Federal Reserve Bulletin, 1915-07

FEDERAL RESERVE BULLETIN ISSUED BY THE FEDERAL RESERVE BOARD AT WASHINGTON JULY, 1915 WASHINGTO I GOVERNMENT PRINTING OFFICE 1915 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

SUBSCRIPTION PRICE OF BULLETIN, May and June issues of the Federal Reserve Bulletin were distributed without charge. This distribution will be continued to member banks of the system and to the officers and directors of Federal Reserve Banks. In sending the Bulletin to others the Federal Reserve Board feels that a subscription price should be required. It has accordingly fixed this price at $2 per annum. Single copies will be sold at 20 cents. Remittances should be made to the Federal Reserve Board. 115 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

TABLE OF CONTENTS. Page. Work of the Board 117 Expenses of the Board. 118 Gold settlement fund 120 Meeting of governors of Federal reserve banks 122 Informal rulings of the Federal Reserve Board 125 The Pan American financial conference 128 Address by Hon. P. M. Warburg 132 Address by Hon. C. S. Hamlin 136 Circulars and regulations 145 Law department 150 General business conditions 157 Gold imports and exports 164 Commercial paper rediscounted 166 Acceptances 169 Resources and liabilities of Federal reserve banks 170 116 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE BULLETIN VOL. 1 JULY 1, 1915 No. 3 WORK OF THE BOARD. National and State banks in the several districts. During the month of June the work of the The Federal Reserve Board has had the Federal Keserve Board has included the fol- question of admission of State banks to the lowing principal elements: reserve system under careful consideration (1) Completion and distribution of the cir- practically ever since the opening of the new institutions. The subject has presented various cular and regulations relating to membership difficulties of interpretation and administraof State banks in the Federal reserve system. tion, and it was deemed best to obtain as much (2) Development of plan and arrangements advice and suggestion as possible. The present for prompt consideration and action upon ap- circular and regulation are the result of many plications of State banks for such membership. consultations with experts, representatives of Federal reserve banks, and members of the (3) Development and application of a plan Advisary Council of the system. The latter for the actual transfer of member banks from body unanimously recommended action along one Federal reserve district to another—a step the lines of the present plan. It is believed necessitated by the redistricting decisions is- that agreement has been arrived at with refersued in May. ence to the conditions of State bank membership on the part of practically all who are (4) Action favorable to the establishment at familiar with the subject, and that the present New Orleans of a branch bank of the Federal circular and regulation fairly represent the Reserve Bank of Atlanta, and development of consensus of opinion. The Federal Reserve regulations relating thereto. Board regards the action taken in the State The list of applications for power to ex- bank matter as being of the utmost importance to the future development of the system, and ercise the functions of trustee, executor, etc., its action has been considered with a corregranted during the month, will be found on sponding amount of care. page 144. Eevision of the circular and regulation re- Acting in accordance Avith the plan thus lating to capital stock has been necessary. marked out for the admission of State banks, These will be found on pages 148-149 of this the Board has begun the investigation of those issue. whose applications had already been made and So far as possible, matters awaiting the of others which have been filed since the publi- Board's action prior to the beginning of sum- cation of the regulations. Among the earliest mer have been disposed of. to make application for immediate admission Distribution of the Board's circular and reg- to the system in accordance with the terms of ulations relating to membership of State banks the new regulations were the Old Colony Trust in the Federal reserve system completes an in- Co., of Boston, and the Broadway Trust Co., quiry which the Board has had actively in of New York. In the case of all State banks hand ever since it was organized. In making and trust companies seeking admission to the public the circular and regulations the Board Federal reserve system, the Board has ruled issued the following statement, which briefly that the new application blanks distributed sets forth the character of the task now brought with the circular and regulations shall be folto a termination: lowed, independent of the question whether The Federal Reserve Board to-day makes any applying institution had made application public the text of its proposed circular and prior to the issue of the regulations or not. regulations relative to membership of State This is merely in order to secure uniformity. banks in the Federal reserve system. Supplies of this document have been sent to each Fed- During the month of June the Board has eral reserve bank, and will be distributed to the voted to request various of its members to ac- 117 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

118 FEDERAL RESERVE BULLETIN. JULY 1, 1915, cept invitations to attend State bankers' as- Resolved, That pursuant to the authority sociation meetings to which they had been in- vested in it by law the Federal Reserve Board hereby levies an assessment upon the several vited, for the purpose of participation in the Federal reserve banks of an amount equal to sessions, and of explaining the position of the one-tenth of 1 per cent of the total capital Board on pending questions. The Board de- stock of such banks, and the fiscal agent of the sires to keep in communication in this way Board is hereby authorized to collect from said with associations of bankers throughout the banks such assessment and execute in the name of this Board a receipt for payment made. country. Such assessment will be collected in two in- For the summer months arrangements have stallments of one-half each, the first installbeen made whereby a quorum will be conment to be paid on July 1 and the second half stantly available for meetings in Washington. on September 1, 1915. Purely routine business will be dealt with by The first assessment for expenses of the the executive committee of the Board. Board was for four-tenths of 1 per cent and was made on November 2, 1914. This included Expenses of Federal Reserve Board. an amount for Federal reserve notes. It was paid in three installments and aggregated It is estimated by the Federal Reserve Board $431,768.40. that its general expenses for the six months On March 23 the Board agreed to separate from July 1 to December 31, 1915, will be the receipts from this assessment, placing $110,897.82. This is based upon probable $191,897.30, the amount estimated for general monthly requirements of $18,482.97. Approxi- expenses, in one account, and the $239,871.10 mately $22,500 for contingencies is provided estimated for Federal reserve notes in another. by an estimated unexpended balance of about At the same time a note account was opened $25,000 from the first assessment. This, added with each of the 12 Federal reserve banks and to the amount of the second assessment, $108,- credit given for the amount paid in for notes 447, will give the Board $133,447 to meet its when the assessment was first made, obligations during the next six months. An Under the Federal reserve act, the Board is assessment of one-tenth of 1 per cent to cover directed to make an assessment once in six the $108,447 deemed necessary was voted by months to cover its expenses for the succeedthe Board by agreement to the following reso- ing half-yearly period. There was no actual lution on June 15: basis on which to estimate the first assessment, Whereas under section 10 of the act approved the first payment of which was made on No- December 23, 1913, and known as the Fed- vember 2. It was found sufficient, however, eral reserve act, the Federal Reserve Board after the separation of the general expense acis empowered to levy semiannually upon the count from the note account, to carry the Federal reserve banks, in proportion to their Board to June 30, 1915, the end of the fiscal capital stock and surplus, an assessment sufficient, to pay its estimated expenses, includ- half year. It will be noticed, therefore, that ing the salaries of its members, assistants, the amount levied for a period of six months attorneys, experts, and employees for the was made to carry the expenses to the end of half year succeeding the levying of such as- June, or eight months. sessment, together with any deficit carried There are reproduced below both the conforward from the preceding half year; and Whereas it appears from estimates submitted solidated and detailed estimates upon which and considered that it is necessary that a the July assessment now made by the Board fund equal to one-tenth of 1 per cent of the is based. These provide for carrying over an capital stock of the Federal reserve banks be unexpended balance of approximately $25,000 created for the purposes hereinbefore deanticipated to be held on June 30. Included scribed, exclusive of the cost of engraving in the total expenditures and pledges prior to and printing Federal reserve notes: Now therefore be it June 1,1915, is $23,199.98, for which the Board Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

1, 1915. FEDERAL RESERVE BULLETIN. 119 was obligated prior to November 2, 1914, the Detailed statement as basis of estimate for July, 1915, assessment. date on which it took over so much as it required of the clerical force of the Organization Encumbrances. Estimated Committee. average monthly The following statement was issued by the require- Total to ments Board to the press on June 16: June 1. April. May. July 1 to Dec. 31. The Federal Eeserve Board to-day sent to all Federal reserve banks copies of a resolution PERSONAL SERVICES. levying an assessment of one-tenth of 1 per cent Salaries: Board and its clerks $66,626.55 $7,333.31 $7,333.31 $7,333.31 on gross capital against the several Federal re- Secretary's office 10,827.69 1,436.67 1,470.00 1,500.00 serve banks for the purpose of defraying the Correspondence division.. 5,854.82 641.65 558.32 475.00 Mail and files 2,140. 33 310.00 310.00 310.00 estimated general expenses in connection with Counsel's office 7,737. 76 1,158.33 1,519.44 1,575.00 Division of audit and exthe work of the Board from July 1 to Decem- amination 7,189.98 876.65 1,128.33 1,133.33 ber 31, 1915. This will result in payment of Division of reports and statistics 3,419.98 596.66 541.66 558.33 $108,447. Division of issue 10,676.89 1,739.31 1,872.66 650.00 Telephone operator 348.33 50.00 50.00 50.00 The first assessment was levied on November Messengers 2,653.30 355.00 355.00 355.00 2, 1914, and was for $431,768.40. In this esti- C C h o a n r t w in o g m en e c n ies 417.99 60.00 60.00 1,00 6 0 0. . 0 0 0 0 mate a sum for the cost of Federal reserve 117,893.62 14,557.58 15,198. 72 14,999.97 notes was included. These accounts have since been separated. The present assessment in- NONPERSONAL SERVICES. cludes no estimate for the preparation of Fed- Transportation and subsistence of persons: eral reserve notes, each bank paying for its own Board and its clerks 633.64 288. 62 192.12 200.00 notes. Secretary's office 25.00 Division of audit and ex- Federal reserve banks are requested to make amination 2,263.39 300.04 720.92 800.00 Division of reports and remittance of one-half of the amount of their statistics 10.00 assessment on July 1 and the second half on Messengers (car fare) 15.00 5.00 5.00 September 1. The basis of estimate is the 2,912.03 593.66 913.04 1,040.00 capital stock allotted to member banks figured Transportation of things... 2.93 1.44 at its full value of about $108,447,000. Communication service: Telephone 966.10 60.00 50.00 75.00 Telegraph 2,130.17 234.10 200.00 300.00 Consolidated statement 191 a 5 s , b a a s s s i e s s sm fo e r n t. the estimate for July, Postage 157.00 55.00 50.00 3,253.27 294.10 305.00 425.00 Total encumbrance for month of May, 1915 $18, 480.36 Estimated monthly requirements, July-Decem- Printing, binding, etc 7,119.41 801.24 1,260.85 1,000.00 ber, 1915 18,482.97 Engraving, etc 308.82 250.00 250.00 Advertising 39.15 Increase over May 2.61 Contract repairs 95.42 1.00 .50 Electricity(light and power) 210. 00 30.00 30.00 30.00 Steam (heat) 75.00 10.00 Other(nonpersonal services) 2,180. 09 45.00 83.85 75.00 Total estimated requirements, July-December 10,027.89 1,127.24 1,375.20 1,365.00 1915 110, 897. 82 Total receipts to June 1, 1915 Total nonpersonal (general expenses of board $192, 350. 01 services 16,196.12 2,015.00 2,594.68 2,830.00 Total encumbrances to June 1, 1915__ $147,034.76 Supplies: Estimated require- Stationery 2,790.08 100.93 322.59 300.00 ments, June, 1915_ 20, 000. 00 Periodicals. 134.25 8.00 1.60 20.00 167,034.76 Other 797.33 21.43 48.22 50.00 Estimated unexpended balance first assess- 3,721. 66 130.36 372.41 370.00 ment 25, 315. 25 Equipment: 80, 582. 57 Furniture and office equipment 8,149.99 132.98 314. 55 200.00 Books 72.58 25.00 83.00 Office changes and im- Total capitalisation Federal reserve provements 548.08 banks, June 1 $108, 447, 000. 00 Reimbursable expendi- Rate of assessment to produce $80,576.12_ . 000743 tures: Expenditures and Rate of assessment to produce $81,335.25- . 00075 452 71 Rate of assessment to produce $ 108,447__ . 001 147,034. 7616,860.92 18,480.36 18,482.97 SHERMAN ALLEN, Fiscal Agent. Approved by committee on budget and expenditures as NOTE.—Total commitments to November 2, 1914, inbasis for an assessment of one-tenth of 1 per cent. cluded in tbe total of $147,034.76 to June 1. were F. A. DELANO, $23,199.98. A. C. MILLER,, Committee. SHERMAN ALLEN, JCNE 12, 1915. Fiscal Agent. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

