours;

Enclosul·e.

(Sent to Chairman of ec1ch Fedor:..l RGS·3rve J3J.J.J..k). ,


..

X-l.!476-b

RESOLUTION LEVYING ASSESS1mNT

~ereas, und~r Section 10 of tho ~ct ~pprovod December 23; 1913) and known ~s the FedGr~l Resarvc Act, the Fodor.:-.1 ReaGrva Bol:l.rd is empowered. to lsvy semia.nnu;J.lly upon the FedGr""1 resorve banks in :proportion to thair c.l:pit.J.1 stock <md surplus an <J.ssessment sufficient to p:;;,y its ostilil.J.ted ox:pensos, incluling the sa.la.rias of its memburs, assist,.iJlts, attorneys, expurts ai"J.d employees for tho ha.lf-yea.r succ.).~d.ing thJ l-:Jvying of such c:.~.ssessmont, togathar with any ~eficit carried forw~rd from the prec.Jdine; h .... lf-ye:ill' i ~d

Viherea.s, it a.:p1~01J.rs from estimates submitted a.nd. considered th,:~.t it is il.3C3ss~ry t~t :.~. fund. equ(J,l to one hund.rod two thous.:;llld.ths of one :pr cent of the tot;i:i.l lJ.:lid.in capital stock Jl'l\1. sur:plus of the F13ior.:.~.l res•;;rv.J banks be cra;itod for th;; J..lur:poso hoNinbafore described, exclusive of the cost of 0n~,r J.Ving <And printing of Foder.:ll reserve

' notes; Now, thcreforo,

Be it rosolved, That pursuant to the authority vested in it by law, the Fod.Qr~l Rosarvc Board hereby levies .m a.ssesament U}On the saver . .l.l Federal reserve b.gnks of cim amount eq,~l to one hundred two thousmdtha of one per cent of the totul p;.~oi.;l-in Ci!.~i t, .• l ,;.ni surr~lus of such b..mka s.s of Dl;)cember 31, 1925, ·cilld thJ Fiscal Agemt of the Bo~rd is hereby authorized to collect from said b~ such .J.sse ssment and. execute, in the name of the ]o.l.rd., recai}:)ts for ~~ents ma.ia. Such aasessmonts will be collectod in two instal1ments of on~-~1! each; the first installment to be lJ· ... id on J-:.1nu-J.ry l, 1926, :md the s~cund ha.lf on Ma.rch l, 1926 •

286


...

X-4478 287 FZDERAL RESERVJ; :BOARD

J<~or Release in Morning Papers, Monclay, Dece!nl~r 28, 1925.

T:1e following is a su.t..:nary of general bu!: iness and financial conditions thro,Jghout tr~ several Federal Reserve Districts. based upon statistics for the months of Nove~ber·n~d December, as contained in the forthcoming issue of the Federal Reserve :Bulletin.

Production of basic co~~oditics in November continued in about the

same volume as the month before* and the general level of prices rerr..ained

unchanged. Activity of wholesale and retail trade was below the record

level of October, but larger than in November of last year.

}.='reduction.

Output of l:o.sic industries included in tl:e Federal Reserve :Board 1s in-

dex of production was at aeout the sarre rate in No7ember as in October, but

owing to a sm~llGr number of worki~g days tlm index declined by about 1 per

cent. Increases occurred in average daily p':'oduction of pig iron, steel

ingots, copper, and bitmrinous coal, a...'ld in t;he consumption of cotton, while

the :production of flour, sugar, and meat products declined. Automobile

production in Uovcmber was seasonally less than in Octeber, but continued

large for this time of the year. Employment and payrolls in manufacturing

industries showed s:na.ll increases in November as compared with October.

Employment ond worknon 1 s earnings increased in the rr..achinory indus tries,

while in food products and tobacco and in the clothing industry there were

seasonal declines. B1.lilding contracts awarded were smaller in November

than in October, but were large when compared with the volu1ne for November

of previous years.


...

•

-2- 288

Final estimateG by the Deparktent of Agriculture in 1925 indicate ttJ.8.t

the acree.ge of all crops harvested y;as slightly larger tban in 1924, but tlJat

the aggregate production of crops was in about the same volu.r:1e. Yields of

cotton, corn and tobacco wore considerably larger tha~ last year, while the

J?roduction of wheat, oats, potatoes, and hay was smaller.

Trade.

Sales in leading lines of wholesale trr.:.de shov:ed the usual decline in

Novenber from tho seasonally high levels in October, but continued larger

thou in the corresponding r:tonth of uny of tho past five years, Total volu.'!le

of trade at department stores and ma.i 1 crdor houses was sr.Ja.ller than in

October, ov1ing largely to the sr.1aller nm:1ber of business days in November.

Co0f>ared with earlier years, however, departnent store sales were the

largest on record for lTovenbcr and sales at nail order housos wore tho

largest for tl1at month in the past six years. Merchandise stocks at de

partment stores showed considerably more than the usual increase in No-

vember and were 4 per cent larger than in November of last year. Distri-

bution of comrnodi ties by railroads during November reached new high levels

for the month. Movements of merchandise and miscellaneous commodities,

coal, and coke were larger, while those of livestock, grain, and forest

products were somewhat smaller thru1 in November of the two preceding years.

Prices.

Wholesale prices, according to the index of tho Bureau of Labor

Statistics, remained the some in November as in October. Prices of live

stock, meats, and. cotton goods declined, but thorJe decreases were offaet

in the general averages by advances in the price of grains, fuel, lumber,


. ...

-1

..

...

•

-3- X-4478 289

a.nJ. r<lllber. In the first th:ree weeks of Dece:n-~~er prices of wheat, flour,

and hardwood lunber '<7ure slit"c1tly hi 1_:sl1.er t:1n.n :Ln Hovernber, while quotations

on cattlo, cotton, coke, canpGr, 1.r~d hides i7ero lorrer.

liank Credit.

At mer:1ber banks in leading cities the volume of credit outstanding G>n

De0efuber 9 was near tho high level roached early in 1Tovornbcr. Loans for

cornr.:ercial ar.rl Ggricultu:;:al pu::po::;es declined so::1errhat during the period,

and t~ero was also a decrease in t~~ banks 1 security holdings; continued

growth of loons on securities, however, was sufficient to offset those re

ductions and trJ.O total of lo~:ms and. invos trJon ts rcmt;.,ined practically un-

changed •

.At tho reserve bunks the seasonal dor.:JD.nd for ccin·ency and credit re

sulted in a.n increase of total bills and soc\lr:i. tiE.:s in De comber to the

highest level in nearly :i'our yenrs. This increase in reserve bank credit

in usa has been in tho fori:'\ of eli sconnts for :::lEJi.lbor banks, as the volume

of purchased bills held chru:tell but H ttlo between tho niddle of Noveo.ber

and the ;:1idJ.lo of Docer:.oor, and holdings of United States securities also

rern.a.inod conctant, except for a tcnporary increase connected with' Treasury

financing on December 15. Mone~r in circulation increased by $?1, 00'), 000

between Uover.J.ber 1 and Decm~ber 1 and the con tiuu.ed dernLmd for currency in

December was reflected. at the reserve banks both in increased Federal re

serve note circulation and in a decline in cash reserves.

Duri::.g tho latter P'Jit of November and the early part of December open

mnrket rntes on corn.rr1.ercial pepor and acceptances remained substantially

unchanged. Later in Docm:1ber increased dcmend for credit and currency,

lar{;el;;,r seasonal in character, was reflected in firmer money conditions.


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ADDRESS OFFICIAL CORRESPONDENC!t TO THE FEDERAL REliERVE BOARD


WASHINGTON

X-4480 December 24, 1925.

SUBJECT: Holidays during January, 1926.

Dear Sir:

On Friday, January :. 1926, New Year's Day, there will be no Gold Settlement Fund nor Federal Reserve Note Clearing, and the offices of the Federal Reserve Board will be closed •

The Federal Reserve Banks and Branches indicated below will also be closed in observance of holidays during Janu.c'1.ry:

Friday, January 8 New Orleans Anniversary of Battle of Ne\v Orleans

Tuesday,January 19 Richmond· Atlanta Birmingham· Nashville Jacksonville Memphis

.Anniversary of birthday of General Robert E. Lee

Please include yo~r credits of January 8th for New Orleans, and January 19th for Richmond, Atlanta and Memphis, in the Gold Fund Clearings of the following business days, and make no shipment of Riclli~ond or Atlanta Federal Reserve notes, to Head Office or to Washington, on January 19th.

Very truly yours,

TO GOVERNORS OF ALL F. R. BANKS

J. C. Noell, Ass~stant Secretary.

290


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FOREIGN BR.\NCHES OF Al\GRI CAN BANKING INSTI'I'UTIONS.

Bankera Trust Compa!_!;L__Ne\V York.~J. Ilranches: France: Paris

England: London

Equitable Trust Company, New York, N. Y. Branches: England: I,ondon

:France: Paris ~iexico : Me:)!i co City

ClJaBe National Bank, New Yor:.:, l'I_~. l3ranches: eu·ba: Habana

Panama: Paru:ma City Canal Zone: Cristobal

X-4481

Farmers Loan and Trust Compa~y, New York, N. Y. Farmers Loan and Trust Coa:rpany, Ltd. , London, England (two offices)

a British Company; all stock owned by Farmers Loan and Trust Company, New York, N. Y.

Representatives: Paris, France.

First National Bank, Boston, Mass.: Br&nches: Argentina: Buenos Aires

CubaF Habana.

Guaranty Trust Cenrpa.ny, New York, N. Y. Branches: England: London (three offices)

England: Liverpool Belgium: Antwerp Belgium: Brussels France: Paris France: Havre

National City Bank of New York, New York, N. Y. Branches: ~gentina: Buenos Aires

Rosario

Belgium:

Brazil:

Antwerp Brussels

Pernambuco Rio de Janiero Santos (Agency) Sao Paulo

Bayamo Caibarien Camaguey

2~J1


)

l'Tati,nc:J .. City Ba~12.-c of }.!ranches: Cuba:

Chile:

-2-

U e':.r ·r_QfS.L..::N;.c;e;.;.~':......:Y:...::o:.::r..::j:::.J,~l!:....:.c...-.:Y:....:.__,(....,c:.:::o;..:;n::..;t:....:i:;..:cn::.::u;:..:e:....:d"-'-) Ca:.:·d.cuas Ciego de .Avila Cie:1fuegos Florida Guan tanamo Manz~nillo Matanzas Santa Clara Habana (sub-brro1ches)

Belascoain Galiano C'J.::;, tro Caminos La Lonja

Moron Nuevitas Pinar del Rio Remedios Se.gua la Graade Sa.ncti S:9iri tus So.;.1. tiago Vertiel1tes Yaguajay

Sa.::..tia.go Val~;araiso

X-4481

Dominican Republic:

E:J.gland:

Fro.uce:

Italy:

Peru:

Barahona La Vega Puc;rto Plata S::u1 :C':caacisco de Macoris San Pedro de Macoris Santiago de Los Caballeros Santo Domingo City

Lo:1don

Paris

Genoa Milan

Lima

City Branch '\Vest-end branch

National City Bru1k (Frru1ce) S.A. (Subsidio.ry of National City Bru1k

of New York)

Porto Rico:So.n JU&~

2B2


•

-3-

1Tationa1 City :Ba:ak of New _Yort..,_New York, lL Y. CCo:1tL1ued) Branches: Uruguay: Montevideo

Venezuela: Caracas

X-4481

B]UUJCHES OF FOREIGN BANKING CORPORATIONS OPERATING UNDER AGREEMENT WITH THE FEDERAL RES:SRVB :BOARD.

Equitable Eastern Banking Corporation (subsidiary of Equitable Trust Company, New York, N. Y.): Branc:1es: China: Shanghai

Hongkong

International Banking Corporation, New York, N. Y.: Branches: China: Canton

Dairen Hankow F..arbin Hongkong Peking Shanghai Tientsin

England: London

India: Bomba7 Calcutta Rangoon (Burma)

Java: Batavia

Spain: Barcelona Madrid

Republic of Panar;a; Colon Panama

Japa"ll: Kobe Tokyo Yokohama Osaka

Philippine Islru1ds: Cebu Manila

Straits Settlements: Singapore

National City Bank (France) S. A. (subsidiary, in Paris, of Natio:1al City Bank of New York).

Federal Reserve Board, Ja..J.uary 1, 1926.

293


For Immediate release.

STATE!·,!:8NT FOR TH::!i PRESS FEDER.U. I'..ES:SRV3 BOAP..D

X-4482 December 30, 1925.

The Federal Reserve Board will hold a hearing on January 15, 1926, at which those interes~ed in the establishment of a branch of the Federal Reserve Bank of Rir.h~ond to serve the territory located in the southwestern portion of the Fifth Federal Reserve District will bo afforded an O?portunity to present orally and in writing their views as to the necessity for the establishment of such a bra..'lch, and at what city in said. terri tory such a branch should be established.

2B4


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WASHINGTON

X-4483

December 30, 1925.

SUBJEC'I': Practical In ter::pretation of terr.:1 11 1Ton-Perishable Readily Marketable Staple Agricultural Product'.

Dear Sir:

In its l':3tter X-~~94-8, dated ._Tanuarzr 21, 1.924, the :federal Reserve Boar:l di~C'lSS3cl. the pro:Jer intenwetc:tion of the term 11 non-:9erishable readily m:.:trlzeta1)le s ta.ple a:;ricul tural :9roduct11 ,

as useu in Section 1~5 of the :Fed.eral 2esr:rvo Act. I::1 that let-tt.:r the Bo.o~rd ex-;resse'l the )pir.ion t}lat FEderal ::.·eserve banks should not refuse to di.scount sight o:~.· dDma:iCi b:.n Oi~ lading cl.rafts merely be ca.'.1se tho 2{;rj cultural :produ.ct covered thereby is l10 longer in a tec}micall;/ l'.'lW state, cut ha:: ]:J.!:':SS8d through the initial ste.gos of rofinc;nont or processin~; subsequent to the actual harvosting. It wr.s stated, however, that ·che Board was not then :prepared to formulate a co;-:~prehensi ve definition of this broad term, but dee;,jeti it Et'J.visable to rule upon specific cases as the;,r should be preser, te::L

The Boer<l has now been requested to rule U':)On the question of whet!l8r canned corn should properly be considered a non-perishable readily marketable staple agricultursl product in accordance with the Board's letter X-3948. }3efore passing upon this question the :Board 7rishes to i1ave information as to the practic(J.l in t0)rpretiltii)n which ha::-, been given by tho Federal reserve ban~cs to the term 11 non-perisr1ablo readily m~rkotable staple agri-cultural :product11 • You are reque:-;ted t0 a,-fvise the Board what products y::mr bank }:as heretofore considere:l as agricultural and what pro duets it has declined to consid.er as agricultural in passing upon applications for the disc;:nmt of Sif:,:ht and demand drafts. ':'he Board particularly desires to lmow whether sight or demand J.rafts sec1Jred b;r canned products have been offered. to you for redisC)"lm t, and, if so, wh13.t action you have ta.kcn vvi th regard thereto.