120 EEDEEAL RESERVE BULLETIN. JULY 1, 1915. Gold Settlement Fund. eral reserve banks are listed in the proper columns under the names of the other banks, the Deposits in the gold-settlement fund have total being entered at the right margin, and now reached the sum of $30,540,000. This is each horizontal column thus shows amounts held in gold certificates issued by the Treasand total which the Federal reserve bank owes urer of the United States in denominations of to all the other reserve banks. When the fig- $10,000, payable to the Federal Reserve Board ures from the 12 telegrams have been entered and perforated with the words " Payable only the vertical columns show the amounts and to the Treasurer of the United States or a Federal reserve bank." These certificates are total due from other Federal reserve banks to kept in a safe with two combinations, which the reserve bank named at the head of each safe is placed in one of the larger vaults of the column. Each bank is then charged with the Treasury Department, access to which can only amount due to other Federal reserve banks and be had by two officers of the Board acting to- credited with the amounts due to it from them, gether. the net amount to its debit or credit being carried to its account on the books of the gold- In this issue of the Bulletin is given a sumsettlement fund. A telegram is sent to each mary of the transactions through the fund bank giving the amounts which other Fedfrom May 19 to June 24, inclusive. A total of eral reserve banks report due it, and the net $18,450,000 had been deposited up to the time amount by which it is debtor or creditor at the of the second settlement, made on the morning clearing. Upon receipt of this telegram it of May 27. As a result of this settlement the charges the accounts of other Federal reserve balances of several Federal reserve banks fell banks for the amounts it has reported due to below the required amount of $1,000,000 each, and additional gold deposits were made to the them, and credits their accounts with the amount of $4,400,000, increasing the gold in the amounts which they have reported due to it, fund to $22,850,000. After the settlements of the obligations in each case having been extin- June 10 and 17 additional gold deposits were guished by the operation of settling and the required, and the amount of gold held in the transfer of title to gold held in the goldfund has thus been increased to $30,540,000, at settlement fund. which figure it stood at close of business June 24. In response to a request from a Federal re- On Wednesday evening each Federal re- serve bank, the Federal Reserve Board has serve bank telegraphs to the Federal Reserve agreed to pay to the Treasurer of the United Board the amount due from it to each other States from the gold-settlement fund sums in Federal reserve bank. These telegrams are all multiples of $10,000 for the credit of any rein the hands of the Board early Thursday morn- serve bank's gold redemption fund with the ing, and the figures given are then assembled Treasurer of the United States. on a sheet known as " the checkerboard," which This information has been transmitted to has the names of the Federal reserve banks at the other 11 banks. No request from a Federal the head of 12 columns and also at the left- reserve bank for the transfer of funds other hand margin. From the telegram of each bank than the weekly settlement had before been the amounts which it reports due to other Fed- received. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

121 JULY 1, 1915. FEDERAL RESERVE BULLETIN. Gold settlement fund—Summary of transactions May 19,1915- June 24, 1915, [In thousands of dollars.] B to o n s- . Y N o e r w k. P p d h h e i i l l a - a . - C la le n v d e . - m R o ic n h d - . la A n t t - a. c C a h g i o - . Lo S u t. is. M ap i o n l n is e . - K C s i a a t n s y - . Dallas. c F S i r s a a c n n o - . Total. Preliminary settlement as of close of business May 19,1915: Due to other Federal reserve banks $3,230 $9,589 $840 $395 $1,215 $1,330 $4,368 $1,804 $396 $3,627 $4,057 $1,671 $32,522 Due from other Federal reserve banks 1,687 11,284 1,715 324 1,532 2,931 4,305 1,477 1,482 1,752 1,554 2,479 32,522 Net balance due to fund 1,543 71 63 327 1,875 2,503 6,382 Net balance due from fund 1,695 875 317 1,601 1,086 808 6,382 Initial gold deposits 2,550 1,000 1,000 1,500 1,700 260 1,070 1,330 1,000 2,880 3,010 1,150 18,450 Balance in fund 1,007 2,695 1,875 1,429 2,017 1,861 1,007 1,003 1 2,086 1,005 507 1,958 18,450 Settlement of May 27,1915: Due to other Federal reserve banks 2,817 4,391 1,692 134 527 832 2,927 2,821 1,145 1,641 709 8 19,644 Due from other Federal reserve banks 2,145 9,300 678 363 373 778 2,406 1,351 173 1,065 966 46 19,644 Net balance due to fund 672 1,014 154 54 521 1,470 972 576 5,433 Net balance due from fund 4,909 229 257 38 5,433 Balance in fund after settling. 335 7,604 861 1,658 1,863 1,807 486 —467 o 1,114 429 764 1,996 18,450 Gold deposits 680 500 600 1,470 600 500 50 4,400 Settlement of June 3,1915: Due to other Federal reserve banks 2,203 5,972 1,439 110 277 492 4,871 2,401 127 689 357 47 18,985 Due from other Federal reserve banks 2,792 4,268 2,323 342 566 367 2,902 3,828 96 1,169 321 11 18,985 Net balance duf to fund 1,704 125 1,969 31 36 36 3,901 Net balance due from fund... 589 884 232 289 1,427 480 3,901 Balance in fund after settling. 1,604 5,900 2,245 1,890 2,152 1,682 —883 a 2,430 1,083 1,509 1,228 2,010 22,850 GokTdeposits 3,000 Settlement of June 10,1915: Due to other Federal reserve banks 2,128 5,176 874 92 515 599 8,149 6,286 91 858 472 114 25,354 Due from other Federal reserve banks 2,634 7,906 851 248 625 472 4,015 6,028 232 1,598 714 31 25,354 Net balance due to fund 23 127 4,134 258 83 4,625 Net balance due from, to fund. 506 2,730 156 110 141 740 242 4,625 ( Balance in fund after settling. 2,110 8,630 2,222 2,046 2,262 1,555 -2,017o| 2,172 1,224 2,249 1,470 1,927 25,850 = Gold deposits 420 3,100 3,520 Settlement of June 17,1915: Due to other Federal reserve banks 1,307 10,038 2,162 60 677 684 4,349 4,038, 158 1,803 495 687 26,458 Due from other Federal reserve banks 2,771 5,007 1,720 289 831 878 8,279 3,735 220 2,068 647 13 26,458 Net balance due to fund 5,031 442 303 674 6,450 Net balance due from fund 1,464 229 154 194 3,930 62 265 152 6,450 Balance in fund after settling. 3,574 3,599 1,780 2,695 2,416 1,749 5,013 1,869 1,286 2,514 1,622 1,253 29,370 Gold deposits 600 570 Settlement of June 24,1915: Due to other Federal reserve banks 2,841 3,479 2,512 171 717 417 3,982 2,928 339 562 305 166 18,419 Due from other Federal reserve banks 2,486 4,358 1,595 164 610 249 3,454 3,172 156 1,198 951 26 18,419 Net balance due to fund 355 917 7 107 168 528 183 140 2,405 Net balance due from fund . 879 244 636 646 2,405 B alance in fund after settling. 3,419 4,478 863 3,288 2,309 1,581 4,485 2,113 1,103 3,150 2,268 1,483 30,540 Overdrawn. 98402—15 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

122 FEDERAL BESEEVE BULLETIN. JULY 1,1915. Meeting of Governors of Reserve Banks. In relation to the re discounting of commercial paper, it was agreed that each governor The Fourth Conference of Governors of the would send to the other 11 banks copies of the Federal reserve banks was held in Chicago at forms of application and financial statement the Blackstone Hotel on June 14 to 16, into be required after July 15 next, in accordance clusive, this being the first conference not held with the provisions of Circular 3, Regulation in Washington. All the governors were in B, of the Federal Reserve Board, on this subattendance with the exception of Gov. Kains, ject. of the San Francisco Reserve Bank, which was Plans were also agreed upon for the preprepresented by Mr. Eussell Lowry, deputy govaration of standard forms for municipal warernor of the bank. rants, the extension of facilities for trans- Mr. Strong, who is chairman of the conferferring funds, and recommendations concernences for the current year, presided, and Mr. ing the proper method of computing dividend Curtis, counsel and secretary of the New York payments. Reserve Bank, acted as secretary. The chairman was authorized to invite a During the sessions Mr. A. C. Miller, of member of the Federal Reserve Board to atthe Federal Reserve Board, attended on two tend future conferences of the governors, esoccasions by invitation, and took part in the pecially to discuss such topics as may be sugdiscussion. Mr. J. B. Forgan, president of gested by the Board. the Federal advisory council, was also present Recommendations indicating the attitude of for a brief conference with the governors, and the governors were also made by the confer- Mr. J. A. Broderick, chief of the division of ence to the Federal Reserve Board with refaudit and examination, Federal Reserve erence to the following subjects: Board, assisted in the discussion of the items relating to records and accounts. 1. Rebating interest on rediscounts. 2. Discount rates for short-term paper of The conference had under consideration and less than 15 days' maturity. disposed of 76 items under 24 principal topics. 3. Cooperation with national-bank exam- Among other actions taken by the conference iners in the examination of member banks. were the following: 4. The principles to be adopted in the ex- The chairman was authorized to appoint amination of State bank members, both for regular and for admission examinations. a representative of all the 12 banks to act with 5. Cooperation with State authorities in such the representative of the Federal Reserve examinations. Board appointed to audit the accounts of the 6. Digest of rulings of Federal Reserve gold settlement fund. Board. The executive committee was authorized to 7. Discount rates. 8. Purchase of total issues of municipal call a meeting of auditors or accountants of warrants of small municipalities. the reserve banks for the discussion in detail 9. Amortization of organization expenses. of daily transactions, records and reports, cost 10. Operation of the gold-settlement fund. of printing notes, analysis of operating ex- 11. Purchase of Government bonds. penses, standard form for analysis of expenses 12. Purchase of trade acceptances. 13. Deposit of money in the Treasury to the and income, establishment of unit cost or credit of Federal reserve agents. standard of comparison, and other similar 14. Appointment of committee to confer on topics. general Subtreasury relations. It was also voted to be the sense of the meet- 15. Indorsement of paper and gold order ing that the reserve banks should loan men certificates held by Federal reserve agents for account of Federal reserve banks. from their respective forces to assist the ex- 16. Issuance of letters of credit by national amining staff of the Federal Reserve Board banks. in conducting examinations of banks applying 17. Establishment of branches of Federal for membership in the system. reserve banks. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JCLY 1, 1915. FEDERAL RESERVE BULLETIN. 123 In addition to the topics referred to in the spectively, of the parent bank and the Federal foregoing, the following were also discussed: Reserve Board. The reserve bank shall designate one of the directors as manager. Relations between Federal reserve banks. Open-market operations. While the Board has carefully considered Intradistrict collections. the principles which should be observed in Interdistrict collections and clearings. opening a branch of the Federal Reserve Bank Foreign exchange. of Atlanta, it is not ready at this time to pro- National bank reserves. mulgate any general rules applicable to other Retirement of Federal reserve notes. points, as it regards the proposition as some- In place of the subcommittee which had prewhat experimental. viously had in charge the matter of arranging It is felt that the experience gained in this the intradistrict collection systems and the case will have an important bearing upon the gold settlement fund recentty established at future development of the branch-bank idea. Washington, the conference voted to create a Incidentally it may be mentioned that the standing executive committee to be composed banks comprised in the New Orleans Clearing of Messrs. McDougal, Aiken, Strong, Rhoads, House Association have undertaken to make Fancher, and Seay, of which Mr. McDougal good for the first year of operation any difwas appointed chairman. It is understood ference between the expense of conducting the that this committee will hold meetings from new branch bank now proposed and the revtime to time to act on such matters as have enues to be derived from it. been referred to them by the conference, or No definite assignment of territory has been as they may be requested to take up by the made to the New Orleans branch, but it is Federal Reserve Board. understood that it is intended to assign to it The conference adjourned at the call of the the member banks of Louisiana and Mississippi chairman with the understanding that the next in district 6, and those of Mobile and Baldmeeting would be held in some other Federal win Counties, Ala. The banks in the terrireserve city and probably toward the end of tories so segregated will deal with the New the summer. Orleans branch only. The Board has directed that the New Orleans Branch at New Orleans. branch shall conduct only operations in the discount and purchase of commercial paper and The Federal Reserve Board in a press state- acceptances and those relating to clearing, colment issued June 24 announced that it has ap- lection, and exchange transactions and transproved the request of the Federal Reserve fers of funds. The issue of notes and the func-. Bank of Atlanta to open a branch at New tion of rediscounting with other Federal re- Orleans, La. Its action was taken in accord- serve banks, the purchase of United States ance with the provisions of section 3 of the bonds and notes, and dealings in warrants of Federal reserve act, which reads as follows: "municipalities" are to be carried on solely Each Federal reserve bank shall establish by the Federal Reserve Bank of Atlanta. All branch banks within the Federal reserve disoperations are to be reported promptly to the trict in which it is located, and may do so in Federal Reserve Bank of Atlanta, and the Fedthe district of any Federal reserve bank which may have been suspended. Such branches shall eral Reserve Board is to be advised of the same be operated by a board of directors, under rules without delay. The transactions of the New and regulations approved by the Federal Re- Orleans branch will be considered as the transserve Board. Directors of branch banks shall actions of the Federal Reserve Bank of Atpossess the same qualifications as directors of lanta and so reported in the statements of the the Federal reserve banks. Four of said dilatter. rectors shall be selected by the reserve bank and three .by the Federal Reserve Board, and It is assumed that the provisions of the Fedthey shall hold office during the pleasure, re- eral reserve act require that of the seven direc- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

124 FEDERAL RESERVE BULLETIN. JULY 1, 1915. tors two shall be bankers and two business men York, Philadelphia, San Francisco, and St. (not necessarily bankers), and that the three Louis. Government directors shall conform, so far as The matter of establishing such a rate has possible, to the same requirements as those of been before the Board for some time past, and the " C " class directors of the parent bank. A has received very careful investigation. It manager will be appointed from among the was discussed at the recent conference of govdirectors. ernors in Chicago, and the general idea of such The terms of office of the first directors are a rate was approved. In the opinion of the set at one year, those first appointed to hold Board the introduction of the plan just at the office for one year from January 1,1916. beginning of the crop-moving season may re- By-laws, salaries, fees, etc., are to be subject sult in extending material assistance to banks to the approval of the Federal Reserve Board. which desire special accommodation for very Transactions in foreign exchange on behalf short periods. The short-term rate is believed of the New Orleans branch are to be the sub- likely to be an effective substitute for call loans ject of later regulations. based on collateral, and is in line with the No other Federal reserve bank has approved policy of the Board heretofore established of a request for branches, and the Board does not progressively decreasing the rate of discount expect to take further action until more ex- as the maturity of the paper presented is shortperience has been gained. ened and as its liquidity correspondingly increases. The new plan will, it is thought, be Discount Rates. particularly useful to banks that are members Discount rate of each Federal reserve bank in effect of the clearing system and desire from time to on June 26, 1915. time to obtain short-term accommodation for the maintenance of their balances with the re- Maturi- Maturi- Agricul- Fede b ra a l n k re . serve D ch a l a a t n e st g o e f d t M i a e y s a s t o u a f r n i 3 - d 0 d o t a v ie y e s r s o 3 t f o 0 d o t a v ie y e s r s o 6 t f o 0 p l t i a u v p r e a e - l r s t a o o n c v k d er serve banks. of rate. less. 60 days, 90 days, 90 days. inclusive. inclusive. Aldrich-Vreeland Currency. By July 1, 1915, practically all of the Emer- N Bo ew st o Y n ork J F u e n b e . 1 1 8 8 4 4 4 4 4| gency, or "Aldrich-Vreeland " Currency issued Philadelphia Jan. 28 4 4 4i after the declaration of the European war will Cleveland Feb. 6 4 4 4i Richmond June 25 4 4 4i have been retired. In this connection the fol- Atlanta Apr. 30 4 4 4i Chicago Jan. 23 4 4 *l lowing figures may be interesting: The first St. Louis Apr. 22 4 4 4& issue of notes was made during the first days Minneapolis May 18 4 4 5 Kansas City June 18 4 4 4| of August, 1914. By August 8 the amount ap- Dallas Feb. 4 4 4 41. . San Francisco May 8 3£ 4 4£ proved by the Secretary of the Treasury for issuance " had reached $100,068,350. This Authorized rate of acceptances, 2 to 4 per cent. amount was increased on September 5 to $240,- On June 24 the Federal Reserve Board approved a 979,960, on October 3 to $344,779,640, on Norate of 3 per cent for loans of 10 days' maturity at vember 7 to $379,060,715. By February 13 the Federal reserve banks of New York, Philadelphia, the aggregate approvals had reached $386,- San Francisco, and St. Louis. 444,215, but by that time $341,067,073.22 of the On March 10 the Federal Reserve Board fixed the total amount issued had been retired, leaving following rates for rediscounts between Federal re- the net amount outstanding February 13, 1915, serve banks: 3£ per cent for maturities of 30 days only $45,377,141.78. The maximum amount and less; 4 per cent for maturities of over 30 days outstanding at any time was reached the latter to 90 days, inclusive. part of October. The redemptions began in the middle part of October. By November 28, Short-term Discount Rate. $101,602,066 had been retired; by December The Federal Reserve Board in a press state- 26, 1914, redemptions had amounted to $217,- 101,614; by January 2, 1915, the total redempment issued June 24 announced a new departions had amounted to $238,698,483; February ture with regard to discount rates, approving a 6, $326,203,992; March 6, $354,597,268; April 3, rate of 3 per cent for loans of 10 days' ma- $368,987,024; May 1, $376,097,462; June 5, turity at the Federal reserve banks of New $380,701,044. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

125 JULY 1,1915. FEDERAL EESEEVE BULLETIN. INFORMAL RULINGS OF THE BOARD. Below are reproduced letters sent out from It appears that in not a few instances memtime to time over the signatures of the offi- ber banks which make such applications are indebted to the Federal reserve bank of their cers of the Federal Reserve Board, which condistrict for accommodation, so that the latter tain information believed to be of general has a very decided interest of its own in their interest to Federal reserve banks and member action. banks of the system: For this and other reasons the Board has voted that in the future when a member bank Branches of National Banks. desires to reduce its capital stock it shall be Your letter of May 7 relative to the First required first to make application to the Fed- National Bank of and its branch bank eral reserve bank of its district, and, after has had the consideration of the Federal Re- obtaining its approval, to present its case to serve Board. the Comptroller of the Currency, the matter I am attaching hereto copy of opinion, dated finally going with the Comptroller's favorable September 15, 1909, by former Attorney Gen- or adverse recommendation to the Federal eral George W. Wickersham, dealing with the Reserve Board as at present. status of branch banks. It will be observed It is recommended that you notify each of that the Attorney General reaches the conclu- your member banks of this change in practice. sion that— JUNE 2, 1915. uNo matter how many branches the State bank may have, upon compliance with the pro- Deposit of Trustee Funds. visions of section 5154, Revised Statues, it be- Your letter of June 1, inquiring on behalf comes a national banking association, with the of a member bank whether it is necessary for same powers and privileges * * * as are such bank to deposit cash owned by it as prescribed for other associations originally or- trustee in another institution, has been reganizing as national banking associations," ceived. In reply you are advised that the Board has and that he treats the branch banks as having considered this matter and is not disposed to no separate corporate existence. make such a requirement. Without discussing, therefore, the question Under Regulation H it does, however, call submitted from a standpoint of bookkeeping, it for the segregation of such trust funds, they would seem to be necessary for the Federal being carried in a distinct account in the case Reserve Bank of St. Louis in all cases to treat of each trust. all transactions, either of a parent bank or one of the branches, as a transaction of the cor- ] JUNE 3, 1915. poration. In this view the reserve to be main- Trust Powers. tained should be based upon the aggregate deposits of the parent bank and its branches, and Your letter of May 17, relative to the apthe capital-stock subscriptions and dividends plication of Kentucky member banks for paid on capital stock should be treated in the fiduciary powers, has been given due considsame manner. If, as a matter of bookkeeping eration. In answer, it is requested that you convenience, your bank desires to carry sep- forward all applications filed by national arate checking accounts, there would seem to banks for permission to act as executor, trustee, be no legal objection to this course being fol- etc., to this Board. The Board, in the last lowed. analysis, must determine whether or not to grant these permits in the light of the informa- MAY 22, 1915. tion before it. It is, therefore, the Board's wish that all Federal reserve banks comply Reducing Capital Stock. with the terms of the regulations already is- The Federal Reserve Board has considered sued and submit all applications for its conyour recent letter relative to the method of sideration. taking action on the application of member The Board desires to have your opinion in banks for reduction in capital stock and has each case as to whether the applying bank is also given attention to letters received on the worthy, from a business standpoint, to be same subject from other Federal reserve agents. vested with the powers applied for, even if Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

126 FEDERAL RESERVE BULLETIN. JQLZ 1, 1915. your views of the State law should lead you In reply you are informed that no authority to refrain from recommending favorable ac- from the Federal Reserve Board is necessary, tion. unless you wish to conduct a business in acceptances in excess of 50 per cent of your capital JUNE 4, 1915. and surplus. Timber as Note Security. JUNE 14, 1915. In reply to your letter of the 7th instant, I am authorized by the Board to say that we do Acceptances. not feel that it would be a safe policy for In reply to your letter of May 26, addressed Federal reserve banks to look upon* timber to the Governor of the Federal Reserve Board, standing upon tracts of land as quick assets, I beg to state that you are mistaken in thinksuch as manufactured goods in the hands of a ing that the Board has restricted the Federal manufacturer or merchandise in the hands of reserve banks' discount privilege to acceptances a jobber. While it is true that there are times pertaining " to the original transactions only " when timberlands, that have been thoroughly and that the Federal reserve banks could not cruised and reported upon by competent ex- discount renewals. perts, are readily salable, there are other condi- This is not the case. Whenever a member tions relating to properties of this kind which bank accepts " drafts drawn upon it and growmust be taken into consideration. Forest fires ing out of transactions involving the importasometimes destroy a good deal of standing tim- tion or exportation of goods having not more ber, and sometimes wind storms greatly dimin- than six months' sight to run" the Federal ish the value of such properties. reserve banks may discount the same, provided The precedent would be a dangerous one, as that at the time of the discount they do not run owners of coal and ore lands might ask to have more than three months. If the transaction has not been liquidated by the time the first their coal and ore in the ground appraised on acceptance matures, and the member bank, a royalty basis, and ask to have paper, based under the law, may in that case renew the acupon their holdings of such lands, made eligible ceptance, there is no reason why the Federal for discount at Federal reserve banks. reserve bank may not discount such renewed The Board is clearly of the opinion that acceptance, though, of course, the Federal rethere is nothing in the act, or in good banking serve bank may not engage in advance to dispractice, that would permit of the classificacount any renewals. tion of uncut timber or unmined minerals as quick assets. JUNE ie, 1915. JUNE 11, 1915. Deposits as Loans. In reply to your letter of May 22, addressed Trust Company Branches. to the Federal Reserve Board, permit me to Your letter of June 11, with reference to the point out to you that the ruling of the Compregulations just issued covering the terms troller does not imply that deposits of national under which State banks and trust companies banks with nonmember banks are to be conmay become members of the Federal Reserve sidered as " loans." It says only that " all de- System, is received. posits of a national bank with nonmember I note your request to be advised whether a banks which are in excess of 10 per cent of its trust company having branches is eligible for capital and surplus are to be reported as exmembership, and whether such trust company cessive loans." Inasmuch as the law plainly as a member may maintain the branches as at states that " except as thus provided, no mempresent. ber bank shall keep on deposit with any non- In reply you are informed that both quesmember bank a sum in excess of 10 per cent of tions should be answered in the affirmative. its own paid-up capital and surplus," the JUNE 12, 1915. Comptroller has no choice but to enforce this requirement of the act; and while the Board Authority to Accept. sympathizes very much with the embarrassing Your letter of June 11, relative to accept- position in which the banks of South Dakota ances, and asking if it is necessary to have au- have been placed it does not see how, under the thority from the Federal Reserve Board to act, any different ruling can be suggested, undertake acceptance business, is received. JUNE 16, 1915. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JULY 1, 1915. FEDERAL RESERVE BULLETIN. 127 Money-Order Business. Purchase of United States Bonds. Your letter of June 8, addressed to Hon. I am directed by the Federal Keserve Board, Charles S. Hamlin, has been taken under care- in answer to your letter of June 9, to state ful advisement by the Board. I am instructed that the law requiring the purchase of United to say that the Board feels that the Federal States bonds does not become effective until reserve banks could not at this time go into the two years after the passage of the Federal money-order business. Under the law it does reserve act; that is to say, not until the year not seem that they have authority to do so, which begins December 23, 1915. You will JUNE 17, 1915. find this provision in section 18 of the Federal reserve act. After December 23, 1915, any Collateral Trust Notes. member bank desiring to retire the whole or Your letter of June 11, relative to the redis- any part of its circulating notes may file an count of manufacturers' notes secured by bills application expressing a desire to sell its bonds receivable, has been carefully considered. at par and accrued interest, and the Federal In reply to the question you have submitted, Reserve Board may, at its discretion, require it is the opinion of the Board that a note of a Federal reserve banks to purchase such bonds manufacturer secured by his bills receivable is from member banks whose applications have most desirable paper, and should certainly not been filed with the Treasurer at least 10 days be debarred as a "collateral trust note." It before the end of any quarterly period at would be entirely unreasonable to say that the which the Federal Reserve Board may direct note of a manufacturer is good when it is un- the purchase to be made. secured and bad when it is secured. When the You understand, under the provisions of the note is issued for the purpose of carrying col- law, that if there were more than twenty-five lateral for a speculative purpose or collateral millions of bonds offered for sale in any one in the nature of stocks and bonds (other than year the amount that would be purchased from securities of the United States), the note would any offering bank would be proportionately have the character of a " collateral trust note " decreased. The law is tolerably clear on this of a character rendering it ineligible for redis- matter, and you will find a ruling of our count. counsel in this connection on page 99 of the June issue of the FEDERAL RESERVE BULLETIN. JUNE 17, 1915. JUNE 18, 1915. Pig Iron as Security. Your letter of June 8 has been given careful Silver Certificates for Notes, consideration by the Board. At a meeting of the Federal Reserve Board In reply to your question whether the note on January 12 it was voted that, inasmuch as of a furnace company would be eligible if the silver certificates are now to all intents and concern had manufactured a stock of pig iron purposes lawful money, they may be received for later delivery on a large contract and used by Federal reserve agents when offered by the pig iron as security for the note during part Federal reserve banks for the purpose of reof the period previous to delivery, you are adducing their liability for Federal reserve notes vised that the note is eligible under the circumoutstanding. stances, inasmuch as a sale has been made and the carrying of the material is not for speculative purposes. On general principles, we Endorsements. might say that where goods are used as collat- In reply to yours of the 15th instant, in the eral in the natural course of business (produc- opinion of counsel to the Board it is necessary tion or distribution) collateral of this kind that any notes held by the Federal reserve would certainly not make the note ineligible. agent as security for Federal reserve notes From a banking point of view, however, it is should have the indorsement of the Federal necessary to scrutinize each case in order to as- reserve bank hypothecating same. certain whether or not it is a matter of legiti- The Federal reserve agent should be placed mate business or speculation, and also whether in a position to collect any notes maturing in or not the goods offered as collateral are readily his possesion and should have the indorsemarketable; but this, of course, is a general ment of the Federal reserve bank on such notes question of banking prudence, which must be in order to fix definitely the liability of such left to the judgment of those in charge of the bank. Indorsements may, of course, be made member banks and the Federal reserve banks, in blank if desired. JUNE 17, 1915. JANUARY 23, 1915. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