Very truly yours,

'Nal ter 1. E:idy, Secretary.

TO GOVERl.\ORS OF ALL FEDERAL. RESt.::R.VE J3.A.NKS.

295


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WASHINGTON

X-4484

December 30, 1925.

SL~JECT: Eligibility for RediscolL~t of Notes of Corporation Representing Borrowings of Funds to be Advanced to Subsidiaries.

Dear Sir:

296

The Federal Reserve Board has recently had occasion to rule upon the eligibility for rediscount at a Federal reserve bank of notes of a parent corporation representing borrowings by the parent corporation of funds to be advanced to its own subsidiaries.

In the narticular case ~resented to the Board for a ruling it appeared t:::w.t formerly mo:nber banks took the notes of the subsidiaries with the endorsement of the parent corporation and that such notes were considered eligible for rediscou.~t at Federal reserve banks; but that recently the :Parent corporation had decided tba.t it would be better and simpler financing for it to borrow all funds to be used by it or its subsidiaries on its own notes and to make advances from such borrowings to its subsidiaries. Two of the Federal reserve banks, however, took tho :?osition that, i.L."l.dor tho regulatio:i.s of tho Federal Reserve Board, notes of the parent corporation given for funds borrowed for the purpose of IT..akiag advances to its o><n subsidiaries must be classed as 11 finance paper 11 which is ineligible for rediscount at Federal reserve ba'i.ks; a."'ld a member bank requested the Board to reco~sider the question with a view of ascertaining ;:hether a more liberal interpretation could be placed upon tl~t provision of its regulations which pertains to fina"'l.cc paper.

The -position taken by the Federal reserve bar.Jcs in this matter is in accordance ~ith a strict technical interpretation of that provision of the Board's reGulations which ~rovides trat in order for paper to be eligible for rediscount the proceeds of such paper must have been used 11 in the first instance" for an eligible purpose and that paper 11 the proceeds of whicn have been or are to be advanced or loaned to some other borrowerM is not eligible for rediscount. Upon further consideration of this question, however, the Board reached the conclusion that this is an unnecessarily strict interpretation of its regulations in cases of thi.s kind, and the :Soard Tilled that where a parent corporation owns a.t least 75 per cent of tho stock·of each of a number of subsidiary corporations the nO'"til:>S of ouch parent corporation the proceeds of which


'

297

-2- X-4484

have been adv~~ced or loaned to its subsidiary corporations will not be considered finan·co paper vvithin the moa.~irlg of tho Board 1 s regulations; provided that (1) tho parent corporation makes no adva~ces except to its own subsidiaries, (2) the subsidiaries borrow no money except from the parent corporation, and (3) the yrocceds of such advances have boon or are to be used by the subsidiary corporation for ru1 industrial, commercial, or agricultural purpose, within the meaning of the Federal Reserve Act and the Bo[~d 1 s regulations. It is understood, of course, that in order to be eligible for rediscount such paper must also comply in all other respects with the requirements of the law and the Board's regulations.

The Board has heretofore published several rulings to the effect that paper representing borrowings by one person, firm, or corporation of funds to be advanced to an independent person, firm, or corporation, is 11 finance paper11 a~J.d is therefore ineligible for rediscount; and this ruling is not intended as a reversal or qualification of those rulings. There is a clear distinction, however, between cases such as those covered in tho rulings above mentioned and the case here urcsontod; because, whore tho borrower is a parent corporation ond makes~ advances only to subsidiary corporations owned by it, the parent corporation a~d tho subsidiaries arc in practical effect one single organization a~d may with propriety be viewed as a single borrower.

Very truly yours,

D. R. CRISSINGER, Governor.

TO GOVERJ:.TORS AND FEDERAL RESERVE AGENTS OF ALL F. R. BANKS


..

2B8


WASHINGTON X-4485

ADD~ESS OFFICIAL CORRESPONDENCE TO

'THE FEDERAL RESERVE BOARD·

December 30, 1925.

..

SU:SJECT: Ratios of Capital Assets to ~~rrent Liatilities.

Deru· Sir:

At its meeting on December l, 1925, t~e Fe1eral Advisory Council at the Boardfs request gave consideration to the cause and probable effoct of the present trend towards lower ratios of capital assets to current liabilities in the ba..YJ.king ins t:i tutions of the country. Tho Council 1 s recommendation to the Board on this topic is as follows:

' 1 From the rne!:lora.ndum and chart furnished by the Federal Ro serve Board it is evident that tl-:ere has b oen a downward tendency in the proportion of capital funds of national banks to liabilities, and the chart would indicate that the ratio has reached its lowest point siilCe 1865. It would seem, therefore. proper for the Federal Reserve Board to draw attention of the Federal reserve banks to this trend 1 and through them, the attention of the clearing houses and member banks with a view to en-· couraging a close study of the question on their :Qart . 11

Accordingly, we are sending you h•Jrowi th a copy of the chart showing the trend of the ratio of capitAl to deposits since 1865 and a table giving the same inforination for two more recent dates by Federal reserve districts. This material is sent to you for your information and such diJtrihution as you may see fit to make among memoer banks or 0 ther banks.

Enclosure

'1'0 .ALL FEDERAL RESERVE AGE1rl£S.

Yours very truly,

Wal tc;r L. Eddy, Secretary •


• •

(COPY )

SOUTHERN PACIFIC COMPANY 65 Market Street

Son Francisco

X-4486

Wm. Sproule, Decemoer 24, 1925. President.

Honoraole C. S. Hamlin, Federal Reserve Board, United States Treasury Bldg., Washington, D. C.

2B9

~ Dear Mr. Hamlin:

... ..

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•

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I have yours of 11th instant and have not forgotten your desire for

a memorandum of the bank organization that would seem to be more effective

than the present •

My views are given with some reluctance lest they be deemed a pre-

sumption or mischievous.

Fact is the suggestions offered are of value only as they are con-

structive toward putting the Federal Reserve Board in such control of the batiks

as will cause them to function in their daily work upon policies suggested by

the. Federal Reserve Board, with local renresentation in carrying out the

policies effectively, which will give recognition to the Government's in-

terest in the not returns from each bank, requiring adoquato supervision of

the bank's operations. In this I do not refer to one bruik but to any Federal

Reserve Bank •

I think it better to put tho momoro.ndum in detached form, rmrkod -

11 Controlling Influences in Federal Reserve Ba-~ks. 11

Yours truly,

Encl (signed) Wm. Sproule

P.S.--I have been qQito free in expressing myself in tho memorandum as I understand it to be so desired, ffi1d confidential •

w .s.


•

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300 -2- X-4486

Controlling L1flu.::::"ces in Fed.eral Reserve :Ba"lks

A co:1trollbg i:1flue:1ce in a Federal Reserve :Ban.k: is either in

Washington or is local.

The IJa::.lap:cr of tho Bo.nk is aut to be selected by the local majority

in the directory of the :Bank, whose feelinG is apt to be that the local inter

ests in the area served by the Bank are best protected by strengthening the

Ma:i.1ager, who is elected by will of tho local r.aajori ty oven ':7hcn tho election

is unanimous. A Manager not agreeable to the local majority in its directory

could not be elected •

The r;fanager should be the Manager of the Bank in the conduct of its

daily transactions and general routL1e; but this is not the way it works.

He starts with the title of Governor, which is a misnomer. He is not a

Governor; nei thor is he a Managing Director. He is not a Director a"ld should

not be. His business should be to run the Bailk as an organization, under

the direction of the Board of Governors. The :Board of Governors are merely

given, for convenience, the more general title of :Board of Directors. The

Board of Governors should give its instructions to the Manager. The Manager

should be given these instructions through the Chairman of the Board of

Governors (i.e. Directors.)

1 Chai~~ of the Board and Federal Reserve Agent is the only of-

ficial of the Bank named in the statute. As such, his official fUnctions

are joint &1d continuous. He should not be expected to abdicate either of

• his joint functions at any time. His chairmanship should not cease when

...

the meeting of the Directors adjourns, any more than his fUnctions as Federal

Reserve .Agent cease vrho~1 the Directors have meeting.' The duties of the


•

• ...

30:1 -3- X-4486

Chairrna:'l of the Board of Directors and Federal Reserve J~ent are lodged in

one official to the end that he should be directed as to general policies

by the Federal Reserve Board ru1d so give direction to the policy of tl~

Board of Directors. As policies of management arise from time to time, which

warrant consideration in Washil~ton at the instance of the Bauk, the

questio:1s should be presented tl1rough the Chai1~~1 of the Board of Directors.

Recor:ni tion of this official by the Board as their direct and

resoonsible representative is imnort~~t. 1l1y procedure that tends to sub

merge him, or go past him in the transactions of the Federal Reserve Board

with the ba1~~. impairs his usefulness to the Board and does :1ot tend in tho •

..

•

..

direction of strengthening the Board. By virtue of his office he should be

Chairman of all commi tteos, ond vote h1 commi ttoe.

The Chairnuu1 of the Board and Federal Reserve ~\gent should be re

garded not only as the official representative of the Federal Reserve Board;

it should be known that he is also the direct adviser of the Board by virtue

of the joint office and its statutory Character. As your adviser, his calls

to Washington could well be separate and distinct from your calls upon the

Governor for conference with the latter. The calls upon the Governor by

the Federal Reserve.Board should be through the Statutory Officer, and it

could well be made optional with him as to whether he should go to

Washington for the same conference or not, unless your Board wishes him

specifically to go. When he so goes, the conference to be so handled tba. t

the Statutory Officerts official relationship to the Board is given the im

portm1ce of the position, without being in any way made offensive in the

• Governors. He should have precedence.


302

-4- X-4486

~ven matter of conmensation should be dealt with according to common

usage, which is in terms of salary. By virtue of his office yhe Statutory

Officer has to perform regular daily duties, maintaining and being responsible

for an organization with office and field forces. In business lifo, terms of

such responsibility are interpreted in terms of compensation. Alike to offi

cers and ewgloyos of tho Bank and of the Federal Reserve Jlgent, the senior

officer of highest responsibility is trult officer whoso compensation is the

greatest. With the lAanager of the B~~ getting $25,000 a year, for example,

the Statutory Officer should be paid not less than $30,000 as a mere raatter

of wholesome organization.

The Federal Reserve Board, of course, in matters of detail ca1n1ot

control the routine of the Ba1k1 s business, but can deal with discount rates,

open market operations, unusual credits given or ~reposed to be given by any

Reserve Ba1k to any of its member Bariks; also with policies under one-product

conditions which call for special consideration ond caution in granting or

withholding of credit, or other conditions of an abnormal character arising

from time to time. These are dealt with now in mixed fashion. The open

sho~ operations are under the Governor for instance, although such operations

belong to the realm of policy in which the voice of the Statutory Officer

might properly have weight. The givi~g of credits is in charge of 001 Exe

cutive Committee the Chair~n of which is tho Governor ~ho is not a Director.

It is true, as a further ex~)le, that ~~e Federal Reserve ~\gent is supposed

to be a check on the paper submitted for loans but this is in the nature of

a11 unpleasa.1t veto pouer, of which I understand he has been deprived by a

ruling that makes the Executive Committee's action final.

i Loan Committee might be created to consist of the Chairman,


ao3 -5- X-4486

Deputy Chainnan, a member of the Bank1 s Board representing the mujor Banks,

~~d one representing tho minor Bonks, each of these four members to vote.

This would give two Class C Directors a11d two of the Directors representing

member Bonks, so that all interests would be protected. There would seldom

be a tie, but a tie would have the effect of negative action. It should not

be too easy to tie up the reserve of the Bru1ks in doubtful cases. The losses

to the B8.l.J.ks through bad loans. might well be checked up for closer L1forffi3,tion.

There is no rule tr~t takes the place of consideration of question as to

whether member Banks 1 capital is unimpaired, value a:1d character of its

surplus, and the sounlli~ess of its m~1agement. True, in these three, Wash

ington's interest is general but it is not remote, because it runs not only

to-the returns derived by the Government from the Reserve Banks 1 operations,

- it nu1s finally to the soun~~ess of the member Bank in its relations to

the depositors the Reserve System is in part designed to protect.

The Manager of the Bank may sit ex officio as now with the Board of

Directors, without vote, to give them information they require. In like

manner and for same purpose, he could sit in the Loan Committee or in any

other com<nittee desirable.

In matters of poli~r. it may occur from time to time that there are

differences of opinion upon matters deemed material. This may occur even in

matters of appointments. The Federal Reserve ~oard could require that in

such cases whenever the Chairman of the Board and one or both of the Class

C members dissent from the vote of the majority, the subjects are to be sub

mitted to the Federal Reserve Board with statement of the vote and reasons

for or against, to the end that approval may be given or denied as advisable,

the ~1air1~"1. to decide uuon wisdom of such submission to Washington.


304 -6- X-4486

In su.rmnary, the "9resen t vrorking of Federal Reserve Bank organi

zation is centrifugal so to spea~:. The Federal Reserve Boord, on the con

trary, is interested in Reserve Ba11k organization that will have a centri

petal tendency, in preserving the proper relation and influence of Washington

within the councils of the Bank. This can still be done by the firm and

consistent attitude of Washington in support of the Chairman of the Board

and Federal Reserve Agent as a joint officer who functions in that duel of

ficial relation continuously and not intermittently. As such, Washington

looks to him to be the dominant factor in conserving the interests of

Government in the stability of the Federal Reserve Banks, and their function

ing as a system of Banks rather than as widely scattered banking units. The

Federal Reserve Board has to decide whether tho Manager of the Bank is the

dominant figure in the Board, or the Statutory Officer is to be that figure.

If the Manager is to be dominant, then the Chairman of the Board is merely

the person designated to preside when there is a Directors' oeeting, which

is the present drift. As to which it is to be, this is for Washington to

decide in order that the present unseemly uncertainties may be brought to

a conclusion, even though that conclusion be gradual once the policy is

fixed and consistently adhered to. Putting the moral influence of the

Board strongly behind the Statutory Officer in the Bank, will alone be a

start in the direction desired, and the councils of the Bank should gradually

be reorganized to fit.

No one Balli( serves for criterion. The Board might consider it

well to call into council three or more Directors of the broadest experience

from Class C in three or more Federal Reserve Banks, if Washington is not

satisfied with the present tre~d of Reserve Banks. The trend appears to be


...

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305 -7- X-4486

the localizing of tho Reserve Bonks in view of the Class C Directors being

in a ninority. With strong Cfr~irnen strongly supported by Washington, that

support gradually established, but pursuant to a fixed policy interpreted

by regulations issued from time to t~e, there should come without undue

friction a better recognition of the immediate interest of Government in

the conduct of the Bank, both as to policies and as to conservation of the

capital resources of the Bank and of its member Banks, that the reserves may

be put to their best uses ,e and providently •.

It· may be conceded tba t such a change would make the chairmanship

the d.ominan t place and the Manager of the Bank would run the nachine under

the dominating influence of the Statutory Officer. If the Federal Reserve

ba.11king system is to have the Fe:deral Reserve Board for its hub, i.t would

seem that this policy ~~ll become necessary, whatever nay be the 1~chinery

designed to carry it out •. Otherwise there seems to be little reason why

the Federal Reserve Board's influence in the Banks should be any more than

merely to enable the Directors of the Banks to get by without conflict with

the Federal Reserve Act.

The fact is that defects in the law leave undefined the fUnctions

of these officers and so cmllenge human nature. It is not fair to blaDe

r~n for conditions of conflict they have not created but of which they are

the victims• This will have to be corrected sooner or later.

San Francisco, Cal.,

December 24, 1925 •

~!. .... ·''





SUBJECT:

Dear Sir:

WASHINGTON

July 2, 1925. St. 4578.

Branches and Agencies of Federal Reserve Banks.

There are being forwarded to you today, under

separate cover, copies of a parr~hlet relating

to Branches and Agencies of Federal reserve banks, show-

ing their powers ano f'unctions and volume of business

handled, revised as of June 1925.

It is desired to keep the data on pages 1 to

S current at all times, and it is therefore requested

that the Board's attention be called to any alterations

or revisions that may become necessary due to changes

in the functions performed by branches of your bank,

if any.

Enclosures

Very truly yours,

E. L. Smead, Chief, Division of Bank Operations.

LETTER TO EACH FEI11i;RAJ_, RESEHVE AGENT.

a on


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Dear Sir:


WASHINGTON

August 15, 1925. St. 4623.

SUBJECT: Condition of Member banks as of June 30, 1925.

Fbr your inforrration there is enclosed herewith

a preliminary statement regarding the condition of all

member banks combined as of June 30, 1925. The Board's

abstract (No. 29) showing the detailed ~igures for

State bank and Trust cornpany members and the combined

figures for all member banks will be ready for dis-

tribution in the ne~r future.

Very truly yours,

Enclosure.


LETTER TO .ALL FEDER.AL RESERVE AGENTS.

307


308

CONDITION OF ME:4!BER BANKS AS OF JUNE 30, 1925.

Loans and investments of all :nerr.b~:- banks, as at each call date since September 14, 1923, reac.;1ed a new raco:::·cl trJtal ano on June 30, 1925 amounted to $29,702,525,000, or $418',000 1000 in excess of the April 6 total and $3,570,020,000 in excess of the maximum figure reported 0:1 a:1y call date during the early post war period of expansion. Loans ancl discounts including overdrafts aggregated $20,814,180,000, an increase of $424,000,000 since April 6; 1925, a~d of $1,550,000,000 since June 30, 1924. Increases in this item since April 6 were shown by all Federal reserve districts except St. Louis, Minnea"?o lis, Kansas City and Dallas. Investments in U. S. securities amounted to $3sS02,370,000, or $113,000,000 less than the amount reported on April 6, but an increase of $195,000,000 during the year. Holdings of other bonds, stoc:ks and securities amounted to $5,085,975,000, a growth of $107,000,000 since .April 6 and of $696,000,000 since June 30, 1924.

Total deposits aggregated $32,420,480,000, an increase of $1,194,000,000 since April 6 and of $2,891,000,000 since June 30, 1924. Of the increase during the year, which was participated in by all districts, $1,503,000,000 was in demand deposits, $1,178,000,000 in time deposits, $164,000,000 in amounts due to banks, and $49,000,000 in certified and cashiers• checks. The increase in deposits over the amount reported for April 6 is due in lar~ part to the usual midyear S\~11 in uncollected items for which depositors have received credit as is evidenced by the fact that items with the Federal reserve banks in process of collection, exchanges for clearing house ancl checks on other banks in the same place were $758,000,000 in excess of amounts reported on April 6. In the attached table are presented :figures reflecting the condition oi' state bankl · and trust company members and oi' all mamber banks on June 30, 1925.

The folloWing statement shows changes in the principal resources and liabilities oi' all member banka on the last call date as compared with figures for April 6, 1925, and June 30, 1924.

Loans and discounts (including overdrafts) United States securities Other bonds, stocks and securities

Total loans and investments Demand deposits (including certified and

cashiers• checks) Time deposits Goverm1ent deposita rue to banks and bankers Acceptances execured for customers Bills payable and rediscounts

Increase (+) or decrease (-) on June 30, 1925, since

April 6, 1925 June 30, 1924

+$424,000,000 ....:. 113,000,000 + 107,000,000 + 418,000,000

*+1,238~000,000 + 254;000 ,000 - 235,000,000

63,000$000 109,000,000

+ 18,000,000

+$1,550,000,000 -i- 195,000,000 -i- 696,000,000 +2,441,000,000

+1,552,000,000 +1, 178,000,000

2,000,000 + 164,000,000 -i- 89,000,000 + 215,000,000

*Demand deposits, less exchanges for the clearing house, items \vith the Federal reserve banks in process oi' collection and checks on other banks in the sarne place, increased only $480,000,000.


. •

...

309

RESOURCES .AND LIABILITIES OF STATE BANK AND TRUST COMPANY · MEMBERS AND OF ALL MEMBER BANKS ON JUNE 30, 1925.

Loans and discounts (including overdra.:ft s)

U. ·s. securitiae Other bonds,-stocks and securities

Total loans and investments

Cash in vault Reserve with F. R. Banks Items with Federal Reserve Banks in

process of" collection Due from banks and bankers Exchanges for clearing house, and

Checks on other banks in same place All other resources

'f.)tal l"esources

.Dernund dapcsits Time deposits. U. s. deposita Certified and cashiers' checks

Total deposits (other than bank~-

Due to banks and bankers Bills payable and rediscounts Acceptances Capital stock paio in Surplus All other liabilities

.All member banks

$20,814,180,000 3,802,370,000 5,085,975,000

29,702,525,000

. 52}f, 3?0 ,ooo 2,190,991,000

67? ,;;56,ooo 2,017,445,000

1,882,317JOOO 2,112,071,000

39,105,025 ,ooo

16,811,751,000 10,381,486,000

176,653,000 1,032,804,000 - . ·-·-· 2~.~2 ,_§9.~.QqQ 4,017 ,."[86 ,000

717,701 J 000 l.!o7,815,000

2,085,732,000 1, 750,815 poo 1,722,482,000

State b enk and trust company members

$8' 134,714,000 1,268,604,000 1,894,119,000

11,297,437,000

165,622,000 864,127,000

208,569,000 518,994,000

813,527,000 897,918,000

14,766,194,000

6,386,479,000 4,458,510,000

70,396,000 472,683,000

11, 388 '068 J 000.

1,132,579,000 238 '720,000 226,465,000 717,097,000 6 32 ,597,000 430,668,000

(st. 4623)

· ..



THE: FEDERAL RESERVE BOARD

Dea:r Si:r:


WASHINGTON Septambe:r 15, 1925. St. 4645.

The Board is <'lesi:rous of obtaining information showing the number of member banka which rns.y be classed as continuous bc:r:rcwe:rs, that is, banks which have not at some time during the past year liquidatecl all their in:'lebtedness to the Fe<'!e:ral :rose:rve bank. It will be app:repiatecl, t:be:refo:re, if you will furnish '~S at rour e9.:rly convenience with a statement listing by name each :nerdJe:r bank in ;your clist:rict v;hich v:as continuo·:::.sly indebted to your bank from September 1, 192!.~, to August 31, 1925. This statement shoulcl inclu<'l e all banks that have been continuous bor:rowe:rs rega:r,-'llcss of whether o:r not their bo:r:rowi:r.gs wG:re in excess of o:r less than their capital a111,'l surplus.

In submitting this :repc:rt, it Will be appreciated if you will present ti.1e info-ryr;ation in a form !'l imilar to that inclicat eel in the atte.chsd statement St. 4645a, which calls fo:r information E.s follows:

l. Date on which er~ch continuous bor-r-ov:er was laat out of debt to the :res e:rve bank.

2.

3·

4.

5·

PT"act ice of bar.ks as :rega:rds cor1·espondent banks.

Capital anc'i surplus on June

Eo.,..,. owings from Res e:rve bank

Net d srranc1 .::.nc1 t irne c'l epos its

borrowing from

30, l~C5.

on Aug·us t 31, 1925.

on August 31, 1925.

6. Maximum and rr.inimu.m bor:rcwings from Rese:rve bank CltJ.ring each calenoa:r. year of the period in which the bank has been a continuous borrower, with dates.

7. Net ds~nd and time. clepos its on elates of maximum anc1 minimum borrowings as call eel fo:r. in item 6.

Ve:ry truly you:rs,

...

LETTER TO ALL FEDERAL RJi.SERVE AGEJ.ilTS.

Walter I .. Ecl<'ly, Secretary.


MEt•>IBEB BANKS BC'RPOWING r.:ON'J'HWO~ST·Y FROM Tlffi FNJE'P.AL RESERVE BANK DUBIN'G THE TWELVE MOllTBS ElDING AUGUST 31, 192).

Name an.'! Location pf b£n~' _[ _____ _

Ras been continuous bor~ower from F. B. ba~ since

Makes a pract. ice of ·corrowing f:rom o:.ha:" ba~~3 (ans. Yes or Nc.)

Ga·.-Jite.l an(i au:rp!.us - June 30, l'::l25 Bcr.·c.v::.n;;;s - l·r::;"L:3t 31, 1925 Lep0::1 its - Au.glliii t 31, 1925

Ct::.l c:r:·.~ t::~:r y 3E~:r l92t) - r:Iw::::.r:~J.ln bo·,·rowJng:o *

Depr:·s ~. ts or. <;!.l JJ''j c1 ate ill t·~i:~·l: .. _~;i b o:r~¥c~vi :~.6S * Deposits on same 0ate

192!+ - IL.1..Xir::u.;1 bv:r;·o·,vi.nge* Dep or i ~. s on !'lr. .. r:;e 6 ate ~::;.1::_·:-:~ bo·:.•:r:Vi~Ir.g:-: * Daposi·.;s on san,e cia.te

NOTE: Figu.res of r.n£.v.i m.1m ancl mini.m,:un bor,:ro'VI:ir.~s (:red isc01.1:nt.s an(l bills p2.yable) anc'l the dates. thc,reof anc1 of ne-t Cl amQ.r"0 a:il t it:"l 0 ::.;o:: its fo:::- tLe snc1 (1c.t·.?s sh::ml0 be s':own fc:r each ye,a:r of the periocl clurL1g v:hicn b&.nk hr;.s bean a continuous bon·ower.

* Date of anc1 amount •

(~t. 4645a) Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis




WASHINGTON

September 21, 1925. "'t 45C..l y • ' v •

SUBJECT: Bank Suspensions and Insolvencies.

Dear Sir:

In continuation o:f the list o:f banks S'lspended or declared insolvent up to July 31, 1925, which was sent to you vd th t!le Board's letter X-44o9 of Augu.st 25, 19~~5, there is enclosed herewith a list o:f m'3mber ano nonmember banks reported to the Board as having suspended operations clu.ring the mor: th of .c\ugust, and o:fbanks previously closed which resumed business during the same month. The statement also incl•Jdes any banks whi~h closed or reopened prior to August cut w:h.i.ch were not reported to the B~ard in time to be included in the list sent to you on .August 25.

It will be appreciated if you will kindly check the data pertaining to your district against your records and advise the Board on or before September 26, by telegraph if necessary, whether or not any corrections or additions are necessary in the list, in order that correct data may be publiohed in the Federal Reserve Bulletin.

Very truly yours,

Enclosure.

TO ALL FEDERAL RESERVE AGE1~S.

Walter :r;... Eddy, Secratary,


CONFIDEN'T LA.L" Not for publication

II •

BANKS CLOSED OR SUSPENDED DURING AUGUST, 1925 (Including 'banks suspended before August 1925 but not previously reported to the

Federal Reserve Board)

F. R. district nur1ber

6 8 8 8 9 9 9 9

10 10 10 10 10 10 10 11

1 6 8 9

10 10 ll

Date Name and location of bank closed Capital

Orrville Bank & Trus~ Co .. , Orrville , .Ala. " 8-27-25 $25,000 :Wgan State Bank, Logan, Ill. 8-27-25 15,000 Bank of Battlefield, :Battlefield, Mo. 8-12--25 10,000 Wayne County Bank1 Greenville, Mo. 8-12-·25 12,500 Fanners State Bank, Mavis, Minn. 8-10-25 10,000 Farmers State Bank, Jasper, Minn. 8-15-25 30,000 First National Bank, Lake Park, Minn. 8-24-25 25JOOO Fanners & Merchants :Bank, Aneta., N. Dak. 8-13-25 15,000 First State Bank, Cheraw, Colorado 8-24-25 20,000 Scranton State Bank, Scranton, Kansas 8- 5-25 10,000 Cedar State Bank, Cedar, Kansas 8-19-25 10,000 First National Bank, Walters, Okla. 8- 3-25 50,000 Peoples Bank & ,Trust Co., Las Vegas, N. Mexico 8-·21-25 100,000 Las Vegas State Bank., Las Vegas, N. Mexico 8-21-25 25,000 Bank of Roy, Roy, New Mexico 8-31-25 30,000 Bank of Scotland, Scotland, Texas 8-19-25 10,0()0

BANKS CLOSED PRIOR TO AUGUST 1925, BUT NOT PREVIOUSLY REPORTED:

Peoples Trust Company, Lebanon, New Hampshire .Allen Bank & Trust Co., Oakdale, La. Farmers Bank, Big Sandy, Tennessee First State Bank, leonard, Minn. .Angora State Bank, Angora., Nebraska Fanners State Bank, Adams, Nebraska First State Bank, Trinity, Texas

•

1-13-25 50,000 7- 9-25 50,000 7-21-25 12,000 7-31-25 10,000 3-30-25 25,000 6-17-25 25,000 7-25-25 50,000

Member Surplus or non-

merr1ber

$30,26o Merriber 3,500 Non-merriber 2,800 " 3,370 11

2,220. " 14,050 n

5,000 Member 5,000 Non-member 5,000 11

12,000 11

1,000 " 10,000 Member

100,226 Non-member 1,100 fl

2,000 " 3,000 "

55,000 11

tf

1,000 II

3,000 " II

7,000 II

24,000 "

St. 4661.