128 FEDERAL RESERVE BULLETIN. JULY 1,1915. THE PAN AMERICAN FINANCIAL the Congress of the United States will act CONFERENCE. favorably upon this suggestion. I respectfully request that you make a similar recommendation to your Government. I have suggested The general results of the Pan American that the city of Washington be made the place conference which are likely to receive greatest of meeting for the annual sessions of the Pan attention and study are found in the recom- American Financial Conference merely bemendations made: cause I think that it is, on the whole, the most (1) With reference to the future work grow- convenient place therefor, and that it is possible to secure a larger attendance of our iming out of the conference; portant financiers and business men in Wash- (2) With reference to actual legislation of a ington than elsewhere. Moreover, the Pan general sort for the purpose of carrying out American Union has a beautiful building in the objects of the conference; and Washington, where all the necessary facilities (3) With reference to the commercial meas- for the conference can be obtained. It is also important, I think, to have the Pan American ures designed to be actually taken as the result Financial Conference cooperate with the Pan of the conference. American Union. I shall be glad, however, if The three specific points relating to future you will frankly inform me whether you think work which will stand out as a result of this it would be better to hold the financial conference at some other place than Washington. conference are (a) the suggestion that a regular board or other division of the Pan Ameri- I earnestly recommend that the minister of finance of your country appoint at the earliest can Union at Washington be established for possible moment the nine members of the interthe purpose of taking charge of and reporting national high commission, proposed in the reupon financial conditions throughout the West- port of the committee on uniform legislation. ern Hemisphere; (b) the recommendation that I inclose several copies of that report. there be established an "International High In order that this high commission may have the status to which its importance and Commission on Uniform Legislation"; and dignity entitle it, I think that the minister of (c) the suggestion that there be an annual finance of each country should himself accept Pan American conference. The first of these the chairmanship of the commission in his suggestions is obvious in its purpose. It is a country. This suggestion has been made to plan for maintaining and disseminating regu- me from many quarters, and I think it is an admirable one. The Secretary of the Treasury lar information regarding financial conditions of the United States will act as chairman of the throughout South and Central America and commission for the United States. If the minthe United States. With reference to the sec- isters of finance of the several countries will ond and third points, probably the most clear- adopt this suggestion, the commission will at cut explanation is that furnished by Hon. Wil- once have a prestige and dignity which will add much to its effectiveness. The high comliam G. McAdoo, Secretary of the Treasury, mission of each country should promptly orin a letter written by him to each of the deleganize and appoint a secretary general, who gations from Central and South America im- should at once assume the duties of his office mediately prior to their departure from the and get into communication with the high United States. In this letter Mr. McAdoo commissions appointed by the several countries. said: There should be^ a meeting of the Interna- The conference demonstrated conclusively to tional High Commission as early as possible at my mind that it will be of immense advantage some suitable place in Central or South Amerto all the Republics of the American Continent ica. I would suggest the city of Buenos Aires to hold an annual Pan American financial con- as being the most convenient point for this ference in Washington. I am going to ask the purpose, and that the date for the meeting be President of the United States to strongly rec- the 1st day of November, 1915. This date ommend this to the next session of the United would be very appropriate for the members of States Congress and ask for a sufficient appro- the United States commission, as it will be priation to carry on the work. I am sure that about one month before the next session of the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JULY 1,191? FEDERAL RESERVE BULLETIN. 129 United States Congress, which convenes on tion to enable the High Commission of each the 6th of December, 1915. Thus an oppor- country to carry on its work. I shall beg the tunity would be given to submit to that session President of the United States to make similar of the United States Congress the conclusions recommendations to the Congress of the United reached by the International High Commission. States, and I am satisfied that there will be no It is, of course, essential that the work of the difficulty in securing from the Congress of the several High Commissions be coordinated and United States the necessary appropriation for have general direction from some common point. this purpose. The creation of an International I would suggest that until there can be a meet- High Commission is certain to produce ading of the International High Commission, as vantageous results in all the countries conproposed, the secretary general of the United cerned. I respectfully urge upon you the im- States commission act temporarily as secretary portance of these suggestions, and beg that you general for the International High Commis- will express to your Government my hope that sion, and I shall be greatly obliged if the min- it will take early and favorable action thereon. ister of finance of each country will cable me as soon as possible if this suggestion is ac- The ideas developed in the course of the ceptable to his country. conference with reference to the uniform legis- The secretary general of the United States lation to be adopted throughout • all of the commission will have his headquarters in the States of North, Central, and South America United States Treasury Department at Washare most clearly expressed in that part of the ington, and will be immediately under the direport of the committee on uniform laws rerection of the Secretary of the Treasury of the United States. Every effort will be made lating to the actual measures of legislation to keep in touch with the general situation and proposed. Parts of the report which bear to arrange for the meeting of the International upon this question are as follows, beginning High Commission when a permanent organizawith an enumeration of work to be done: tion can be effected. I shall greatly appreciate it if the minister of finance of each country 1. The establishment of a gold standard of will cable me at the Treasury Department in value. Washington the names of the members of the ^ 2. Bills of exchange, commercial paper, and High Commission for his country as soon as bills of lading. they are appointed, in addition to the name of (Note the results of the two European conthe secretary general, and state whether the ferences on these subjects.) city of Buenos Aires is agreeable for the first 3. Uniform (a) classification of merchanmeeting of the International High Commission dise, (b) customs regulations, (c) consular and if November 1 is acceptable as the date for certificates and invoices, (d) port charges. said meeting. (See the report adopted by the Fourth In- Each High Commission should, as soon as ap- ternational American Conference, at Buenos pointed, take up and consider carefully the re- Aires, 1910.) port made by the committee on uniform legis- 4. Uniform regulations for commercial travlation to the Pan American financial confer- elers. ence, dated May 29, 1915, copies of which are Consider in this relation the question of a inclosed, and should send to the secretary gen- certificate to be issued by the proper departeral, Treasury Department, Washmgton, D. C, ment of the Government of the country from the fullest possible information as to the ex- which the traveler comes that the bearer is a tent to which the recommendations of the com- bona fide commercial traveler, this certificate mittee on uniform legislation above referred to to be properly viseed. are regarded favorably by their Governments, 5. To what extent further legislation may together with any suggestions they have to be necessary concerning trade-marks, patents, offer. and copyrights. I would also respectfully urge upon your (See the treaties adopted by the Fourth In- Government the importance of making such ternational American Conference.) provision as may be necessary to give the High 6. The establishment of a uniform low rate of Commission an official status and standing, and postage and of charges for money orders and also for the making of a reasonable appropria- parcels post between the American countries. 98402—15 3 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

130 FEDERAL RESERVE BULLETIN. JULY 1, 1915. 7. The extension of the process of arbitra- portation facilities between the leading ports tion for the adjustment of commercial dis- in South America and the United States are putes. of vital importance. The conference unani- ORGANIZATION. mously adopted the following resolution: 1. That for the purpose of carrying into effect Resolved, That it is the sense of this conferthe resolutions of the conference, and particuence that improved ocean transportation facililarly for bringing about uniformity of laws ties between the countries composing the Pan on the subjects embraced in those resolutions, American Union have become a vital and imthere be established an International High Comperative necessity, and that every effort should mission, to be composed of not more than nine be made to secure at the earliest possible momembers, resident in each country, to be apment such improved means of ocean transporpointed by the minister of finance of such tation, since it is of primary importance to the country. The aggregate members thus apextension of trade and commerce and improved pointed shall constitute the commission. financial relations between the American Re- 2. That for the purpose of aiding the In- publics. ternational High Commission and coordinating its work there be created in the Pan Ameri- With reference to postal facilities, the Postcan Union a bureau, whose chief shall receive master General of the United States submitted a salary of not less than $5,000 gold per anthe following suggestions: num; and it is recommended that, in view of his initiative in bringing about the conference, The Postmaster General of the United States the governing board of the Pan American under date of October 17, 1914, addressed to Union invite the Hon. William G. McAdoo, the postal authorities of each of the countries Secretary of the Treasury of the United and colonies of the Western Hemisphere t<> States, to suggest the name of the first chief which our domestic letter rate did not then of this bureau. Expenses of the bureau, in- apply a proposal on the part of this Governcluding the salaries of the chief and his as- ment to enter into conventions establishing a sistants, to be paid by the Pan American 2-cent letter rate—the domestic rate—from the Union, in whose budget a corresponding in- United States to those countries if they would crease shall be included. agree that letters coming from their countries 3. The American Governments are requested to the United States should bear their domestic to instruct their diplomatic and consular offi- rate. This offer upon the part of the United cers and their commercial attaches to cooper- States postal administration still stands and it ate with the International High Commission is intended in the near future to again address and with the bureau. a communication to each country renewing the The bureau shall be authorized to obtain in offer. each country such expert assistance as may be There is now pending an offer to enter into necessary to the prosecution of its work, the a convention for the exchange of money orders expenses thus incurred to be treated as a part with each country of Central and South of the expenses of the bureau. America with which we do not now transact 4. The bureau shall make to the governing such business, with the exception of two r board of the Pan American Union, for dis namely, Guatemala and Venezuela, which at tribution among the Governments concerned, this time have no domestic money-order system,, and to the International High Commission, an and consequently could not exchange remitannual report. tances in that form with the United States. It is the purpose of the Postmaster General to re- As for immediate economic measures to pronew in the near future the invitation which he mote better relationships between North, Cenhas extended to the countries referred to, to tral, and South America, probably the most enter into money-order exchange conventions important were those relating to the improve- with this country as early as practicable. ment of communication. Both better shipping The Postmaster General of the United States is also examining the terms of the parcels-post facilities and better postal arrangements were conventions in force between the United States recommended. It was the unanimous opinion and the several countries of Central and South of the conference that improved ocean trans- America with a view to removing all obstacles Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JULY 1, 1915. FEDERAL RESERVE BULLETIN. 131 that it is practicable to remove in the way of re- tries. The group committees now appointed strictions embodied in such conventions which will serve until the convening of the Pan interfere with the freedom of transmission of American Financial Conference of 1916, unless parcels, etc. relieved from further service by the Secretary The things above indicated are those which of the Treasury of the United States. the Postmaster General of the United States I would suggest that the delegates from your is anxious to do and have done in order to country continue as a group committee for bring about better postal relations between this your country, so that in like manner our busicountry and the respective countries of Latin ness men and financiers may be able to apply America with a view to increasing the trade to you for reliable information concerning relations between the countries of the Western matters affecting business or finance in your Hemisphere for their mutual advantage. country. The participation of the Federal Reserve Subsequent to the close of the conference Mr. Board in the conference consisted in work McAdoo made a recommendation for an andone by the several members of the Board in nual Pan American Financial Conference and connection with the various group committees for immediate and continued cooperative efto which they were assigned, as well as in conforts, which have already been quoted. He nection with the general committees on which also suggested a plan for the maintenance of some of the members of the Board served; but the work of the several group committees the governor of the Board, Hon. Charles S. which had been assigned to the various South Hamlin, and Hon. Paul M. Warburg, member American countries represented in the followof the Board, delivered addresses at public sesing language: sions of the conference. These addresses are Much of the success of the conference re- reprinted in this issue of the Federal Reserve sulted from the division of the representatives Bulletin. of the United States into 18 group committees, The conference convened in Washington on one of which was assigned to the delegation from each of the visiting countries, thus bring- Monday, May 24, and continued in practically ing about a group conference between the dele- continuous session until the close of that week gates of each country and a committee of rep- The first day was naturally devoted to organiresentative financiers and business men of the zation, and committees were established one United States, with a resulting interchange of for each of the South American countries repviews at close range and under conditions where the problems of each country were inti- resented, including in its membership a nummately discussed and the difficulties in the way ber of delegates representative of that country of more extended trade, commerce, and inter- itself, and a number of American delegates who course between them were developed and the were to act in an advisory capacity. In addiremedies therefor ascertained and considered. tion to these special committees or " groups,'* It is clear that it will be to the interest of all concerned if these group committees shall be there were named certain general committeescontinued. It is my purpose, therefore, to including one on uniform laws, one on transappoint a group committee in this country to portation communication between the United which will be assigned the specific duty of States and South America, and certain others. keeping in touch with the delegates from your Many interesting reports with reference to the country and act as the medium in the United existing conditions and financial needs of the States through which you may secure reliable information or submit matters for the con- different countries represented in the confersideration of financiers, merchants, or manu- ence were presented. To review these would facturers in the United States. This com- be a matter of very great detail, and would mittee will, of course, have no official status, but amount to a study of the existing economic will act as a voluntary organization for the purand financial conditions prevalent in each such pose of fostering closer financial and commercial relations between our respective coun- State throughout South and Central America. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

132 FEDEKAL RESERVE BULLETIN. JULY 1, 1915. Future of American Credit. Our sufferings originated in disturbances of three kinds—of shipping, of trade, and of credit. Hon. Paul M. Warburg, member of the Fed- These three phases of our economic life are so eral Eeserve Board, delivered the following closely interrelated that a.breakdown of one immediaddress before the Pan American Financial ately affects the other. A collapse of credit must interrupt trade, and therefore shipping. On the other Conference, at Washington, D. C, on May 25: hand, disruption of shipping and trade necessarily It is a great honor to be permitted to speak before disorganizes credit, crippling, as it does, the banking a conference including the eminent leaders of gov- machinery which rests on the fulfillment of contracts, ernment, finance, and business of an entire continent. remittances, and payments based on commercial trans- It must be confessed, however, that to address so dis- actions. tinguished an audience upon a topic as difficult as When in the face of untoward events actual experithe future financial course of the nations of America ence affords a definite standard by which to judge is a task to be undertaken only with great diffidence cause anc| effect it seems easy and often gratuitous and hesitation. for the critic to state what steps should have been We meet here deeply impressed by the unparalleled taken. Retrospect is easier than forecast. Still, it struggle which involves all the leading European na- is only by such analysis that we may hope to avoid tions and conscious of the fact that we are witness- similar mistakes in the future. ing the beginning of one of the most important trans- Reviewing, then, last summer's events upon these formations in the world's history. assumptions we may say that disruption of shipping, We can not at this time forecast whether the out- trade, and credit in the countries of this hemisphere come of this struggle will be a drastic revision of the might have been less disastrous if, instead of relying world's map or wThether national lines will remain exclusively upon Europe for their shipping and credit substantially unchanged. But we already know that facilities, the American nations had begun in time to the economic consequences of this unhappy strife will develop and organize their own large resources. be far-reaching and will vitally affect the future It is not within the purview of this address to economic development of our own hemisphere. elaborate the most interesting and important question, The object of this address is to attempt to crystal- What American nations might have done in the past lize some thoughts that must have come to us all who or what they should do in the future in order to sehave stood in awe and amazement watching the sud- cure their own transportation facilities independent den outburst and rapid spread of this disastrous con- of those of Gthers. Confining ourselves to the subject flagration across the Atlantic. of credit and banking, we may say with confidence Before presenting these thoughts to you, on behalf that had the United States enacted and put into opof the Federal Reserve Board I beg to express the eration three years ago its Federal Reserve System great satisfaction that my colleagues and I feel at not only could our country have weathered the storm being afforded this opportunity of deliberating with without such far-reaching disturbances but we should you the problem confronting us all at this momentous have been in position to save our American sister turn in our history. Republics much loss and inconvenience. In order to make this point clear it may be profitable WHENCE AND WHITHER? to summarize briefly last year's events as now a chapter of the world's financial history. When the war THE FUTURE FINANCIAL COURSE OF AMERICAN NATIONS. began England occupied a most advantageous strategic In August, 1914, six European powers went to war. financial position. She had been acting as the banker The anomalous consequence of this event was that all of the entire world, particularly by her system of ac- American nations were thrown into a condition of ceptance credits, thus financing a vast majority of acute financial and commercial disturbance. transactions involving the importation and exportation Would it have been possible to avoid so disastrous of goods between nations. The Hindu, the Chinaman, an effect upon nations not directly involved in this the Japanese, the Australian, the African from Cape struggle and thousands of miles removed from the Colony to Egypt, the Canadian, the South American, fields of battle? And, furthermore, by what means may the citizen of the United States, and those of a large we hope to prevent, in the future, the recurrence of number of the European States, all had used the Engsuch fatal conditions? lish credit market. These questions are deserving of the most serious But when the war broke out all countries were sudconsideration by this conference. The problem affects denly called upon to pay their debts and to finance us all. We have all, whether in the northern, central, their trade from that time forward wherever they or southern division of the Western Hemisphere, could do it to their best advantage. The consequence suffered together. It is of the most vital importance of this situation was that England found herself in that, if at all possible, a proper remedy be found. the position of a creditor calling upon the entire world Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JULY 1,1915. FEDERAL RESERVE BULLETIN. 133 for the payment of debts due at a time when shipping Without venturing to analyze the problems of other and trade were disorganized. It was therefore im- countries, we may say with reference to the United possible within the short time granted for such pay- States that the responsibility for having been caught ment to liquidate obligations by the shipment of mer- tied hand and foot when the crash came is in two chandise, even though it had been previously sold respects our own. As already stated, we should sevunder contract. At the same time a British debt to eral years ago have reorganized our financial system foreign countries was shielded by a moratorium, so that so as to keep our gold under our own effective control the foreigner who happened to be in debt to England, and so as to enable us to finance with our own reyet unable to collect there any sums due him, found sources our import and export transactions. We himself able to settle his own debts to that country should, furthermore, have avoided borrowing abroad only by buying sterling remittances at most exorbitant when we could have financed our requirements at prices or by shipping actual gold. British stock ex- home, even though foreign aid was had at a slight changes had been closed, and even those foreign advantage in rate. debtors who owned British securities or securities The chief lesson which all American nations will which normally found a market in England, by thy have to learn from last year's experience is that it is sale of which, therefore, they might have created bal- unwise for the world to place its financial dependence ances with which to pay their debts, saw themselves upon any single nation; and that those who can debarred from using these assets for the liquidation afford to do so, as, for instance, the United States, of their obligations. should from this time on adopt a policy of greater Every country was thrown into confusion. Not one reliance upon their own resources. Those countries remained sufficiently undisturbed to be able to help which can not rely exclusivelv upon their own rethe others. sources should adopt a policy of dividing the risks of An English writer, now officially connected with the financial dependence as evenly and widely as they British exchequer, has written a very able and inter- possibly can. esting book wherein he sums up the condition then Financial dependence expresses itself in two ways— created, as follows: first, in the short-term credit granted to individuals, and, second, in the long-term and corporate credit, London was so strong that it did not know how particularly that granted to Governments. strong it was. Consequently, being a little flustered by the suddenness of the outbreak of the war, on a Dealing first with the problem of individual credits, scale that mankind had never seen before, it made the the United States may be profoundly grateful that mistake of asking its debtors to repay it, not the just at this time its new banking system has been esthousands of millions that it had lent in the form of tablished. The day of the opening of our Federal permanent investment, but the comparatively trifling amount—perhaps one hundred and fifty or two hun- reserve banks will mark the advent of our financial dred millions (pounds sterling)—that it had lent In independence. We are now able to finance our own the shape of bills of exchange drawn on it, and other imports and exports by the use of American acceptforms of short credits. Thereby it put the rest of the ances. More than that, we are in a position to finance economically civilized world, for-the time being, into the bankruptcy court, and so, finding that none of its the trade of other nations and to play in this respect debtors could pay, it thought itself obliged to ask the part of an international banker that has heretofor time from its own creditors at home.1 fore been played almost exclusively by England. It is not for us to criticize England for having While it is true that Germany and France during acted in the premises from a merely selfish point of the past generation have begun to finance a large view. This may well have been her duty. Her vital portion of their own trade by acceptances of their interests were at stake, and in view of the great own banks, the bulk of the business has heretofore catastrophe which she had to face it was necessary been handled by England. There is no doubt that that she should muster from all parts of the world, upon the establishment of peace there will be a not only her military but also her financial reserves. tendency on the part of many nations to emancipate Nor is much to be gained by insisting, with the Brit- themselves in this respect, and, we may add, with ish authority already cited, that some of the drastic profound conviction, that it is precisely in this field measures which England found it necessary to take, that the United States will be destined to play a most and even her moratorium, might have been avoided if, important r61e. immediately upon the beginning of the disturbance, We realize, of course, that it will be an arduous she had been adequately prepared to issue without task to procure for our American acceptances the hesitation an ample supply of emergency currency. same standing in world markets as is now enjoyed by those of nations that have been in the field for gen- We must not blame England; we must blame ourerations past. Their commercial and financial relaselves for having carelessly placed ourselves in tnis tions are well established, and bankers in foreign economically dangerous position. countries are more familiar with the names of Euro- 1 Hartley Withers, " War and Lombard Street." pean than of American acceptors. Moreover, the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

134 FEDERAL RESERVE BULLETIN. , 1915. avenues that lead toward European establishments ported to be in excess of $120,000,000 permits the confor the sale or discount of acceptances are clearly clusion that we have begun on a proper basis and with mapped out and at present of readier access than the success. But the test will come when peace shall have new paths leading to those of the United States. It been restored and when we shall have to make special is difficult to change well-established banking habits. efforts to maintain and strengthen our position. It We are well aware, therefore, of the fact that it will will then be one of the functions of the Federal reserve be necessary for this country to render the utmost banks to assist in the establishment of discount rates possible assistance in order to facilitate a development for these acceptances low enough to render them so eminently desirable for the future protection of effective in securing business. these large continents. This can be done in several There is one other signal service that Federal reways: serve banks can render in this respect; that is, to First, by the readiness of our banks and bankers facilitate the quotation of so-called " forward discount to enter this new field in a spirit of liberality and rates." A bank in a foreign country, when buying a patriotism. They must be thoroughly imbued with dollar acceptance, must be assured of the rate at which the thought that it is necessary for the financial in- the bill will be discounted when it reaches our coundependence of their country and for the security of try. On this rate it will largely depend whether the our American sister Republics that import and export foreign shipper will use his European or his Ameritransactions touching this country should in the future can credit facilities. The Federal reserve banks are be financed by ourselves. fully alive to the importance of this question, and I It may be opportune to point out in this connection may state on behalf of some of the largest of these that the Federal reserve act gives ample powers for banks that they will be prepared to give the greatest the development of this business, even though these possible assistance by adopting a liberal policy in powers may have to be still further enlarged. Mem- quoting such forward discount rates, good for a cer* ber banks may accept and Federal reserve banks may tain date or for delivery upon the arrival of mail by discount bills arising out of transactions based upon a given steamer. the " importation or exportation" of goods. The The Federal Reserve Board and the Federal reserve Federal Reserve Board has been advised by its counsel banks have not yet reached any conclusions as to the that the words " importation " and " exportation," as most efficient method of fixing and transmitting these used in this connection, need not be construed as con- rates; whether they should be announced locally only fining these transactions to importations or exporta- at the office of a Federal reserve bank or whether it tions into or from the United States, but that these would be helpful to cable them to the main banking transactions may also cover shipments between for- centers in foreign countries. It is hoped that both our eign countries. We shall be in position, therefore, to guests and our bankers will consider the matter and serve as bankers for our American sister Republics, give us the benefit of their suggestions. not only in their trade with us, but even in their The Federal reserve act, for the first time since trade with others. the establishment of our national banking system, In order to develop this new avenue of American enabled national banks to open branches in foreign banking we need not even draw upon the means here- countries. Important branches have already been tofore employed for the financing of our own prob- opened and others are soon to follow. It is hoped lems. The United States has a gold stock amounting that the law may be amended in the near future so to the phenomenal sum of about $1,890,000,000, of as to still further facilitate the establishment of such which so far only $300,000,000 in round figures have branches. It is generally felt that these direct conbeen concentrated in the Federal reserve banks. The nections with foreign countries will tend toward the Federal reserve banks need only continue the process development of better knowledge and understanding just begun of substituting Federal reserve notes for of local conditions and problems and the greater inthe gold and gold certificates now in circulation in timacy necessary for the development of cordial and order to gain control of a vast additional financial mutually satisfactory business relations. power which now lies idle. We may confidently ex- The vast powers of the Federal reserve banks will pect, therefore, to find ample means to handle this enable them to play a most important part, and they business by the simple process of perfecting our or- will do all they can to assist in facilitating the growth ganization and assembling our idle gold. of a truly American banking system ramifying But in order to compete successfully in foreign mar- throughout our entire hemisphere kets we must have not only banks and bankers of un- The policy thus outlined as applicable to individual doubted standing, able and willing to undertake these transactions should also apply to corporate and Govacceptance transactions, but also discount rates that ernment financing. It is a source of weakness when compare favorably with those of competing nations. a nation depends too largely on one single or several The fact that, within a few months, our banks have closely interrelated foreign markets, no matter how been able to accept in the aggregate an amount re- attractive may be the terms upon which its obligations Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JULY 1,1915. FEDERAL RESERVE BULLETIN. 135 may be placed there. For, as experience has shown tion of property and prosperity. But even at this such securities can be thrown back upon their makers juncture it must be apparent to every student of the at a time when it is least convenient. If during a problem that borrowing nations will have to husband critical period one single market or group of markets their resources and move slowly in the further debecomes unavailable while obligations of a debtor velopment of their capacities until the power of some country mature or requirements must imperatively of these warring nations to save shall have recube met the debtor country finds itself in a most pre- perated and European money shall again freely seek carious condition. opportunities for investment abroad. Upon the degree It is true that one country can not prevent another to which destruction continues will depend the r61e from buying its securities, nor would it be advisable we eventually shall have to play, not only with rehermetically to seal one stock exchange against se- spect to our own affairs but with respect to those of curities quoted on another for fear that a closing of others. No doubt there will be a strong desire on the the one might otherwise force the closing of the other. part of other countries, and particularly of the Ameri- The advantage of free international interchange is can nations, to ask of the bankers of the United States such in peace that we must be willing to bear the dis- governmental and corporate credits. Some large advantages resulting therefrom in time of war. But foreign loans, aggregating more than $200,000,000, every country, in order to be safe, must be prepared have been recently placed as a beginning. Our counfor such an eventuality. The financial structure of try will be prepared to render very substantial service a country consists of three main parts—funded long- in this respect. But we must bear in mind that in term securities and the organization for marketing order to create a broad market for bonds of foreign them, viz, the stock exchange; individual short-term nations it is not sufficient that our bankers alone be credits and the organization for marketing them, viz, familiar with these countries. It is necessary that the discount market and the deposit banks; and, the investor, from his own knowledge, have confidence finally, the note-issuing reserve banks. Every country and a sympathetic understanding concerning the bormust be prepared in grave emergencies to see the rowing country's conditions. In other words, in order first of these three organs crippled and the stock ex- to open a wide market for foreign securities there change closed, but there must be such provision that must be intimate business relations with the countries the business of the country shall in that case be which offer such securities for investment. The belief carried on by the other two units. In that respect is often expressed that foreign loans create foreign last August found us still unprepared. The fact that business relations. This is true, but it can be said our stock-exchange loans became unavailable crippled with equal force that foreign business relations are us. Our Federal reserve system has since been opened, conducive to the conclusion of foreign loans. We our organization is now established, and any future may state with confidence that the United States will catastrophe will find us well equipped. prove a strong market, growing in importance from year to year, for the loans of those foreign countries There is no doubt, however, of the vulnerability of with which we entertain business relations. any country if too large a volume of its securities be held in one other country. It is certain that the Europe has done much in developing the northern, United States will be in a safer condition if, in the the central, and the southern parts of this hemisphere. future, when placing the securities to be issued for European banks and bankers have been our stanch the development of our own properties, we rely to a and loyal friends in the past. It would be unbecoming larger extent than in the past upon our own markets. in us, and disloyal at the same time, were we to for- It is important to state this principle emphatically, get this or to attempt to profit from their misfortunes. even though for the next few years to come it be not But our own growth and development, and the unlikely that Europe could act as a large purchaser of happy fate that has overcome Europe have combined our securities owing to the stupendous amount of to bring us to a momentous turning point in our bonds issued by the various European Governments, economic history. Our own steadily increasing weight the extraordinary inflation of currency existing in and Europe's relatively weakened condition mean that almost every part of Europe, and the appalling loss the New World must in the future lean less heavily on of property suffered by those countries. Indeed, it the Old. may well be expected that from now on the United I think I am justified in saying that there is no States will not only have to rely largely upon its own difference of conservative opinion that the United resources for its internal development but that we States does not aspire now to take the place of shall be called upon to provide means for absorbing Europe's leading financial powers. Our own field of the securities previously placed in Europe but now operation is still too vast to enable us or to render it returning to us. It is impossible to predict how far even desirable for us to become the entire world's the death struggle now going on in Europe must pro- banker at this stage of our own development. But the ceed before an end is reached, and we can not, there- safety of all countries—and we include England among fore, form any estimate of the extent of the destruc- their number—demands that if again the latter should Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