:,.:) ~ ~


C 0 N F I D E N T I A L Not for publication .. SUSPENDED E.A11KS REOP1!.1-:'"ED DURING AUGUST 1925 .

F. R. district Name and location of bank : Date

number closed

4 Vanlue Banking Co., Vanlue, Ohio 7-29-25 7 Otisville State :Bank, Otisville, Mich. 7-23-25 9 Fanners State Eanlt, Mantador, N. Dakota 11-19-24 9 Fam1ers & Mercha.."lts State 13a.nk, Eagle Rivei', Wis. 7-8- 25

. ,

Date Member re- or non-

o:p~nad member

S--18-25 Non-member S-3-25 " S-17-25 n

S-10-25 "

st.li661.





WASHINGTON

Oct'Jber 1, 1325. St.4o7G.

SUBJECT: Revision of Weekly Federal Ruserva Bank Press StCt.te:n,ent.

Dear Sir:

In oroer to shew se:;arately the amount of balances held abroac1 and the amounts due to foreign corresponoents, t1Je Boarc1' s v:eekly statement showing the condition of Fec1eral reserve banks will be revised, effective October 7, 1325, to show two new i terns, "Due from foreign ba.'1k2 11 on the resource side, and nForeign bank" under the heacling 11 Deposits 11 on the liability side. At the s:JrLe time, the caption 11 All other earning assets,n which comprises Feoeral Intennec1iate Crelli t Bank c'lebentures a:rH1 municipal warr<mts, will be changed to "Other S'3curities, 11 and the caption "Totc-cl earning assets" to "Total bills and securities. 11

The analysis ac~orr:panyir.g the Board 1 s ~'feel::ly statement for October 7 will contain the i'ollowing corrnJent regarding the changes:

"Beginning this week two new items have been adc1ec1 to the statement in order to show separately the amount o-P balances held abroac'l ar..c1 emounts d'..:;.e to foreign correspondents. In addition, the cartion'All other earning assets, 1 now made up of Federal Intermediate Creel it Bank clel;entures, has been changed to 'Other securities,' an~ the captio~ 'Total earning a c:.set s 1 to 1 Total bills and securities. 1 The latter tenn h~s bee~ adoptec1 as a more g,ccurate Clescri:ption of the total o:f tl:e C:iscounts, acce'::'ta:nces 3..Ylcl seC'.lrities ac~uired ~"lder the ~rovisicns of sections 13 and 14 of the F'ecl9r<:'<l Rsserv2- Aet, which ar2 the only items include j there in, 11

A copy o-f revi ;:;Gd form St. 231, showing the :form of the new statement and giving the code words which will be useo 1n the weekly CONI! telegra'l'J sent by the Board to Fed2ral reserve agents, is attached hereto. There is also enclosed a stato;ment showing for all Federal reserve banks con,binecJ, the amounts of


- 2 -

"Due from foreign banks 11 and 11 Foreigr. bank" deposits, together with revised figQres of "All oti.1er resources" and "Other deposits," for each weekly statement elate from October 8, 1924 to Septerriber 30, 1925, in order that you may have the data available for publication in the consolidated statement, if one is preparad for local release by your bank.

It is raquest·3d that tha weel.{.ly statements issued 'by your ban~ be chang8d to confomJ to the revised forn1 adopted by the Boarcl.

Very truly yours,

Enclosures.

TO ALL FEDERAL RESERVE AGE1,!TS.

Walter 1. Eddy, Secretary.





WASHINGTON

Oc'~obor 5, 1925. St, 4671.

Su:BJECT: Comparativa statarnents o:f Esrnings end E:..::rensn ~ 1914-1924.

Dear Sir;

The statements showing flarnings, current expenses,

profit and loss account and reimbursable Fiscal Agency ex-

penses o:f the Federal reserve banks :for the period since

their orgardzation, copies o:f which were ori;ginally sent to

the Federal reserve b::mks :for checking with the Board 1 s

letter St, 4119 o:f J~~e 24, 1924, have now been corr~letaly

reconciled. The number o:f copies o:f these statemants re-

que steel by your bank are being :forwarded to you today under

separate cover.

Very truly yours,

E, L. Sme a a, Chief', Divis ion of' Bank Operation~.

LETTER TO GoVERNORS OF .ALL FEDEEAl~ RGSEHV::£ B.ANYS. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

.. FEDERAL RESERVE BOARD

WASHINGTON Cctcl'Dl .. 6 ~ 192~).

St. 4672 ADDRESS OFFICIAL CORRESPONDENCE TO

THE FEDERAL RESERVE soARD StJSJECIJ.': F'.L.'1ct ic~1al :S:-:;t:Or. so ReT ::Jrt s.

D3ar Sir:

.?rom tir-u:: to ti;y; in recen"~ rr.:.:r.t::s ::_nfcra.:t} TLf:_]:_,s':;ic1s :1a\'3 t3en rr.-a.J ·3 ·by- ~tar~ c us b;3_.nk cf·ficia.l s re gs_r -~ii Y'!.:j t .d.e q1; 9..l"t. s .;._..l;f :-~~1ct i.o::.c.1l :; XJ ar1 se re:;or""s, f'o::"m :S, ~,n,~ in orJer tl::r::; tne -.vb:He ql:es+i.:n ::,:'::~1" cs thcr'')t-g~'lly

C.OL.siJer0d the Bo:..trd recentl:;- deci6?-d to ap~~-,:Jir:t u. cc:Y~nj:ttce c:f.' rs-;_J:";SS(Jnta

ti-v""83 cf t"he !1ac;_r·o:.-- ·oe..r~r~s t-~ lr.::-.·?t v."i"~.}~rne:r;b~Srs 0-f t~s 13,.:...a.r~~:'s st.:1.:f'f tore-'riev.·· tLs .i\.n1ctic:1al e::,ens--3 r3ror~-s 2r1d to rr~~r:e sue~ r-.~cc:-~.::~ .. e:Ida.ticn-3 in r-s f~ ... r '1 t ~sr-? to t:..s it L·~i ('(:-:t see fit. jr:1i s c.c:~n: it te 3 rr~·J t :1.t ~he: :-::c arC i s OI~lc-:·s ~n Scpte·:r~oer 2.3 an~ 23, -8-rid o..:ftar ca.r.J=flllJ';t· re-.,:i,:::.~:ir~g ti1:3 r2J.<::rts crnJ tT:J:- :. ... es·-.-~lt·.::.; a.-:.:co~-rrplist-30 ti1rc:>uc:t t~1~r. it r,~ac:r~ed tDe ur:a:..'l~uic.r'J.S ccn-clc:.sion ;;Y,a~ t::.c ::·c--pJrt;; s::1o1.::.l<'l 'Je ~oLtiLued in a:_:-::;rcxi:,at lv th::ir rr3se::1t :f:)IL~ b1.~ t t.l1a t t t.e .'l c Jl~.l d 1J e ?;o~·E.\V~.s t f~ i -~-; 1 i:f it:; ,1 ru~ c~ re ~-~-Ll..C8 .. -j in. size , e..:: so t~1at ec;_2allv gocd r::s:.c.lt: CC'c:lr1 'o3 o·bt9inec1 b;.· s·:lm,ittil~£ ,~1~'8L sc;ri-armuall_y insteG.c1 o:· ·T~art,'3r~~·,:.

enclo ::;ed, hs,s he en a-:c;>,~~::>c<'E:Jd c'.r girlllirlg 1:ext ;l'Jar "v\·i:_l 31lcrt2.:l Fe ~:e ral res,:; rv·:; 1'- 'ink,

J~l1e corr~~·;J_t'...;ee'::: ~e-p-:~rt, 2. cC~);-T o::.L ... 'N!1ic~1. is t.~AJ.· . .:~ So:-r~..i, ;_~.no re -,,...i sJ :_"i fcr~Ds _S for ~J.ss bct~-3 rrj_r_td~ 8.rj [:._ S'lJ!,;:~J:v fur!:.is'!-1ed tv 6ac1.i.

The eho.~e:~-cs in forr.:· :E: recol:.:·~;en3e,~ b:y t.i1~~ d-""'r:::r:itt~~;:; 3Jj.Cl .:.1r·':::ccv~r lJ:t tr1e Bo.s.r.~ cor .. sist r.:.rir-~ci;:.·all~/ cf.' tl~e eo::1so:id::t"tiJr1 ir1tn c·:1L-:: i""Ge~li cf the pr!?sent t.l-~~~5--fcJ..:-1 clas~lTice.tic.n of errlT::lo;·_-,-:-~es! 3a.l.J-ri~s, i.?., a.£:Sif:nsd st:lf'f, eL:ploye·?s loa>J.eci or 0orrc'>vec1 (Dr. o,~ G:·.), an" ::xtl"D. help; the acnso :_ide.. t ion ·Jf tr in t i:1 s .·mG st 3.1: i or1G r_y ·.vi t h c. tnt~ r 211p:·l. i~" s, an~-.1 o:{=" t .:,; le~!iotle with telecr::.rh; a1cl the elir i:",;1tion ryf scps,rat-' :i:ig-t"C'3·~ fo:r· c~::rt::1in i t·"nns cf ex_oer .. sE: ·v~it:erevc;:r tt.~ c~L.OLcrl~~~ involve-1 arG rt::-1-::t-~iV;::ly· s·:T:J..ll, ~f\~;r ;~Xa:~~pl:J

c:1 tb.e :1e<..v fern~ t-h0 itGrcs of ·pcstl?2, sten'lgr:-.:.};_,·f:i~:~, ~-;t,:_:;:;::...i._;~t.irJ.f, r:-y~;;rti.n:e

an, ~Ptpp3 r rr~cn·3J'"', \i'i 1: i~:--~ prac t icL~~ll~l all ~s.s __ : s l)e i :~c l u6 _j d \Vi t !.1 "All ot:-~er e:;x:,;sr-Jc:: s. 11 il:c:r.:- will, ~J.C'YJV3l", oe no cha:1gEO ire tL.3 to ca.l a.noLnt. of 8X})6D:.;es reporte0 i~cr a·:1:r 9Xf'3!1£,-=:; 'C.YlJ.t, Z:.rJ.d t.c.r3 =fi[.~..lr-;:;,a \A;i}l tt .. c;rc~for~ ·te

co:; . .rar2ble with t21osa r3ncrt8:1 at :r::re:.ent,

Enclost:.re ..

IEr'11ER TO CHAIB',:!AN OF LAGl; FEDE2AL .R!L.IFR7B B,.,N-~

Vva: t<J r L. E:'l c)y 4

Se ._;ret .. r .'.~,

CO?I:E;S TO GOVERNCRS ME 'IG c::ilT:::.;,.lKT C;? P~1)C~~DL:,F :X:;;v::aT~EES Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

t ..

REPORT TO FE.DERAIJ RESF.:LVE BOLFC 0!.' s-c.:::cLiL CO!vll.iiT='EE o:ncE:::tNING :E1TNGTIGNXL ~'=·~p·:ns:~ FE;:·O£i..t'f!.

At the request o::? tl1P 7ec'le!''.1.l Roserve Boa::--cl th-3 following met in Washington

September 25 an<'! 2g, 1925 as a special cOimnit.tae to consider what changes if <:m"Jr

\Vould Ce desira.ble in Forrn ~' Fu,.~.Jtiong,l ex:-r_·:er1se r""'nor.f.· c,;, v.

Mr. ~.1r.

Mr. J,!r, &·ir.·

E. M. J. w. 1.

L. Smead and Mr. J. F. Herson ni.~:ressnting ths Fflderal Reserve Boaro J. Fleming of CleveJanC! S. Walden cf Ricbmon0 G. McCreac1y of Phi1adslp~ia R, Rour:cls of Ne•.v Y.Jrk

A:::'ter a lengthy discussion of t:-ne value and usa o.f the Fonr1 E functional

expense reports a:1c'l of the exhibit prepared by the :fl() clers.l B.eser-;re Bo arcl q_uarter-

ly it was the opinion of the con .. '1;ittee: that w'nib such reports and G:x:hi'bi·lis are

of doubtful vah ... a as a basis fJr comparing expen.acs ar ... d o_?arating efficiency at

the S•3Veral ba.'1.ks, it was nevertheless i'el t by all present th<:-:.t these reports

have made a valuable contribution. to th8 progran.; :for greater economy a..'lcl ef'fici-

ency in the operation of the banks and it was tl:J view that the reports should bo

continued. In this connection it was recognized that the repcrt3 give valuable

inf'orma.tion with respect to th2 C()St of op0rating the variovs functions and

services conducted by the Federal Reserve S~rstsrr; en~iroly a:p.:1rt i·rmn any vr.clue

they r:;s,y have as a basis for the corrrpe,rison o:f 3xren:ss by th? bcm.ic:l. It waa

felt, however, that the report !'I could be son.ewhat sin,pl:ifiud .:m c1 recJuc0cl in <;iZ;e.