136 FEDERAL RESERVE BULLETIN. JULY 1, 1915. find herself forced to call upon her debtors for in- tion, history, medicine, or international law, as well stant payment, there should be at least one country as upon the questions you have come together to disstrong and independent enough to shoulder a substan- cuss. That limitations necessarily had to be imposed tial portion of the burden. upon your deliberations, thereby restricting them to The development of all American nations lies in the the field of commerce, transportation, and finance, is same direction, though there will be a difference iu perhaps, after all, an advantage, for to discuss the degree. It must be the aim of the United States from many important contributions to the world's advancenow on to move rapidly toward entire financial inde- ment made by those nations -would require such time pendence. It must be the aim of her sister Republics that from the very nature of things it could not be so to divide the credits needed for their further de- given. velopment that the temporary breakdown of one credi- I take it that the object of every Government is to tor country will not seriously embarrass them. They secure the greatest good of the greatest number of its will enjoy the greatest degree of safety in this respect people, and I believe the world realizes to-day that if their creditor nations are geographically, politically, the prosperity of the people of one nation, in the and economically separated from one another as far as long run, tends to the prosperity of those of other possible. So that in case one should become involved nations, while the adversity of one people must ultithe other may be expected to remain unaffected there- mately tend to the adversity of others. Just as the by. Though in normal times closely connected with individual prospers best when his country prospers. Europe, the American continents ought to be so or- so the nation prospers best out of the prosperity of all ganized as to form a distinct and independent unit in nations. times of emergency—a union whose transportation and In past centuries this great truth was not realized. credit systems will remain unbroken, even though all On the contrary, it was boldly advanced by thinkers Europe should go to war. and philosophers that each man is arrayed against An American union of this kind will prove of the his fellow man; that the gain of the one is the exact greatest economic advantage for all nations concerned. measure of the loss to the other; that competition If such a union be thought desirable, it must, however, between individuals, whether in warfare or in combe forged and riveted every day of the year. If it is merce, must ultimately mean the destruction of the to stand the test of time and stress, it must be a weaker and the gain of the stronger. So, also, it was structure of gradual growth, carefully planned and believed that as between sovereign nations the precise consistently developed, and built upon a safe founda- measure of the gain to one from international trade tion. was the measure of the loss to the other. Fortunately, however, such doctrines have not survived, and when occasionally they show their heads Organization of Reserve System. above the surface they are recognized as but temporary deviations from well-established rules of action. Hon. Charles S. Hamlin, governor of the The world recognizes to-day that sympathy and co- Federal Reserve Board, delivered the follow- operation are the most powerful factors in working ing address before the Pan American Confer- out the social and industrial welfare of the individual, and that the same principles apply to the relations of ence at Washington, D. C, on Tuesday, May 25: one sovereign nation to another. This conference of the sovereign nations of the Furthermore, the fact so cogently pointed out by Western Hemisphere with the Secretary of the Treas- Adam Smith, the great economist, that both nations ury of the United States is an event of deep signifi- gain by dealings in international trade is now accepted cance to the whole civilized world. by all nations as a guiding principle, although, to be If your deliberations are successful it will not only sure, many nations have somewhat obscured the prinadd to the prestige of the nations involved and to the ciple by the levying of customs duties upon imports distinction of the delegates but, as well, it will add far above any possible need, either for revenue or for another achievement to the many already to the credit industrial development. of the Secretary of the Treasury, and will place an- It is also true that the nations to-day are beginning other laurel wreath upon the brow of the President to recognize that they have products, whether of agfor his victories in the cause of peace. riculture or manufacture, which they can create in The scope of your deliberations, necessarily limited such quantities that they are obliged to seek and obto the subjects assigned for discussion, need have been tain for them, or for a portion of them, foreign marlimited only by the confines of human knowledge. | kets. They further realize that they must accept in When we consider the achievements of the nations j great measure as payment for their exported prodwhose representatives are gathered here we realize ucts goods imported from these countries purchasing what a wealth it constitutes, for you could speak with their exports or from other countries for their acauthority upon the achievements of your citizens in I count. In other words, speaking generally, every bale the realms of science, philosophy, art, music, educa- | of goods exported from a country must be paid for Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JULY 1, 1915. FEDERAL RESERVE BULLETIN. 137 by a bale of goods imported into the country. The The dislocation of foreign trade caused by the presactual payment may be made by the delivery of so- ent war furnishes the United States with a great opcalled " bills of exchange," but these bills of exchange portunity, inasmuch as nations which for generations in a very large measure are but symbols of property have had the relation of purchaser and seller now find or are a claim for money based upon the sale of prop- these relations disrupted. erty. The merchant ships his goods abroad, but he The United States also has but recently placed itself sells the bill he draws upon the foreign purchaser to upon a sound financial foundation by enacting a new some domestic bank, and these bills, representing banking system, which, together with the reform laws property, are used to offset similar bills drawn by already enacted, I believe will constitute one of the foreign sellers against imports into the country. If strongest systems in the world. the exports and imports of the country do not furnish Furthermore, the new system of banking inaugubills of exchange enough to balance, then gold or its rated by the Federal reserve act has provided an opequivalent is used or, perhaps, loans, but these latter portunity to our people of financing our foreign trade. play a relatively minor part in international ex- It lias economized the use of credit and capital. It changes. has increased its efficiency, which will enable us, as It would be impossible for a country to shut itself I have said, to engage in financing trade movements off from other countries and still hope to continue its with and between foreign countries, which will do exports, receiving payment in gold instead of in goods. much to build up our international trade exchanges, If we assume—what is impossible of realization—that particularly with the great nations whose representaany country could shut off its imports and continue to tives are here assembled. export, receiving gold for its exports, within a very This leads naturally to consideration of the bankfew years it would cripple the exchange system of all ing system which has lately been organized under foreign countries by the amount of gold it would take the Federal reserve act. In order to understand the from them, but long before that point could be reached changes brought about by the new banking system the importation of gold would so raise prices as to we must briefly consider what the former system was. effectually stop its exports. its defects, and how these defects have been remedied Trade, as now generally recognized, means buying in the new system. as well as selling, and in so far as this conference has Prior to November 16, 1914, when the new Federal to do with trade and with the means and methods for reserve banks opened their doors, we had approxiincreasing trade, it has to do with the increase of buy- mately 7,500 banks in the United States chartered by ing as well as with the increase of selling. the National Government and having the sole right We all recognize to-day the real interdependence of to issue notes known as national-bank notes. The nations; they are especially interdependent from the capital and surplus of these banks was a little under aspect of trade and commerce. The nation of large two billions of dollars and, taken in connection with resources recognizes that in the long run it is for its their deposits, represented a banking power of over own profit to strengthen this interdependence by fur- nine billions of dollars. There were also over 20,000 nishing the nation of smaller resources means to meet State banks, trust companies, and savings banks trade indebtedness to it. It should never be forgotten, chartered by the respective States, representing a however, that in the long run this indebtedness must capital and surplus of a little over two billions of be met by the shipment of goods, whether from the dollars and, including deposits, representing a banking debtor country or from some other country, for its power of over fourteen billions of dollars. account, to the creditor country. These banks, both National and State, were inde- The Question, however, which must be foremost in pendent and isolated, except as to a limited interdeyour minds is just what the United States can do in pendence of some State institutions through stock assisting other nations to finance their trade move- ownership. They together constituted over 30,000 inments, both with the United States and with the other dividual units, between which in times of financial nations of the world. As to the amount of capital at stress effective cooperation was impossible. present available in the United States for such pur- Leaving out of consideration for the moment the poses and the working out in detail of any specific State banks, there were in the United States over plans or suggestions it is not my province to speak. 7,500 independent units called national banks, each, I shall leave that field open to the delegates assembled as I before stated, having the power of note issue and here, and especially to my colleague, Hon. Paul M. each bound to keep in its vaults and with other na- Warburg, who can speak with the authority of a mas- tional banks in certain cities, called reserve cities, a ter on every detail of international finance. reserve fixed by law. The message which I wish to bring to you to-day, Under the national-bank act, however, these reserves however, is that the United States was never before were, in effect, sealed up and could not lawfully be in such a position as it occupies to-day to reach out used, even in times of financial stress. A bank whose and extend its trade by granting credit to those na- lawful reserve was below the legal limit was bound tions who wish to be its customers. to restore it, and if it was not restored within a speci- 98402—15 4 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