Tha committee mac.'le n. detailed stuc'l~r o:£' tl1e report, considering each 1rr.it

separately, with a view to eliminating a nur:b • .;r of '.;he c'le t-:dlf•d it0r::s of' expenses

wher'2l the ~r:ounts alloc::tteo ware small. It also recorrm.t..:ndecl the consolidation

of a few units with a view to rech:cing the nurriber c::' s:1cl:". ur.its. Such changes as

have bean me.Cle will not require cha.nges in tho rr:mu::tl of' instru.ctions ancl will

not affect the comparison of the figures o:f futur,:;: psricos with those past.

s-~. 4672


• •

2

de :finite recornn.snoa t ions,

1. That t~e :-ep0rt hertS2.fter oe I rerared sem.i-a..'1nually instead

of quarterly,

2. That in preparine; tl:e exhibit o£' tl1esJ reports tte section at

ths fcot ot' each p3ge in which it nes been t:::e practice to

show the :f:igu.res of ear:-.h head office ovmbinecJ with its branches

"he eliminate c1 as it was f:l t th::1t these filjclre s W9rc o:f srr:al1

vah1e corr:pe.rJcl '.vith the work involv8ci in thair pra:'")aration,

It wes 8.lsc suggested that occasionally tLere be sc;.bmittec'l as a s'J.py.>le-

mer.tal report a mer<:~ c'letaLlecl st:.1,teL:ent 1::1 comr;arable f'orm of the SY.penses

of some ono unit or 1i.:nctior:. ir.. whicr~ cc:r,,·r:::rative figures should be of value.

E L •. S:r:eari J, "' .L. Herson :vi. J. Flcrr:i r.g W. G. McCreoc1y

t. R. Rounc1s

J. c Walc1en, Jr' "-'•

Corrn:i ttee,

St. l-/672.



WASHINGTON



rsar Sir:

October 3, 192~. St,4674.

SUBJECT: Form 33, Classification of Discou...YJ.tsd and Furche.sed Bills.

Beginning with the Novem-ber issue, the Bulletin tal1le

shewing holdings of earning assets (page 693 in th-=o Septen:ber

Bulletin) will be revised to sho-N holding:_; o:: "Bills payable

in foreign currencies" ssparatsly fron; "Bills pa;pible in c1olLars. 11

It is therefore reauestcd that 0-:-1 :futu-re reports on f'orm 38 itew

"'llot<tl bills boug·nt" be ranurrJ::er-:;d 13, and that thG i terr. 1113-ills

:r:;a.;raols in f'oreign :;t..lrren~issn te sl1c-JVn as No. 12.

It is also req...._,ested th<:,t thG Board be advised o:f the

aiC10un t of such b il J s, if an~r 1 r.al c1 ·b~r your b iillk at the close of

business S~pterrib<H j0.

'?0 GOVEBNDRS OF .ALL EJER.AL RFS;_RV.G 3 'J.{'\0

Walter L. Ec1c1y, Secretary.





Sul3JECT:

Dear Sir:

WASHINGTON

October 12, 1925. St. 4686.

Forms for use 0 uring 1926.

It will be apprecic.tec'l if you will kinoly ac1vise the Boaro at yo'-lr early conv-enience the number of copies of the forms listect below that will be requiracl by you:r bank (incluc'iing branches, if any) c1ur-ing the calenclar yea:r 1926:

Form Number

F. R. A.-5

E

33

95

96

97

97a

170

171

Title ______________________ __

Daily balance sheet. Please state the number req'..li roo fo:r the heM offica anii each branch separately ancl also give any special punching that may be c'lesi:rect.

Daily statement of Fe~eral reser.va agent.

Serni-arnual functional expense report.

Classification of cHecountect ani purchasec1 bills helcl at the enc1 of the month.

Monthly repo,.t of earninga.

Monthly report of cu~rent expenses.

Monthly :report of income ani expense -Oth2r real estate.

Monthly :report of reimb~rsable Fiscal Agency expencl. itures.

Monthly report of clearing op0,.1!i.ticns

Monthly report of average c1aily hole' ings of earning asset a, earnir.g s there en, and an.'1ual :rat_es of. earnirJ.gs.

V :;:ry t:ruly yc·:.1.rs,

E. I,. Srr.ecil, Chief, Division of Ba:ik Op,:;rations.

LETTER TC AI,L FEDERAL RESEPVE AGENTS. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis



FEDERAL. RESERVE BOARD

WASHINGTON

October 14, 1925. St. 4667.

SUBJECT: Reports of Condition of State J3 ,-,n1{ and Trust Companies.

Dear Sir:

It will be greatly appraciatec'l if in ~ccoro<mce with your usur:tl practice ~rou will kindly furnish the Federal Reserve Board, as soon .:~s available, with a copy of the abstract of reports of condition of state ·banks liDO trust companies in your state on Scpterr:ber 2~, 1925, or other recent date in oase you did not issue a c'lll for reports of condition as of Septenjber 23,

In su"brni tting the above mentioned data it is req_uested that the number of bsnks be st".l.ted and th3.t separate figures be furnished :for mutual savings banks provioing there a.ra any such banks operating in your atate, also that the figures ·be segregated by Fedsr.::..l res0rve districts,

A franked and self-adoressed envelore, raq_uiring no postage, is enclosed for usa in transmitjjing the data req_uested,

Enclosure.

Vary truly yours,

J. C. Uoell, Assistant Secretary,





Dear Sir:

WASHINGTON

October 14, 1925. st. 46ss.

SUBJEC:T: Rer.orts of C:onclition of State Ba~$s an0 Trust CoruFanies.

It wi 11 be greatly appreciated if in accorc1ance with your usual practice you will kincny furnish the Federal Reserve Boarcl, as scon as available, with a copy of the abstract of :reports of conclition of state banks ancl trust companies in your state on September 28, 1925, or other recent elate in case you clio not issue a call for repo:rts of concl it ion as of Sep ternbe:r 28.

In submitting the above rnentionecl data it is requestacl that the nurnbe:r of banks be statec1 ancl that separate figures be fu:rnishad for rrutual savings banks T·rovicl ing there a:re aey such banks ~erating in your state.

A frar~ec1 ancl self-aclclressed envelope, requiring no postage, is enclosei1 fo:r use in transmitting the clata requesteri.

Encl osu:re.

Very truly y au rs,

J. C. Neall, Assistant Secretary.





WASHINGTON

Octcb~r 21, 1925. St. 4695·

SU3JECT: Bilnk SuspEmsicns ~-:cnc1 I"lsolvencias.

Del.r Sir:

In continuntion of the 1 ist of bc'!.'1ks suspenr1 eel or cl ecla.rec1 insolvent up to July 31, 19 25, v:hieb was se:1t to you with the Bcarc1 1s letter X-4409 of August 25, 1925, tbere is enclcsecl herewith n list of member an,1 nonmember brmks reporte(i to the 13c:::trc1 as having suspenriec'l opera.t ions r1uring the mcnth of September, anc1 of bcmks previonsly closec'l which resurnc~c'l businass c1uring tbe s,:me month. rr'he stat<3rcmt also incluc1es any bn,nks w>icl; clos,:;r'l or ·r,::cpener1 p-rior to Septernb8r but Vl'hich w::;re nc·t repc-rtec'l to the Bo:,rc1 in time to be inclur1ec1 in lists previously sent to you for verificaticn.

It will be c'tppreciLtsc1 if you will kinrily check the ctatn pJrt:ctining to yo~1r cl istrict against your r"cor,~s anc1 aflvise L1e 13oa·rcl en or before Octsber 27, by teL:Jgr~'lph if necessa.nJ, wl'vther or not any corrections or aflciitiOl:s ar0 n0c·ass::1.ry in the list, in orc'ler thc:tt con·,3c.t r'lata :nay be publish:oc'l in the Fe(1eral R.:s2rva Jjullatin.

Very t:ruly Y'urs,

Y:c11 ter r. E,~ci:t,

S2c.reta-r:, ...


C C "' 8' I D E N ~' I A 1 Hot for publicati en St. 4695a

BANKS CLOS!~D OP S~;sp~·~l·:~EI' DUPING SEP'IK·GETI 1925. (Inc1uclini;>; banks suspc;:n(l ec'l be fore Septerr:ber 1325, but: not previcusly LJ.cl u0 eel)

r1istrict rlc1rr;':yer

Fame anc1 locat.ic~1 of ban1r

·----~--~;te_Tc _____ " _____ t __ Mernber --

j dosec'l Canital ~Surplus ~- or non-! member

------·--------------------------· !.+ Pi rst SU1te 132'mk, Newcastle, Pa. 5 Btlnk of Greene, Snow Hill, N. C. 7 Far. State Bank & ~-'ras t Co.

Jec:-ttur, Ill. 7 -~t. lJVa:yne State Blc. Ft.VTayna, Incl. 7 Peoplss 'T'rust & Savi:e1gs B.sn]:o:-,

Perry, Iawa 7 Ei'armers Sav. Bk. Berkley, Iowa 7 Beene Coun-+:,v Bk. Berkley, Iowa 7 f.unlop State Bk. Dunlop, Iowa 7 Far. State Bank, .itl1iott, Iowa 7 'The State B:>nk, Iv1t. S+er.lin::_:;, Wis. 2 "Peoples B3.nP:, J•Jleac1vil"..e, ''0c. g Bank of Prcterr, Prct9m, "lfo, 9 Fi·rst Nat. 3~mk, T_~ibby, t/Iont. 9 First Nat. 3ank, S'1eyen::ce, N. 2),

9 Tabor State B;cmk, Tabor, s . .C. 9 Hirst Nat. Bank, J,'lll h<lpic1s, S. D. 9 Wc:gner State Bk. Wagnc:n:-, 0. D. 9 .bank of Centerville,Centerville,S.D.

10 G-lobe i'Jat, Bank, Denver, Colo. 10 First Stclte Bk. Cun lingham, r=ans. 10 Fc<r. State Bank, Wilson, Kans. 10 rt'ar. St~cte Bank, Hope, Ka.,s. 10 li'•:tr. State Bank, ~'Jash, Ckla. 10 :::itizens State 3ank, :i:!inton, Old£ .. 10 Honnesse:y State Bk. HeTh.""l.essey, Okla. 10 F'irst Nc:.t. Bank, Devol, Okla. 10 Niobrara Valley 3k. Nio-orara, Nebr. 1.0 S'ar. & T·,ier. Bnnk, Hudson, i;Yyo. 12 Bank of Pasco, Pasco, v·ash. 12 American Secu:r.i ty 3ar.k,

3

3 7 7 7 7 7

7 10 10

Kennewick, W:-ts1-l.

South Philn.c'leJ.phLl State Banli, Phila., Pa.

:Srcvm & St ev3ns, "3:ml:ers, Phil"~· ,Pa. Inr'l.1strial S3-v.~k. Dc'.Vanpo.,.t, Ia. Sancis & Burr, Bc,nk,-,rs, ~.1anisL3a, Tv:ic'h. J. Keenftn B snk, T_,eros, Ill. Farmers St::o.te 13e.nk, JcT~JD.n, Ill. p,:;,rm2rs & i!Ierchant; n:nk,

V.>'l.nci.1.1ia, Iviich. 3an.k cf 3'3-nfor(l., San+'crc1, 'Jlich. Macy St&titi Eanlf, '~;..c:;, "Jebr. V'lle'1tine State Bk. 1hcl3:·Jin8, ;,:c:Jr.

9-17-25 9-25-25

9-23-25 9-22-25

9-21-25 9-24-25 9-24-25 9-25-25 9-12-25 9-23-25 9-16-25 9-28-25 9-23-25 9- 1-:~5

9- 4-25 9-12-25 " "9 'k 'j-c.;: -C.j

C:- 2-25 ./

9-21-25 q_ 6-25 ./

9-30-25 (_.;_ 5-25 /

" 'j- 1-25 9- 1-25 Q_ 2-25 ./

s:-17-25 s-:~5-25 9-28-25 ()_ [~-25 _.

9-;25-25

'::- 6-24 2-11-25 3-18-2'5 7- 3-25 l- 2>i-24

/ \ 1- 2-24-

1- 2-24-l-15-24-f·- 3 ·::_ ~~:-; :-11_-25

~100,000 f7, 190 25, JOO 5,250

200,000 66,500 57,500 2,000

50,000 6,-800 10, -JOO 1,400 10, ·JOG 50,000 30,000 27' 500 14,600 15,000 3,410 1'), )00 10,000 10, ooo ,IJ, 300 40,000 11' 320 .:25, C·OO 8, GOO ,-_,...... ·"'\ . ...,""" ')v,v.JU 5,00:J 6J,OOO 1,510 20' 000 2, 7CO 50,000 19' 560

2GO,OOO 67,520 15,)00 2,000 t+o,ooe; 92,100 1r ,..,,. .....

),.Jvv 7,000 25,000 15,000 5,370 3:5,000 6,000 ,--,.- ) ...... ("\.

.::::) ' --'Jv' 3, 730 20, '000 7,000 10,000 9,700 58,000 13,420

2:)' 000 5,000

71),000 7, 715 lOO,COO *40,250 lC'J,CJO 2,260

( Dri vat e bank) 75 l 000 20' 000 54-,000 l3' 500

(Private bank) ( " " ) lJ,:OJ 13,:00 25, ~00 5, 000

Non-member

"

" l1

~!Terrb er Non-merrber

-~ !I

11

It

11

It

" Member

" Non-member

Memoer Non-member

l1

Memoer Non-mernb er

l1

11

" " It

T·:Tember J cn-mernb er

It

11

"

N en-member tf

ll

n

II

n


C 0 N F I D E ~ ~ I A L f\Tct fer pub1icaticn

St. 4695o

F-:-~~-----------------r-------r--Da~- I1:Ternber

c'lisb·ict j Name an0 lccation of bank 1 Date j re-· or non-_mnnbe=. __ l _______________________ l __ :~ostJci __ l__ open?~ _______ rnern~::=. ____ _

9

3

State '3enk of Lestsr PrairiG; Laster Prairie, Min~.

Citizens State Jnnk, Jarnesvi1.le; Min:1.

12-13-24

7-15-24

9- l-25 Non-member

9-10-25 II


ADDRESS OFFICIAL. CORRESPONDENCE TO THE FEDERAL. RESERVE BOARD

Den.r Sir:


WASHINGTON

October 26, 1925. St. ~701.

SUB.JECT: '.''eekly Fs,~c~r:ll ?eserve Ba.nk Presz StE:terner.t.

As rnos t of t h0 F ..;;r1 e r.:-cl res 3r\T a ·or'.r"lrs an(l brancnes will obs0r\T0 W<Jclnesda;;r, liovemo.3r ll, as a holi(lay, the 3or,rc1 1 s \·e-::l~ly Fec1 errcl :res,;rv2 b.:-,nk statement will be iss1.:eri as at close of b1:.oiness on 'l'uesc1ay, Nc1·ernher 10. r~'he state·n~:mt ,_,-nl, bovvev:;r, be propareri on ~'h~lrs;lay as usual nr.Cl re].,3D.sec1 fer p1.1b:ication in "rrido.y r10TT.in[?; po:r:;ers. '[j,_;; s~:crr.2 proceci1.1rra s:1ollCl oe fo1lovtec1 in local press statements issucrl [~t ;,·our bank •

.Feoeral reserve banks which are op·3n for business on \~Toonos0::.y, Nc!erri'oer 11, shoulc'l forwarc'l their complete for;n 34 t8Jeg}·am to the Boarc'l an that day showing their conc1iticn as of Tuesc1ay, anCI a 0aily TEND telegram on Tbur::;day morning showing their conc1ition at closa of business on ~'e0nesc1ay. Bm1:ks which are closer> on We0nGsci ay, November 11, sb oulr1 fnrw'l:rcl tb e cornp1ete form 34 report on 'rhurs0ay mcr·ning shewing their cerYl i tion at closa cf business on Tuea.0ay.

Very truly yours,

LETTER TO ALL F. :n. AGE.i:·FS.

Walter L. Ec'ldy, Sec ·re tary.


ADDRESS OFFICIAL. CORRESPONDENCE TO THE FEDERAL. RESERVE: BOARD

Dea .... Sir:


WASHINGTON

Novecnber 10, 1925. St. 4 717.

SUBJECT: Revision of Feri~1ral Reserve Bank Balance sheet form j4 for use c1udng 1926.

Th:::re is encl os eel herewith an unrulecl proof

copy of c'laily balance sheet form 34 to be usec1 by the

_4'er1eral reserve banks c1urin<; 1926. It vdll be notecl that

only a few changes have been macie ir tte form now in use,

all of which it is "believecl are self-expl['~nator;y.

'The year's s·8_pply of the form will be n:ailecl

as s ocn as receiv 90 f.,..orn the printer, which shou 10 be

about the rniciclle of December.

Ve-ry truly yc:;.rs,

E. 1. Scaaci, Ctiaf, Division of Barile Or:,erutions.



WASHINGTON

ADDRESS OFFICIAL CORRESPONDENCE TO NOVember 12 1 192J, THE FEDERAL RESERVE BOARD S t , 4 7 20 ,

Lear Sir:

SD3JECT: Bills and Securities of Fin!'.Lnce and Cre Cl it Corn""!ln ie s.

There is enclosed herewith a copy o-f a letter sent to all national ·bank examiners under date of November 10, 1925, by the Comptroller o+' the Currency, r~q_ue sting: them to set out in the next examination report oi' e 'l.Ch natio"nl ·b ·:mk the amount of paper or securities held which was issued by or bears the endorsement of fin9.Xlce or credit corrrp.mies which 'lre described in the Comptroller's letter as "compsnies which fins,nce the ss,le of automo.biles, furniture, musical instruments, etceter;;>., sold on the installment plan, which buy receivables from business firn;s or otherwise 9.ct as intern~ediaries ·between commercial org':lniz::~.tions and the bar,ks in fin-mcing· the s9le and marketing of merchG.ndi se: 11

The Bo'lrd is anxious to know the extent to which member b9..!1A:S hold paper md securities of the character ment ioneo, and it will therefore be s,ppnciated if you will instruct your Exardm.tion Department to obtain similar inforn;ation for each state bar:.k ancl trust corr;pany member at the time of rr,aldng the next examination or credit investigation of the bs,nk, At the encl of each n~onth, beginning with Noverrjber, will y011 kindly have the information bearing on such paper and securities abstracted, in accordance with the attached form, frorr1 the reports of examin:1.tions '=lnd ere eli t investigations received during tbe month and forward the stq,tement to the Board. The statenjen·t should cover nation3.l ·b'lnks as well "-l.S state bank and trust company members. A. sep'"l..r!lte statement should 'lccomps,ny your report listing those member banks which, according to the reports of ex11rnins.tions or credit investie;ations r3-ceived during the month, did not hold '1ny p'lper or securities of finance or credit compani2s.

"By direction of the Feder1.l Reserve Bo~rd.

Ve~y truly yours,

Enclosure.

TO AI,L FEDERAL RESERVE AGENTS

Walter 1. Edc1y, Se ere t e,ry.


ft.DD~.~."S·'S: f:'r'PJ...Y TO

"COMPTP.CLLLE CI' 'LI:: CUE.F'2:NCY"

TRE.<fl~.SURY DEPARTMENT

WASHINGTON

November 10, 1925.

To All National Bank Examiners:

There have cooe into existence during the recent years a comparatively large number of f•inance or credit com1--anies, i. e., companies >~hioh finance the sale of automobiles, furniture, musical instruments, etcetera, sold on the installment plan, which buy receivables from business firms or otherwise act as intermediaries between commercial organizat~ons and the bar~s in financing the sale and marketing of merchandise, and it is believed that a consiuerable amount of paper or securities issued by such finance companies, or paper endorsed by them, has been ncquired ~y national banks.

The Comptroller's office is desirous of obtaining some definite information as'to the extent to which such paper is now hold by the national banks; and accordingly you are instructed to obtain such information at the time of the next examin~tion of the banks in your assignment and set out in the report on Page 3 under Item 1 the statement of the amount of paper or securities held by the national bank which was issued by or bears the endorsem€nt of a finance or credit company of the kind described. Please state the names of the finance or credit comranies, the total amount of such holdings, and whether their borrowi·ngs are on their direct obligations or through the rediscount of bills receivsble.

In order that the information may be reoeivi'J<i at this office in a uniform style, the following form should be used:

NAME

.Am. Finance Co.

AMOUNT DIRECT INDIRECT

$75.000 $30,000 ~45,000.

Respectfully,

J. w. Mcintosh, C~T.ptroll~r of the Currency.


I

OJNFIDENTIAL REPORT TO FEDERAL RESERVE BOARD

P .APER AND SECUBITIES OF FINANCE Al:.JD CREDIT CO!vTP ANIES HELD BY MEMBER BANKS AS SHOWN 'BY REPORTS OF EXAMINATIONS AND CREDIT INVESTIGATIONS RECEIVED DURING TEE l.10NTH OF ------

1Date of 'rotal loans N~ne and location of

\ex!>mina- and N~ne

member ·bank tion investments

ancl location of finmce or credit company

FederAl Beserve District ------·--------

IP.aner and

i I Total ---

securities of finance or credit com anies

Direct obliga- !Bills receivable tions of company I recliscounted

St. 4720a.





WASHINGTON

Novcrrit J r 12 , 19215. St, 4722.

SUBJECT: Concli tion of li!err.ber Ban}:cs as of September 28, 192'1.

Dear Sir:

For your inforrration there is enclosed

herewith a preliminary statement regarding the

condition o:f all wen.ber banks combined as of

September 28, 1925. The Board's abstract (No. 30)

showing the detailed :figures :for State bar~ and

Trust company members and the combined :figures for

all member banks will be ready fbr distribution in

the near future.

Enclosure

Very truly yours,


LETTER TO .ALL FEDERAL RESERVE .AGENTS,


• CONDITI00T OF MElvlBER BAI'~S AS OF Sl<_.Tr.f'El/B.rm 28, 1925.

St,4722.

Loans and investrr.ents of all rr/3rr,ber ban~>::s 3.gein reached a new record total and :for tr..e first time on a call date aggrGga~8cl ovar $:50 1CC:) ,000 ;000, the total o:f $30,369,000,000 being $666,000,000 in ez.ce3s o:f Jure 30 holdings. Of this increase only $55,000,000 was reportecl by beli{;s in the central re sa rve ci tie e o:f New York and Chicago, while the remainder was about eq_u.:~ll;y· eli vi cleo between banks in other reserve cities and country banks. Loans and discounts, including overdrafts, aggregated $21,450,373,000, an increase of' $636 1000,000 since June 30, 1925, and of $1,630,000,000 eince October 10, 1924. Increas3s in this item since June 30 were shown by all Federal reserve districts, the principal incrsases being as follows: New York, $134,000,000; Atlanta, $85.000,000; Boeton, $70,000,000; Ph:iladelphia, $67,000,000; and Chicago, $63;000 1000. Investments in U, S, securities amounted to $3,785,436,000 or $17,000 1000 less than the amount reported on June 30, and-.$109,000,000 less th')Jl on October 10, 1924. Holdings of' other ·bonds, stocks and securities amounted to $5,133,273,000, a growth of $47,000,000 since June 30 and of' $397,000,000 during the y-ear.

Total deposits aggregated $32,049,168,000, a decrease of $~71,000,000 since June 30, but an increase of $1,277,000,000 since October 10, 1924. Increases during the year in both demand and tune deposits, which aggregated $888,000,000 and $870,000,000, res"9ectively, occurred in all Federal reserve distriq,\fu, scfW f/Jw..:-i 00 cipal increases .being reported £or the New York, Atlanta, Chicago/oistricts. -·Ban~ deposits, however, declined $612,000,000 during the year, decreases occurring in all districts, except Richmond and Atlanta, but being most pronounce a in the New York, Chicago ana Kansas City districts, Bank Cleposits in thG Atlanta district went up from $144,000,000 to $244,000,000, or by $100,000,000. Governnent Cleposits :fell off $24,000,000 while the amount of' certified and cashiers• checks outstanding increased $1??,000,000. Of the incre~se of $1,277,000,000 in total deposits since October 10, 1924, the central reserve cities. of New York and Chicago account ~or but $10,000,000, while other reserve cities report an increase in this item of $396,000,000 and country banks of $871)000,000. The decrease in deposits as comparea with June 30 is due primarily to charging depositors' accounts with the reduction of $642,000,000 in items in process of collection including exchanges for clearing house which took place between June 30 and Ser-terr:ber 28, such items nonnally baing at a high level at midyear, In the attacheo table are presented figures reflecting the concli tion o:f state ban...{_ <md trust company merr~bers and of all member banks on Septerr:ber 28, 1925.

Changes in the principal resources 3.nd lhibiliti-:;s on September 28, 1925 compared with figures for June 30, 1925, and October 10; 1924.

Loans and discounts (including overdra:fts) United States securities Other ·bonds, stocks and securities

Total loans ancl investments Demano deposits (including certif'iecl and

cashiers' checks) Time deposit a Government deposits Due to banks and bankera Acceptances executed for customers Bills payable <mcl rediscounts

Incre~se (+) or decrease (-) on Sept. 28, 1925, since

June 30, 1925 October 10,1924 +$636,ooo,ooo +$1,63o,ooo,ooo . 17,000.000 109,000,000 + 47,0001000 + 397,000,000 + 666,000,000 + 1,918,000,000

*..:. 418,000,000 + 86,000,000 + 102 '000 l 000 - 14o,ooo,ooo + 18,000:000 + 159,000,000

+ 1,043,000,000 + 870,000,000

24,000,000 612,000,000

68,000,000 445,000,000

+ +

*Demand d epo sits, 1 ass exchanges $224,000,000.

and othar uncollected itoms increa.seo Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

• - 2-

RESOURCES .AND LIABILITIES OF STA'.LE B.ANK Aim TBUST COMPANY MEJ.V!BERS AND OF .ALL I,mV:3l!;R B.ANKS ON SEPTEMBER 28, 1925

Loans ano Cliscounts (inc ludir>.g overdrafts)

U. s. securities Other bonos, stocks and aecur i ties

Total loans and investments

Cash in vau1 t Reserve with F. R. Banks I terns with Fe c'leral Re serTe Bmks i!l.

process of collection Due from bank-e anc'l bankers Exchanges for clearing house, and

checks on other banks in s:;uva place All other resources

Total resources

Demand deposits Time deposits U. S. deposits Certified and cashiers' checKs

Total deposits (other than bank)

Due to ban,;s and bankers Bills payable and rediscounts Acceptances Capital stock paid in Surplus All other li~bilities

All merriber . State bank and banks I trust cor.::pany rr.embers

$21, 45o, 373 ,ooo $8' 304,309,000 3,735,436,000 1,276,231,000 5,133,273,000 1,892,673,000

30,369,032,000 11,473 '713 ,000

524,592,000 16 31131 ,000 • 2 1 14 7 1 111 1 000 322,735,000

647 ,43~,000 190 '766 ,000 2,031,130,000 518,233,000

1,263,037,000 476,001,000 2,065,920,000 351,165,000 -------

39,053,354,000 14,495,354,000

16,617,456,000 10,467,237 ,000

6 '194, 702,000 4,474,455,000

2731211,000 1051636,000 303,756,000 342,787,000

28,171,66o,ooo 11,117,530,000

3,877,503,000 l,Oll,272,000 876,662,000 314,493,000 425,327,000 204,912,000

2,0921909,000 718,700,000 1,760,076,ooo 635,301,000 1,849, 212,000 493,591,000

(st. 4722.)




Dear Sir:


WASHINGTON

~Jov.:m[ber 14, lS25. st. 4725.

SUBJECT: ConcH tion of rnen:'ber 'ba:-:ti;:s as o~ Se:otem'ber 23, l92S.

In order that yo'J may have available data

regarding the condition of mem'oer banks in each Federal

reserve district as of Septe~ber 23, 192'J, in advance

of the Board 1 s forthcoming abstract (No. 3C), there is

enclosed herewith a mimeographed stateii1ent giving the

resources and liabilities of all n;ember banks, by

districts, for the elate rr.entioned.

Enclosure.

Very truly yours,

E. 1. Smead, Chief, Division of Ba..'1.k Operations.

l,ETTER TO .ALJ_, FEDERAJ..~ RESERVE AGFN''J::S.




WASHINGTON

Siovambar 21, 1925. St. 4730.

SUB.JECT: B.:m]{ Suspensions snd Insol vancias.

Daa.r Sir:

Thera is enclosed herswith d list of member and nomn:.nnber ban.i.:s reported to the Beard a.s -~·<Wing

Eusp:mcad operations during tna month of O:::tob;:;r, and of ba.nl>:s pravio"L.::>ly clos<:>d which rescrned bJ.clin.,;::,;, during t,'J.a same rnontn. 'Tho st-1teU1ant also in..::lu.des banks whicn clos2d or nop:med prior to Octcbar, if any, out whic.n were not raportad to t~~e Beard in t irn,, to o-::, included in lists pr·aviously sent to yo-u. for verifi.::ation. L1 addition there is given for your i.nforrnaticn a state:n.:mt of corrections mc-c1.de in L1e: lists pravicusly sant to yc..u.

It will be appreciated if ycu will kindly cne:ck ti.:a data p;::;rtaining to your district ag.•:1inst your records and ~1dvis<:J tha .3oa.·d on or before Nvverr.ber 26, by telegraph if ner::essary, whether or not any ccrrections or ~ddit ions are necessary in the lists in order L1..1.t correct dc: ... ta rn:-1.y be publishc;d in tha F"derd.l ne::,erve Bullatin.