138 FEDERAL RESERVE BULLETIN. JULY 1, 1915. fied time the Comptroller of the Currency could place its customers absolutely ceased, and many a mera receiver in the bank. chant of high standing and good credit had to be The merchants and farmers of the country \rere refused further assistance, to his injury and possible often refused credit—the very essential of business disaster. life—and yet they could see these sealed-up reserves, Every bank had to arrange so that some of its reample for relief purposes, and yet denied them. They sources should be invested in so-called liquid assets, were in the position of a man weakened by hunger so that in times of financial stress they could instantly looking through a plate-glass window observing every realize upon these assets. As a result funds which kind of food which he is told is for his benefit, and otherwise might have been loaned to farmers and yet no morsel of which could he, under any circum- merchants were sent to the large financial centers of stances, be permitted to eat. the country to be there invested in call loans upon As a result, in times of financial stringency each stock exchange collateral—that is to say, upon bonds, bank had to protect itself regardless of the condition stocks, and other securities which represented no of other banks, and had to fortify itself against its commercial transactions, but which, in many cases, demand obligations by piling up reserves far above the simply represented speculative activities. When, howprescribed limit. To do this it had to call loans or ever, in times of stress these loans had to be called refuse to renew or make new loans during the strin- it was often found that what was considered to be a gency. The necessary result of this procedure was to most liquid asset was, for the time being, no asset-at make the stringency even more severe, and the hoard- all—as witness the period in the summer of 1914, ing of its resources by the individual banks quickly when these so-called liquid assets were absolutely deled to hoarding by individuals, thus throwing the barred from sale by the closing of the stock exchanges. whole banking system into confusion and ruining Furthermore, under the old system the national thousands of merchants who were unable to obtain banks issued so-called national-bank notes, which the assistance to which under ordinary circumstances were originally designed to constitute an elastic curthey would have been clearly entitled. rency, rising and falling in response to the demands During the latter part of the panic of 1907 it was of agriculture and commerce. Unfortunately, howfound that some banks which by law need carry only ever, these notes had no such elasticity as was thus 15 per cent reserves were actually carrying reserves ascribed to them, because of the fact that their issue of between 40 and 50 per cent of their deposits, while was not controlled by or based upon business developin 1914 the reserves of some banks amounted to 70 ment; on the contrary, these notes were indissolubiy per cent. It is also a most significant fact that at the chained to Government bonds, which had to be pledged height of that panic over $200,000,000 in cash were with the Government as collateral. These Government being carried by the banks, in their vaults and with bonds were neither issued nor regulated by the expantheir reserve agents, in excess of their legal require- sion or contraction of trade and commerce. They were ments. If these $200,000,000 of resources could have fixed in amount and fluctuated in value in no fixed been used for the common benefit, such a panic would ratio to the development of those branches of business. not have taken place. As a fact, it was the fluctuation in value of these bonds Under our old system the banks of the United which influenced the expansion or contraction of the States were in the position of an army entering into national-bank notes rather than an expansion or conaction as a disorganized body of individuals, without traction in business. When business slackened and a single onicer and without a single company, bat- contraction of these notes was desirable, the notes retalion, regiment, or brigade. That our oft-recurring sponded but feebly, and in some cases actually inpanics under the old system did not involve more of creased in amount; while, on the other hand, when exour banks and their customers in general ruin is one pansion was desirable to accommodate increasing of the wonders of financial science and is a great trade, the notes at times actually decreased; and at tribute to the marvelous recuperative powers and un- other times when they responded to the need for exrivaled resources of our people. pansion the response was so belated as to take effect Under our old financial system—or, rather, lack of only when the necessity for the expansion had ceased. system—every dollar loaned by a bank on commercial This alliance of national-bank notes with Governpaper was a dead investment, as if buried in the ment bonds was a strange one. The national-bank ground, until the day of maturity. The paper, when notes, supposed to be a measure of the development discounted, was lowered into the vaults of the bank and expansion of trade, were linked to and governed with almost funereal ceremony; in fact, the national by the fluctuation in value of these bonds, which reprebanks were but mausoleums for dead commercial sented war, the destruction of trade, and the past dire paper, and if a bank president with ghoulish pro- necessities of the Government. Thus these nationalpensities were to open the vaults and try to dispose bank notes, intended to represent the progress and deof any of the paper stored there, before its resurrec- velopment of trade and commerce of the twentieth tion on the day of maturity, the act would have been century, were linked to the evidences of destruction of looked upon with suspicion. As a result, when a trade and commerce of the nineteenth century. There bank had made all the loans it could its power to aid may have been a reason for this strange alliance la Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JULT 1, 1915. FEDERAL RESERVE BULLETIN. 139 the nineteenth century owing to the necessity for find- In the first place, it divides the United States into ing a market for Government bonds, but in this twen- 12 districts, each district containing approximately tieth century there is certainly no good reason for its from 500 to 700 national banks. The national banks continuance. in each district unite in forming a new bank called Furthermore, under the old system the national the Federal reserve bank, to which each national bank banks were not able to finance our foreign trade, be- contributes 6 per cent of its paid-up capital stock and cause under the law they could not lend their credit surplus to provide the necessary capital. in the form of acceptances. As a result our foreign The individual capital of these 12 Federal reserve trade had to be financed in London and on the Con- banks varies, respectively, from a little under 5 miltinent, and the expression now so frequetly heard— lions to a little over 20 millions of dollars. The total dollar acceptances—was merely an ideal as far re- capital of the 12 banks (not counting State institumoved from practical realization as the moon is dis- tions which may ultimately become members) is a tant from the earth. little over 100 millions of dollars. For example, we buy large quantities of raw and At the present time only one-half of the capital manufactured silk from the Orient. This silk goes payments have been called, and the total paid in by direct to the Pacific ports of our country; it is taken all the national banks amounts to a little over 50 overland by special train. The bill of exchange, how- millions of dollars. ever, drawn for the selling price, is drawn upon a We thus have 12 Federal reserve banks with a total foreign bank and is sent, together with the bill of capital of over 50 millions of dollars paid in and about lading and other documents, east to London, or it as much more subject to call by the Federal Reserve may even pass through the United States on its way Board when and if needed. This capital, under the to the foreign bank upon which it is drawn, later to terms of the Federal reserve act, has been paid in be returned to the United States for final discharge gold or gold certificates. of the obligation of the purchasers in this country. The 12 Federal reserve districts vary greatly in The lack of cooperative union or confederation be- area and in population. For example, the Federal tween the individual banks and their reserves also reserve district of Chicago has a population of over weakened the ability of the banks to conserve the 12,000,000 of people, exceeding the combined populasupply of gold, the standard of value in the United tions of Norway, Sweden, and Switzerland. States, and as a result the movement of the precious On the other hand, the area of the Federal reserve metals from the country, even when in strict accord- district of San Francisco (683,852 square miles) is so ance with the laws of trade and of ultimate advantage extensive that you could place within it England, to the United States, was looked upon with anxiety Scotland, and Ireland, the whole of continental as a symptom of financial trouble, causing uncertainty France, Italy, and Germany and still have left an and lack of confidence. area exceeding that of all the New England States I have tried to show some of the defects which ex- combined, excepting only the State of Maine. isted under our former system—the lack of coopera- In addition to the capital payments I have before tion between the individual banks, the lack of any mentioned, each national member bank is obliged to system by which the reserves could be either used pay to its Federal reserve bank a certain portion of by the individual banks or consolidated into a common its legal reserve, which portion, however, it still fund for the benefit of all the banks, the impossibility counts as part of its reserve. These payments of reof rediscounting commercial paper once discounted by serves are spread over a period of three years, and the banks, its lack of liquidity, and the consequent the total payments will amount to over one-third of necessity for investment of part of the bank's assets the total reserves held by the national member banks. in call loans as the most liquid investment possible, Up to the present time about two hundred and the lack of a genuine elastic currency, and, finally, ninety-five millions of reserve money has been thus the lack of power to finance our foreign trade through paid to the 12 Federal reserve banks, and at the end the loaning of credit by means of acceptances. of three years over four hundred millions will have The question naturally arises just how the Federal been paid in, which latter amount will be, of course, reserve act has remedied these conditions, placing the greatly increased by the admission of State banks and United States upon a firm banking foundation. I shall trust companies. At that time all the reserves of the try to answer this question briefly. member banks must be held in their vaults or with the Federal reserve bank, the privilege of keeping It should be clearly understood that the Federal their reserves in part in approved bank's in reserve reserve act does not add a dollar of money to existcities ceasing at the end of that period. This will ing stocks held by the banks or by the people, and also necessarily largely increase the amount of money dethat, while it gives the national banks some valuable posited by the member banks in the Federal reserve new powers and privileges, it does not change their banks. inherent structure or their present charters. In addition the Secretary of the Treasury may de- Just what, then, has the Federal reserve act acposit the general funds of the Treasury—excepting complished? While the act is a long one, containing only certain trust funds—with the Federal reserve much minute detail, its underlying principles are simbanks, and disbursements of the Government may be plicity itself. made by checks drawn against such deposits. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

140 FEDERAL RESERVE BULLETIN. JULY 1, 1915. The national banks in the 12 respective districts fear this address would take on the quality and length (and State banks which may join the system later) of a treatise or textbook. I think, however, that what are the only stockholders of the Federal reserve banks, I have outlined will give a fair understanding of the and their stock can not be transferred or hypothe- scope of the system. cated. The stock is entitled to a 6 per cent annual The question remains as to how the Federal reserve cumulative dividend, and one-half the net earnings act remedies the defects which I have outlined as of the Federal reserve banks may be paid into a sur- characteristic of the old system. plus fund until it amounts to 40 per cent of the paid- The first fundamental defect of the old system up capital stock. pointed out by me was that each national bank was All net earnings over and above this dividend and independent, and that as a result we had 7,500 indesurplus are paid to the United States as a franchise pendent banks and 7,500 scattered reserves, no effectax. tive cooperation being possible, nor could the individ- Each Federal reserve bank' is managed by a board ual reserves even be drawn upon legally by the very of directors, consisting of nine members, of which banks which owned them. three are appointed by the Federal Reserve Board This defect is remedied under the Federal reserve and six are elected by the member banks, three of the act through the capital and reserve deposits placed six directors representing the banks and three con- by each member bank with its reserve bank. These sisting of members who at the time of their election payments constitute a substantial fund—already about were actively engaged in commerce, agriculture, or 350 millions of dollars, and constantly growing—which some other industrial pursuit. must be used by the Federal reserve banks for the These 12 Federal reserve banks are under the con- benefit of the member banks and their customers—the trol and direction of the Federal Reserve Board, con- people of the United States. sisting of the Secretary of the Treasury and the These funds are held for use in discounting com- Comptroller of the Currency, ex officio, and of five mercial paper offered by the banks for discounting other members appointed by the President and con- acceptances and for certain open-market investments firmed by the Senate. which I shall not undertake to enumerate to-day. The Federal Reserve Board sits in Washington, Any bank desiring funds can take its commercial D. C. It appoints, as I before said, three directors on paper to the Federal reserve bank and obtain gold or the board of each Federal reserve bank; it has gen- lawful money in exchange. This privilege enables a eral powers of supervision and examination of the bank to loan freely in times of commercial stress and Federal reserve banks and the member banks; it may to draw down its available resources far below what suspend or remove, for cause, any director or officer would have been considered prudent under the old sysof the Federal reserve banks; it may suspend the op- tem, for the commercial paper discounted by the eration of any Federal reserve bank and liquidate or banks under the new system is as good as gold, as it reorganize such bank; it defines the paper which may can be turned into cash or a cash credit at once at the be rediscounted by Federal reserve banks; it has Federal reserve bank upon request. This privilege power to review and determine the rates of discount also makes commercial paper a genuinely liquid inestablished from time to time by the Federal reserve vestment, whereas under the old system such investbanks for the discount of commercial paper offered by ments were absolutely dead until the day of maturity. the member banks; it regulates the open-market Such commercial paper is far more liquid than a loan powers of the Federal reserve banks; it has power upon investment securities, for the loan upon comto suspend every reserve requirement of the act if it mercial paper presumably liquidates itself, as the bordeems such course necessary; and it has many other rower receives from the consummation of the comspecific powers which I need not mention here. mercial transaction—to assist which the note was Each Federal reserve bank is independent of every originally discounted—the money with which to pay it. other. They are empowered, however, with the per- It should, moreover, be pointed out that every dolmission of the Federal Reserve Board, and at rates lar paid into the Federal reserve banks by the memfixed by the board, to rediscount the discounted paper ber banks, including all deposits made by the United of any of the other Federal reserve banks, and can States Government, is impressed with a trust in that be required to do so by the affirmative vote of at least it must be used (excepting as to certain open-market five members of the Federal Reserve Board. investments) only for the discount of paper issued The act aiso creates a body known as the Federal or drawn for agricultural, industrial, or commercial Advisory Council, one member of which is elected by purposes, whether in the domestic or foreign trade, each Federal reserve bank. The duties of the council and can never be invested in or loaned upon speculaare to confer with the Federal Reserve Board and to tive securities or even upon real estate transactions. advise it as to matters connected with discount rates, The second fundamental defect in the old system note issues, reserve conditions, open-market powers, which I have pointed out was the lack of a really and similar questions. elastic currency. The Federal reserve act remedies I have thus given a skeleton outline of the Federal this defect by providing for the gradual payment and reserve system. Many details I have had to omit for cancellation of the national-bank notes, and further, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JULY 1, 1915. FEDERAL RESERVE BULLETIN. 141 by giving authority to the Federal Reserve Board to of purchasing and selling bills of exchange arising issue to Federal reserve banks applying therefor obli- out of commercial transactions; these banks are also gations of the United States known as Federal reserve authorized to deal in gold coin and bullion at home notes. The bank obtaining such notes must deposit and abroad. It is easy to see what power the Fedwith one of the Government directors, known as the eral Reserve Board, through the Federal reserve Federal reserve agent, as collateral commercial paper batiks, will thereby have, in connection with its power approved by the regulations of the Federal Reserve over discount rates, over the movement of the precious Board up to the face value of the notes thus issued, metals into and from the United States. and in addition must maintain a gold reserve of 40 These great powers can and will be exercised in per cent against such notes. These notes will con- such a manner as to emcourage and assist in every stitute a truly elastic currency, rising and falling with way the growth of the volume of trade between the the rising and falling of agriculture, trade, and com- United States and foreign countries. merce. No limit is imposed upon their issue. Such I think it will be realized, as I have before stated, a note could conceivably be issued against every com- that, growing out of this new banking act, the time mercial or agricultural transaction represented by com- has come for a marvelous development in our foreign mercial paper which has been discounted by member trade, especially with South America, and that an banks. When, however, the commercial paper liqui- opportunity is given to finance that trade such as has dates itself, and the maker uses the funds received never been possible before. from the transaction to pay off the note, the Federal The resources of the Federal reserve system will reserve notes issued against that paper must be re- also be greatly augmented in the future by the additurned and canceled, or the amount of the notes thus tion of large resources contributed by State banks paid must be retained by the Federal reserve agent and trust companies, which the act permits to join against the Federal reserve notes until they are re- the Federal reserve system under reasonable regulaturned and canceled. tions. I venture to express the hope that within the The Federal reserve notes will also serve to protect near future the majority of the strong State banks the gold supply of the United States, for much of it, and trust companies doing a commercial business will sooner or later, will go into the vaults of the Federal join this system. reserve banks and Federal reserve notes will be issued The Federal reserve act economizes the use of capiin its place. tal ; it makes its use more effective than under the old The Federal reserve act also authorizes national system; by lowering the prescribed reserve requirebanks, for the first time, to accept bills of exchange ments it has released hundreds of millions of capital growing out of the import and export trade under which will provide additional credit; by its rediscertain reasonable regulations, and the Federal re- count provisions and by the powers given to the Fedserve banks are also authorized to discount such eral Reserve Board to suspend reserve requirements acceptances. This grant of power is a most valuable in cases of necessity it has practically made a finanone and will enable our banks to finance our foreign cial panic of the type we went through in 1907 an trade by loaning their credit upon these acceptances. impossibility. By this grant of power the so-called " dollar accept- The banks have been greatly strengthened by these ance " is made for the first time possible, and this reforms and have enlarged their power to grant dismeans much for the future development of our trade, counts to their customers both in domestic and Inespecially with the great nations of Central and South ternational trade. America, and will add much to our ability to assist I believe the result will be of lasting advantage and them in financing their sales to and purchases from benefit, not only to the people of the United States the United States. but to the people of all nations which engage in trade The Federal reserve act, however, has done much with us. more to help make possible closer trade relations with I have tried briefly to outline just what the Federal foreign countries. The Federal Reserve Board is reserve act? has done for us, and to show how, incigiven power to permit national banks to establish dentally, it may be of great advantage to all nations branches in foreign countries, and it is at once appar- that trade with us. There remains only to consider ent what a great assistance this will be, not only to the practical application of the principles of the act the United States but likewise to the great nations to the great problems of commerce, transportation, who are trading with the United States, especially and finance which you are called together to consider^ those whose delegates are assembled here. Branches and these problems will be considered by you in conof national banks have already been authorized in junction with our own delegates, who are, it is need- Argentina, Brazil, Panama, and other countries, and less to add, chosen men, representing the highest it is confidently expected that a great development in ability in practical banking, and who represent as well our trade relations with such countries will result. the highest type of our citizenship. The Federal Reserve Board is also authorized to I am sure that it will be the earnest prayer of all permit the Federal reserve banks to open and main- the people of our country, and of the great nations tain banking accounts, appoint correspondents, and es- whose delegates are here assembled, that our deliberatablish agencies in foreign countries, for the purpose tions shall be crowned with successful achievements. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