Enclosure.

Ve:ry truly yol.lrs,

Wal t<:r L. Eddy, S<Jcretary.





Dear Sir:

SJBJECT:

WASHINGTON

"Jo re;;:ber 19, 19 25. St. 4731.

Weekl,y Federal Heserve Bank Statement i or Nove.:nber .::-5, 1 jC.5.

Thursd.1.y, Ncvernbcr 2~, being a hcl iday, the

Board t s regular Fedsral reserve bank press state,n&nt as

at close of business on WednesdaJ-", Nove;nber 25, will be

prepared on Friday, NovembJr 27, and released for publi-

cation in Saturday morning papers, while the ccndition

statement of reportin:-::: member banks will be ri::lleased for

publication in Saturday afternoon paper~. The same

procedure should be followed in local prcss statements

issued by your bank.

Very trdy yours,

TO ALL :FEDERAL HESBRVE AGENTS*

Wal tar L. Eddy, Se era ta.ry.


St. 47)2 Fedar~l Rasorva Board,

1Jovarcbcr 19, 1925.

STATK:lEFT FOR TEE PHESS ~~~--~~~----~~----'

Thursday Nov ::nnb-.:r 26 bd ng a holiday, t ne Bo c.rd 1 a

waeldy statements of condition of Federal B.esorve Ba;::ks and

of reporting marnber banks will bG issued on Frid~zy.,

Novarnb<or 27, aDd ralaasad for publ ic~tion on Suturd:1.y,

Nove:·nber 23.





WASHINGTON

November 25, 1925. ~t. 4735·

SUBJECT: 1926 Budget for Stltisticill and Analytical Work.

Dear Sir:

In continuation of the policy adopted fer t}1is ye::tr, will ;r"ou ki dly prep::tre and subrni t to the :Soard for apr-;roval, not later than D ;ce:nber 10, 1925, a budget of expenditures covering vvork in the Statist icnl and Analytical function of ycur b:;,~"lk, to be carried on durir~g the year 1926. The budget should be submitted on the attached form which corresponds with the revised functional expense report fonn E, and which provides for showing in par::tllel columns the amounts ::1ctually expended durin,:; 1925 (Dacember e stir:Jated) and the proposed tudget for the calend3 . .r ye,1r 1926.

Will you also accompany your budget re(1uest ·with a statement showing the approximate proportion of thCJ tirr.e of the assistant Federal reserve a2:ent or aq;ents which is to be --::har~ed to each function of your departrmnt or of the ba::1k during 1??6. In c':lse an as;:;istant Federal reserve a,.,-ent is devotinf" a p,1rt of his time to gener:U activities which are not chargeable> to any of the fur1ctions under t:he supervlsion of th-e FedarJ.l res:Jrv-e E'ger:t, nor to any function of the bank 8xcert Gene:Jro;.l Overhead, kindly give a description of such gc:mc;ra1 activities. In d:otermining Wh21t r:rorortion of tlie tirr.e of assista.nt Fed-:Jci.l re:,erve ag.:mts or of emplo;yees of the agent Is department should b0 charged to Ge,1er-1l OverheJ.d or to any othar functicn of the bank, the matter sl10uld be discus3ed with tn2 op.::L1tin;:; ofr:i.cials of the bank with a vi2w to mal:ing a satisfa,~tor;v distribution of the expense.

Enclosuj:e.

V 8ry trul ;:i yccrs,

J. C. Noell, A::::,oistant S3cretclry.





WASHINGTON

Ncvember 25, 1925. St. 47)b.

SCB.JECT: V,e "i.dy s t:~t8Li8::ct o:::' Geld Settl·e:;,ar:ct Fur.d Tr::cns.tctio:""·

Dear Sir:

The Bc:1-rd for sornr:' time has been considerir.g ;.'J. number of cLanges in the weaidy r.".imsograp'cled sumrrary of transactions thrcugh tlle rsold settlement funi, but befor0 adopting t::1e revisGd ~cr~n cf st.c-tternent we sho-uld be gLHi to have an expression of your views with reference to the proposed ci:ktnges.

Fro~n the dr•-cft of tJ.1e new form a'1closed herewith, yc,u will nr:te th3.t it is proposed to sh,=w fi:;ures for the Federal resJrve note clearirw separatel;c,· frorr, t:r.ose for the transit clearh.g, and t:"lat the net loss or gain of gold through the fund would ba s:1cwn for transit clearL:gs and for combined cle3.ri,1gs and transfer&. It occurs ts c:._s ::1lso that in:tsrnuch as transfars through the fund are '111 cr 1-.racticar._y c1ll for Govermnent account, tne statement would be: scrn2·.-.h3.t more valuaJle if the words "For Gove rnrn.::nt ac ..::cunt 11 war,:; inserted a.fter t.::1e word 11 'T'ran:sfers, 11 ::1nd .:1 note pL:cced at the bcttcrn of tha std.ternent indicating the amount of transfers, if ar;y; ot.t1.::r th_~n for Govermaen t a·2ccunt.

It will be o,p~~r;c;cided if you will kindly :::tdvlse the Board of your view;;; with reg21rd to tne proposed n:ow form of st.1.tement at your e,;,rly c:mvenisnc.;.

No changes c:;,re contelilpLt ted in t~1e 3 t:::.. terr:0 nt sn.~wing transactions in the Fadcr~l R0scrva Ag3at~ 1 GOld fur~.

J. C. NGo:.l ~L, P .. s sis t ~~r1t Sor.r;:.;: _.r~.·.

Enclosur~.



ADDRESS OFFICIAL CORRESpONDENCE TO THE FEDERAL RESERVE BOARD

De:1.r Sir:

r.over

WASHINGTON

De ~err:b<:lr 4, 1925. St. 4748

SUBJECT: Abstract of Condition Reports of State Bank ar.d Trust Compan;y members aEd of all Me;,;ber Bc..nks as of Septe'nber 23, 1925.

We are forwarding to you under separate

copies of the Board's Abstract No. 30

s~'lowing the cond iticn of State Bank and Trust Corn-

pany members and of 9..11 member banks as at close of

business on September 28, 1925. Consolidated

figures for all me:nber banks, both National and

Sta.te, are shewn on pa.gas l and 12.

Please forw~rd one copy of the abstract

to each State B::.~.nk and Trust Company rne:noer in your

district that has expressed a desire to receive

copies of ;abstracts as issued.

Very truly yours,

E. L. S1!lead, Chief, rivision of Bank Operdions.


'DDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD


WASHINGTON

Decernoer 7, 1925. St. 4750.

SU6JECT: Annual R~::po:..~ts of Federal ltesiZrva A,:;ents.

Dear 3ir:

In accorlance '!Ji t..:l L1.e plan adopted last ;yertr, the anrn:al reports of the ]'eder:1l rsserve asE:nts for 1925 should 1::s co.ofined to a textual discussion with such incU,:;r.ta1 data and tables as app.:;ar prope:c. Detail·?;d sta.tistical tables should not be; used, but referance :rd~' bJ rr.:1.d.e to the statistical data published in the r.;port of the ]'ederal Reserve 13oard.

In rrcp:lring its own annual report the Beard will follow the sarns g;meral arrange1n3nt of the stat.isticu tablss in both Parts I and II a.s was s.dopted lnst yeg,r·, &nri copi3s of the ten schedules pertaining to yot·r district which will be published in Part II of the :3oard 1 s s .. 1.nu3l report will be forwarded. to you clc soon as <:wailahle, for comparison with .'1.ny simiLu- dat..:1. that rro.y b.ave baen prepared by yoi.lr bank.

V.ar-:l truly yours,

Walter L. l!;dd:t. S.;;creta.ry.





WASHINGTON

December 3, 1925. St. 4751

SUBJECT: Earninrs and Dividends Reports of State 33-Dk and Trust Company ~ilernbers as of Dec8wber 31, 1925.

:Cear Sir:

There are being forwarded to you today under separat3 cover by mail copies of form 107 for use of State bank and Trust company rr_embers in submitting their semi-annual rerorts of earnings and dividends.

Pl e:'lse advise the bar.ks tl1a t the report, wl-ciC11 should be submitted not Ltter than Jam;ary 10, 1925, is to cover the six-month period ending December 51, 1925, irre:;;pective of wi1ether or not they may have closed their bocks on that date, or whether any dividends thJ.t may have been declared cover L1c1.t particulq,r period.

Kindly :'l.cknowledge receipt.

Very trdy yours,

Walter L. Eddy, Secret,lry.

COPY 'I'O ALL FEJlERAL HES.EBV.E AGEN'IS *





WASHINGTON

December 3, 1925. St. 4752.

SUBJECT: Form F.R.A. - 5, Daily Statement of Federal Reserve Agent.

Dear Sir;

There is enclosed h2rewith a copy of the 1926 edition of form F. R. A.-5, Daily Statement of Federal Reserve Agent, fro;n which you will note that the report has been changed somewhat in order to confon:1 to the Board's press statement showing the condition of Federal reserve banks.

The number of copies of the f orrn requested for use during 1926 is being forwarded to you today under separate cover.

Enclosure.

Very truly yours,

E. L. Smead, Chi::Jf, Division of Bank Operations.

TO ALL FEDEHAL RESER7E AGEliTS *





WASHINGTON

December 15, 1925. St~ 4760

SUBJECT: Functional Expense Reports.

Dear Sir:

Thare is enclosed herewith for your inforrmtion a

proof copy of revised form E, Functional Expanse Report. The

new form has bean drawn up in accordance with the racomnend-

at ions of the ccrnrni ttt3c which met at the Board 1 s offices on

September 23 .c~nd 23, of which you were advised in the Bourd1 s

letter St. 4672 of October 6, 1S;25. The form will be p.rinted

as indicated by the proof, except that the titles of the ex-

pense units will be shown in bold-face type and a few minor

changes will be made in the ruling, etc.

The supply of the form will be forwarded to you as

soon as received from the printer, which probably will be

s orne t ima next month.

Enclosure .•

Very truly yours,

.E.. L. Smead, S.;;cretary, Comrnittea on Salaries, Expenditurss and Efficiency.

TO CHAIRl\lliN OF 1U.L FEDERlli. RESERVE BANKS* COPY TO GOVEHNORS A:ND TO CHAIR\1EN OE' PROCEDURE CQI.'ll,:Fr'IEES.


\DDRESS OFFICIAL. CORRESPONDENCE TO


FEDERAL :RESERVE BOARD

WASHINGTON Iace,nber l 6, 1 S25.

~t. 47bl.

SUBJECT: }or~i ~5, 96, 97, and 171.

Dear Sir:

There are being forwarded to you toctay undsr

separate cover the following number of cop.;.es of forms

95, 96, ';:7, and l 71, rnont:bJ.y earnings :=lnd expense re-

ports, fur use dur-ing 1926:

Forn1 95, co-ries

I orrr; 96, copL;s

I orrr: o-j I ' copi0s

Form 171' copies

It will be noted that prcv is ion has baen m1-de at

the bottom of form 96 to show reimbursable Fi;:;cal Agency

Iepartment expenses, instead of rcc0porting them on a separ::1.te

form as &.t present. Accordingly, form S7a wi.1.1 00 d1scon-

tinued at til2 end of this year. In tne fu.ture cnly combined

reports need. be subrni ttad on fc rrn 171.

Vary truly yours,

E. 1. Sma::cd, Chief, Division of ~a-fr Op=rations.

TO GOVERnORS OF 1~11 F. R. BAJ.\JKS*





WASHINGTON

L::cc;nO"r 12:, 1925. St. 47uZ:.

SUBJEC'l'_: Vieedy ba11Y debits press stat~:;;ner"t.

D.;;ar Sir:

'['h3 "Fs:leral Heserve Bo:1.rd 1 s press state-

m:~nt sJ.1owing ·1ebits to individual accounts for the

week enclin:::: W,dnJsda~v, re:::e:n:~2r 23, will be issued

'Tuesday, DcJce:::bar 29.

Very truly yours,

ViaL t2r L. Fdd,y, ScJcro::tai"~.

TO ALL iEDERAL R.S:3EB.VE AGEH13*


STATEMENT FCR THE

St. 4769 Faddral Reserve Board

DacamJer 19) 1925.

?EESS

The Federal Ro ,,,erve Board 1 s statement of debits

to individual accounts :t'cr the W8ak ending Wedne:;day,

recernber 23, will be issued en Monday' Decen:bcr 28 I

instead of on Saturday, December 26, and rel.aased for

publication en 'Tuesday, I'ecemb0r 29.



THE FEDERAL RESERVE DOARD


WASHINGTON

D~"cemb;:;:r 21, 1325. St. 4771.

SUBJECT:· Ktnk Suspensions and Insolvoncies.

Thdra is enclosed herewith a list of membar and nonmember banks reported to the Board .3.::; having suspendad op,.:H~lt ions during the month cf r ovember, and of banks praviously closed which reswr.3d busir,ass during tho s::1me month. The statement also includes any corrections rr.ade in the lists previousl;r sent to you.

It will be ,;::ppreciated if you will kindly check the data pertaL1ing to your district against your records and advise the Board on or before December 23, by telegr:Lph if necessary, wnether or not any corrections or additions are necessary therein, in order that correct ~ata rfi:~Y be published in the Federal Reserve Bulletin.

Enclosure.

Vary truly yours,

W:ll tar L. Edd~', Secretary.

LETTER TO ALL FEDERAL RESERVE AGENTS. *



WASHINGTON

iADDRESS OFFICIAL CORRESPONDENCE TO


Den.r Sir:

D0C2U:Oior 21, 1925. St. 47(2.

STJ13J3CT: fl.,:ports of Earnings, :E'xpc:nses, Dividc;n1 s, and Irar.chisi..l Tax

Pn.yrm:,nts fc.;r 1925.

In crder tb.at the Beard rr:ay hava inform::ttion reg:1rding tJ.J.e fir.:.:1.ncial rt?3ults cf operations of }l'.;dora:. reserve banl~s during the ~ores-.:;nt C"l.lsnciar ye~cr :;"s seem as prE1.ctiG:1.ble s,fter Januar~' 1, it is rec]_uJ<>t,?,i t1:cat ~:. statement be tGlogl'.'cphed or mailed in time to x·eac:il the Bc:1.rd 1 s offices en Sat-c:.rdo.,y rncrning, January 2, 1926, showing th0 following infonr,ation:

(CoC.e) EACH - Gross ee1.rni~lgs .................. $ _________ _ EA1JS - Current 0xp"'rs2s •............... EAll.N - Currer.t :c2t o:.;,rnings ......... ~~~- .......... $ ______ _ ELBA - Addi ticns tc Current r-"et aarnings ___ -· ·---ENID - h;ducticns frcrn G'Jrr3nt Fet E.-1.rnings _________ _

Net additisns tc or deductlcnd from current net earnin~s ................. .

bAST - Net earnings 3,vailable ior dividends, franchise t0.x, ::1nd surplus ..................•

EYRE - I:i Yidends paid •.....................•.......... FlVIET - Paid to Government as f ranc!1iBci t_u ........... . EVEN - 'h~::1nsf erred to surplus ::tccount •...............•

Total (to a=rea witD item EAST) ....•.....••

CAPP - Si.lbs,;ri bcci c;,pi tal Jarmm·;y 1, 1926 ............ . CiDT<: - Suq;l,~s ,January l, l92b ....................... .


- 2 -

It is also req_uested that the l'egular monthly reports of .sarnings cmcl expenses on forms 95, 96, 97 and 97-a be accompanied with an itemized staterr:ent showing in detail all additic·ns to an:'. :ieductions fro:n current net earnings (Profit awl Loss acsount) d1.1ring the ye2.r, and that in addition to the regular balar..ce sheet form 34 for the L:.st day of the ye:1r representing the condition of th0 bank after final closing of the books, a fonn 34 be submitted showing th0 condition of the tank at close of business but priCJ_£ to the rruking of any adjusting or closing entries.

Very truly yours,

E. L. Smaad, Chiaf, Division of J3ar..Z Operations.

TC GOVERNORS 1}B' ALL FEflLRAL RE5Fc:HVB BANKS "


;ADDRESS OFFICIAL CORRESPONDENCE TO


Dsar Sir:


WASHINGTON

December 24, 1925. St. 4773·

SUBJECT: Condition reports of State tallir and Trust Company Members, Form 105.

'Ihers are being forward.ed to you toda.y under separate cov8r copies of form 105 revised as of Sep'~e~nbsr 10, 1925. Please mail three copies of the form to each State B:mk and Tncst Cornpany member in ycc.:_r .·iistrL~t with instructions to hold the blank fon~.s per1cijns rscaipt of a call for condition reports.

Dr;on nceipt of noti<;e from the Board of the call for conri.i tion reports, kindly notify the banks thareof by m2il o.nd request them to fill out the reports and r:/lil them to you promptly - in no ca;:;e lator than 10 days after receipt of the call.

In ordar that the cornpil3,tion of the Board's abstract showin;;1; tbe condition of 211 state banl: and trust company members eombin~'d as of the date of the next call e·:ay not l:e ur:.duly delayed, it is requested that the reports be forwarded to the !3oard as soon as practicable ·:tftsr they ars received by tile Federal l"clSc:rvJ bo.nk. If it is necessary to corrurnmicate with a bank regardin;s appat·.:mt errcrs in its rc:rort, a note to that effect should be made en the r,3rort H.self oeforc it is mailed to the Boar·d, Gcnci t:,e i3card should 1.:Je advised of the necessary corrections when tha desired information is recaiv2d from the rnarnb.::r bank.

Kidly acknowledge .receipt.

Yours very truly,


LETTER TC ALL TEDI:'RAL RES!<.TVE AGENT3*


DDRESS OFFICIAL CORRESPONDENCE TO



WASHINGTON =~- :JC2.r.b3 .L' )·0, 1 ·~ 2').

St. 4((7.

SGBJE:C'I': SCi'"adule oi. Fdcicrcil Ld::oo:;,l'V...:

B.:cnk Pcr::>crh"el.

~rill :.-o-u. l:.i.11ly r·::~ri_isn tirL:; doul·:l as SOi....1£ 1

::tfter· J:L.u'-•Y l, ::.s1c:-.~, _,s ,J.r:l_;ti:::able, vd.L1 a stat::;rr.:c;,lt .·ol..u.tiug tc tl>~ f8l'3C;L8.L of ;yoc'!' bcln]r, (L"clu.di"lg ·8rD.:lCD3;.,, if a~·:y) J.ci :-:tt C.iCSe ci' :Jo.c~in,.::ss 0n fecs:nbc;r 31, l ~'-'-+ c.nd. 1 tkS, :l::C:. :;1,s of J~~nu .• ry l, lJ26, :r.ade cut L1 ',cccid~.a::;c; wit:1 t'1.0 form 2.t~:1·cl"ed :·1e1·eto. 'L.12 iic;"c1:·es f cr I'::ce:noer ~;l, lj24 and 1:325 'Ni: l ~e rub 1 . is::"ed in tn . .;, Board 1 s lS2) :mr1:.:t1l report, ct"'ld 3-CCOi'di.;;"Ly S.l01-L.d :J.Ot t·1.l:e :1CCO''cr'Lt cf ch:l.lLges L"~ e ith2r t:1e numoccr cr E:ll'.J.'ies cf officers or eu,ployses tJ:: .. 1.t. 0-re p1.~t into e:'fect :.cs cf "T:lmJ3..LJ' l. In determiniLg vv'::1st.::,.;r or net a. ;siven individc1al should be list·Jd 1s ·m oj ficer cr an en:: lo~·:c:e tha Bo::.rd 1 s letter X-3c:;}~ of C::::tcbor j, 1:;'2:~ s,:cu1C. os lJSdd oi.S a cr,t.;id3. After t~u st:l.t3rr•e,1.t ]:Yl.S bEc2'l carLplated it shcul.d be compJ.r<:'cJ. ::vitrl data publ.ished C<1 f1.ges ?17-2:.20 Of tJ:-,e '30:lrd 1 S 19:::4 an·:ull. r?port, so that ~·~ differenc;;s ~ay be reconcil0d bei~re t~.12 r:?f·Ort i;.; tra0srr.itted t-.e t.12 0c:1.i'd.

Enclosure.

Very truly ;yours,

Wal tar L, EJdy, Se-cretary.


St. 47(7a

FEDERAL. RESERVE BAr~ OF ---(Including Branches)

•

I J\Tu_;rbc r 1 _______________ 2~"'-131 S~!:_,-;-rie s _____ _ l JaiJ. 1 j I''6c. 31 I Iec. )1 1 ~-'~·: I I:ec. 31 I D,c. )l

______ _j_l_g_~_g_j_1 q~s__l ___ 1.90_J.__ ___ ___l qc:o ___ J_ ___ l9~2 _____ L ____ _191_'± __ _

Oi f icers: C"l::1irm:.1-n and "Feder·'ll Reserve A.nent "-c-rsr::cr Ot!".er offic0rs

Errployeei3 by departm-::nts: B:::.ukiLg dapart:r.ent J!c:,iar_:u Ii.a::;<:lrv.s A_g.:mt 1 3 A-:.::_d it i::'1€; Depc'-rtment :i sc:l-l P ... ga .~CJ·~ Dop .-1rtu:e:n. t

FJ.sr:al

L1e 'I reasury Depart:ne nt Otr:.sr e>rr.rloyses whcse sal:1.ries :t.re

reirr.i:Jc.rsed to bank, incL:ding b<..dldL1g employees in sp3.ce ranted to tenants

Grarii Total

T& mporary employees (not included above)

• •

l I I / l I i i I I i I

I I l . I l I I I I I I / I I I I I I I I I _ _L _______ _j _______ _

I ___ _j I I I I I I I I , _____ l ____ _j._ ____ -1---

l_====:!: I I





WASHINGTON

racembar 3~, 1925. St. Lq79.

SUBJEC'T: Certii:icclt ion of Franclli2C: Tax..::s ~3id on Daca~bsr 31, 1~25.

Followinr: th.s usual practica, ttL .:Soard rJY.u;st;;

Ftat you ln.:v3 th3 Aulii tor of your bar:k r;rcrara and forvvard

to th3 Und.Jr-Secr8ta,ry of tha Treasury, 'Nas~li1.gtcn, D. C.,

certified st :ttc:rnants r0flectint=: tha financial rcsul ts of

operation of ;rour b'n;k c~t·rln~ the c . .1lend:1r y"ar 1925, in

acco1·dance with the f cnns outl inad ir: the Board's l c t ter

St. 4338 of Jar:ma,ry ::, 192", :1 copy of whicn is enclosed

Kindly fc rnis'1 tl19 Board with a dc<pl icat e cop;y

of the certified sLtternents forward3d to tL2 'lr·3a_s,Jry

;}er3.rtment.

Vary truly yours,

V.'alter L. Eddy, Scocr" t :::.ry.


~DDRESS OFFICIAL CORRESPONDENCE TO



WASHINGTON

:a-·rrc..arz,~ ), 1925, St. 4)33.

Cs rt E ica t ion of J'ra..;1c-.l~i ~. e rf'e.x:os -od0 on Deee,n'cJer ):., 19C.4.

In acec-..-.6a""'!ce vvi tl-1 t .;.e p:r.acti,:~e ac1opte(; a·~

tb:3 Sl_-:_g;.Jst icn of t.:-3 T~e113u:r;:r Dapcr.tc9n!, +l1e Bo"·Tcl :rey_•Jests tb::.t :;cc.. h&7G the AuJitor. of yoccr 1::.an1::: D"epa:re ar.cl foTv·ar0 'c c -c::,e 1}!_"l:i c-n·-Secretar;,r ccf the 1}'-r·ea.sur:.', ;vr.sh2.n-;ton, D. :::., 2- s":;aterr;ent shc.·ring; t'::~e fcllo~~i:nrs in:c"V"r·la"t ~o:1:

First. GT-Jss eE~T.'T1ings, cur-;en-f:. e:,:pensas, ar::.i -r;.r.o:it anf. less accc'tl.Ylt :or the-; C'E•l<'m;1a:r- ~rear 1:~,;:_4, in t"'te for::n of t:::.:J::..es 73 :c~nc'l 74 P"'intec'l en p::'g•C:!S -:Sr -170 cf t':ce ~· oa rei 's 1 ·3 ~23 ar;nu2l ···en crt, exce:t: t that t~1A amcunts ~ro~i.ll::1 -~\e ri··.J3n in c1cl1&rs an0 cents.

Se~ct' ... 2_. t.ta~clr:er..t cf cor1~Ht::.on (L-~ ciclla.rs w~d ce~ts) after clcsi~g cf becks on Jecemb.::Jr. }i, :i:92~, p-repared in the fcr.rn Gf ~~l_e Sc._._-,·0 'a .:-.sr:.sc·licif~teci

r.reeldy press st..1tS1_~_~:::·~ c::: c.c:nf·i"tic:r.L .... ,_ . . ( ~.-.:i.. 3

statt::rner..t C~OL~.l..J o.J..~:;.:; zi ~~ ... 3, :·::s .'::.., rr...r:.~-rn.o:r.a:lf urn it. em, the a~-:~O~lt c ::_· : ]:s 'b<:..nk 1 s s nbscrib 90 cu.pi tal en De0errr'Jer 31, 1924, also ths baJ.a':lce in ~rc'T' S'lr.plus accou:'lt after clcsir.g cf ,)CO:i.<;:s on :Uecar~b0::- 31, 1923.

c:.ppear. the A"."h~itcr's ccrt:ficaticn, col.mtersig;lecl by f-:ha GO''Gr.ncr cr a D0p-1ty G-c7e:n·ncr, rea.ciL1g &s fc-ll.cvs:

"I 1-:.-:.:~~eb~- t~ .;-r·t:i .. z~ ... t1:3..t I t_:J..'\'le exarn.ineG t1~.e

at.:,ve stat~~~er~ttJ o·;_ ... ,;;c_.;.,...-ni~~gs, e::~pe~ses, rLr.td. profit a~1CT

lc.-5s of the·· .F~~ 4 -s~s.l ~-3~:3:r"':-e ~Fa~.1~: c: ----- -----·--·-~cr t:J.G cale:-:·~c~ar- ~,.,.3L .. 1~ :·s:~4, &.nrl tho c::~n~·~t.i-::;n sta:~errsnt


- 2 St. 4)83

cf suc11 ba.nk after closie1~;:; ')-["bocks on DecernbGr 31, l924; thect the items in s<.<Ch stc..t.:w.e:J.ts are correct as sr.own by the records of s'•ch F.:::0eral res~rvs bank; that SL'ch p;~ofit nn"i l0ss stat.smsr..t shov:s all items of gain riuring the periorlj th<:.t all clef,.lctions :-:;a:'l.s fro::-: g:r.oss an:'l net 0a:r.nings in such statr.nne:lt app·:-,~:.r to be :f2i:r., jnst aml re<·sonable in o.11 resp-::cts; and thcoct, •:;,::; shovvn thereon, there was $ ~;:-ij~;-C:li "t8clS-c:t es ur.(i-87"the nro7is_:_ ---------- --·-- ·-~---- ·--·--·------------"----·-icns Qf S::cticr" 7__g_f_~~e F..c'l~~ral.:__Eo::oe?'.:Ye Ac~ apzoveri De·-c:_srnE_cr ?3, 1Cjl3, a;; &rLr".1':lr1 by the Act cf' ¥::trch 3, 1919. 11

Auoi+cr, Fer'1eral Pess'l'Ve :B<mk of

In t~e evc;:c1t that no francLis0 tc..x was paici on Dec:em';_,ar 31, 1'~:24, tha -.-..n(Url ins0 p -:::-ticn of tr.e above c,q-··ti_fie;__tion sl:crv.1::'l r.sdi! 11 an.i that tt.ere v;c. .. s no 1::mount (l''"-6 the cnite:1 States unr'ler tne p:rcvisiCL3 cf Seetion 7 0~ t:':le _?e:;(isral rss-:rvG Act n:pp:r.o·.-~c~ Di:h~·?:::o3r c:3, l:t~3. as amen<1ec1 by the Act of ~Jia:r.ch 3, 19:!.)."

Kin,':~.y fu.rnis~1 tl1e 5oa'Y'('i -,jit~ a ciL:)licate cop~~ o: the:, C0rt.::.:fi._:0 state:1Lonts forvv-lrc1sct to the Tr-easu:J1' D 3'J::a1'tmont.

Very' tT'l:ly yours,

Wal tar L. Jll'iciy, Sec,...et~::r;l.


[Volume 23], July - December 1925 - FRASER - St. Louis Fed

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Transcript of [Volume 23], July - December 1925 - FRASER - St. Louis Fed