142 FEDERAL RESERVE BULLETIN. JULY 1, 1915. Transfer of Member Banks Between (2) Send to the Federal Reserve Bank of Districts. Cleveland, with a certified copy of the resolutions, all receipts issued and sent to you for When the Federal Reserve Board announced payments made by you on account of your subdecisions in the redistricting cases it was stated scription to the capital stock of the Federal to the reserve banks affected thereby that the Reserve Bank of Richmond. decisions should become effective not later than (3) Execute and send to the Federal Re- July 1, 1915, and that in the meantime it was serve Bank of Cleveland the necessary order designed to work out a satisfactory plan cover- authorizing the Federal Reserve Bank of Richmond to remit to the Federal Reserve Bank of ing the details of the transfer. This plan was Cleveland, on your behalf, the net amount intended to provide a method of surrendering hereinbefore paid by you on account of your stock in the reserve banks from which the subscription to the capital stock of the Fedmember banks were transferred, of taking out eral Reserve Bank of Richmond. This paynew stock in the reserve banks to which they ment will be applied by the Federal Reserve were transferred, and of bringing about a set- Bank of Cleveland on your subscription to the tlement of capital stock and reserve accounts capital stock of said bank. Upon receipt of this payment the Federal Reserve Bank of between the two Federal reserve banks affected Cleveland will execute and forward to you its by each such transfer with the smallest possible temporary receipt for the amount so paid. amount of delay and difficulty. Investigation (4) At the close of business on June 30,1915, of the problems growing out of such transfer for the purpose of transferring reserve balance was undertaken by various Federal reserve from the Federal Reserve Bank of Richmond to agents and officers of Federal reserve banks, the Federal Reserve Bank of Cleveland, please particularly by those of New York and Phila- send to the Federal Reserve Bank of Cleveland delphia, and by the Federal Reserve Board. for your credit your draft on the Federal Reserve Bank of Richmond for the balance as As a result, on June 16 forms of procedure shown on your books. were forwarded to the six Federal reserve (5) Please fill out Treasury Department banks affected by the redistricting decisions, as Form B-2149 prescribing method of calculafollows: tion of reserve as at the close of business June SIR: Upon review of the decision of the Re- 30. 1915, and send it to the Federal Reserve serve Bank Organization Committee the Federal Bank of Cleveland. The Federal Reserve Bank Reserve Board has entered an order effective of Richmond will send statement of your acfrom July 1, 1915, readjusting districts Nos. count at the close of business June 30, 1915, 4 and 5, as a result of which your bank will, and will reconcile it in the usual manner. after that date, be ineligible to hold stock in (6) Inasmuch as the 6 per cent dividend the Federal Reserve Bank of Richmond, but provided for by statute is cumulative, the Fedwill be eligible to membership in the Federal eral Reserve Bank of Richmond will issue to you Reserve Bank of Cleveland. In order to com- an accrued dividend certificate. This certifiply with the terms of the order referred to you cate will entitle you to receive interest on your are requested to have your board of directors cash-paid subscription at the rate of 6 per cent adopt, on or before July 1, the inclosed resolu- per annum, to be computed from the dates of tions covering surrender of your stock in the your cash payments to the date of the surrender Federal Reserve Bank of Richmond and appli- of your stock, and to be paid to you when the cation for stock in the Federal Reserve Bank earnings of the Federal Reserve Bank of Richof Cleveland. When this has been done a cer- mond justify the payment of accrued dividends tified copy should be forwarded to the Federal to its stockholders. Reserve Bank of Cleveland. Two copies of the Kindly note that all of the above papers are resolution are inclosed so that you may have a to be sent to the Federal Reserve Bank of duplicate for your files. Cleveland. For convenience the necessary operations Respectfully, have been arranged in the following order: FEDERAL RESERVE BANK OF RICHMOND, (1) Adopt the resolutions above referred to By 5 Governor. and send certified copy to the Federal Reserve FEDERAL RESERVE BANK OF CLEVELAND, Bank of Cleveland. By Governor. . Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE BULLETIN. 143 JULY 1, 1915. At a meeting of the board of directors of the to $- -, and agree to pay for same in accordance f duly called and held on the with the provisions of the Federal reserve act. o day of , 191-, the following resolution was [SEAL.] of , offered and duly adopted: By , President. " Whereas this bank has subscribed to , Cashier. shares of the capital stock of the Federal Reserve We, the undersigned, hereby certify that this bank Bank of Richmond, pursuant to a resolution adopted has an unimpaired capital of $ and surplus -by its board of directors on the day of — , of $ , as shown by its books at the close of busi- 1914, in accordance with the provisions of the act ness on the day of , 1915. of Congress approved December 23, 1913, and known (To be signed by three or more directors.) as the Federal reserve act, has paid on account thereof in installments the sum of $ , said sum being 50 per cent of the par value of said shares; "And whereas, according to the certificate filed April 2, 1914, by the reserve bank organization com- Directors. mittee with the Comptroller of the Currency, desig- LOCATION OF APPLYING BANK. nating the several Federal reserve cities and defining the geographical limits of the districts to be respec- City or town tively served by the Federal reserve banks located County in said cities, this association was at that time lo- State cated in district No. 5, which district is served by the Federal Reserve Bank of Richmond; CERTIFICATE OF FEDERAL RESERVE AGENT. "And whereas the Federal Reserve Board under the authority granted to it by section 2 of the said The foregoing application for the surrender of Federal reserve act has by resolution adopted May stock in the Federal Reserve Bank of Richmond has 4, 1915, ordered that Federal reserve district No. 4 been examined and the statement of the number of shall be modified and extended so as to include on shares allotted to the applying bank has been verified. and after July 1, 1915, the counties of Tyler and Wetzel, in the State of West Virginia, which said I recommend that shares of stock be accepted counties have heretofore been included in Federal for cancellation, and that the cash subscriptions reserve district No. 5; already paid for this surrendered stock be returned. "And whereas this association is located in the county of in the State of West Virginia, said county being one of the two counties transferred by Federal Reserve Agent, said resolution and order from district No. 5 to dis- Federal Reserve Bank of Richmond. trict No. 4: Now, therefore, be it "Resolved, That the president or vice president and CERTIFICATE OF FEDERAL RESERVE AGENT. cashier of this association be, and they are hereby, authorized, empowered, and directed to make applica- The foregoing application for shares of tion to the said Federal Reserve Bank of Richmond stock in the Federal Reserve Bank of Cleveland has for the cancellation of said shares of stock been examined and checked. The amount of stock heretofore allotted to this bank and for the refund applied for is equal to 6 per cent of the capital and of all payments made thereon; and be it further surplus of the applying bank as shown by certified "Resolved, That the president or vice president and cashier of this association be, and they hereby are, statement of directors. I recommend that authorized, empowered, and directed to make applica- shares of stock be allotted to it by the Federal Retion for and to subscribe to shares of the par serve Board. value of $100 each of the capital stock of the Federal Reserve Bank of Cleveland, to pay for such stock in Federal Reserve Agent, accordance with the provisions of the said Federal reserve act, and to take any other action necessary or Federal Reserve Bank of Cleveland. desirable to the accomplishment of the said readjustment." CERTIFICATE OF APPROVAL. I hereby certify that the foregoing is a true and The foregoing application for the surrender of correct copy of a resolution passed by the board of di- shares of stock in the Federal Reserve Bank rectors of this association on the date specified. of Richmond, and for the allotment of shares Cashier. of stock in the Federal Reserve Bank of Cleveland, has been approved by the Federal Reserve Board. Pursuant to the foregoing resolution, the , of , hereby makes application for the cancellation of shares of stock of the Federal Reserve Secretary, Federal Reserve Board. Bank of Richmond heretofore allotted to it, and for RECORD OF ENTRY. the refund of such cash payments as this bank may be entitled to under the provisions of section 5 of the The foregoing application has been duly entered on Federal reserve act. the records of the Federal Reserve Board. Pursuant to foregoing resolution, the hereby subscribes to and makes application for shares of the capital stock of the Federal Reserve Bank of Bookkeeper. Cleveland of the par value of $100 each, amounting 191-. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

144 FEDERAL RESERVE BULLETIN. JULY 1, 1915. SAMPLE FOEM. Trustee Powers. 191—. Applications from the following banks for FEDERAL RESERVE BANK OF RICHMOND, permission to act under section 11 (k) of the Richmond, Va. Federal reserve act have been approved since DEAR SIRS: In accordance with resolution of the Federal Reserve Board, dated May 4, 1915, transfer- the June issue of the Bulletin, as follows: ring this bank from district No. 5 to district No. 4, and with the resolutions of the board of directors of DISTRICT NO. 1. this bank, dated , 1915, this bank has applied Trustee and registrar of stocks and bonds: for cancellation of its shares of stock of the Ashuelot National Bank, Keene, N. H. Federal Reserve Bank of Richmond and has applied DISTRICT NO. 2. for shares of the stock of the Federal Reserve Bank of Cleveland. Registrar of stocks and bonds: To facilitate these transactions you are hereby au- National Park Bank, New York City. thorized and requested to pay to the Federal Reserve DISTRICT NO. 3. Bank of Cleveland on account of our subscription to the capital stock of that bank $ , representing Registrar of stocks and bonds: the net amount paid by us on account of our subscrip- Merchants National Bank, Cape May, N. J. Fourth Street National Bank, Philadelphia, Pa. tion to shares of your capital stock. Yours, very truly, DISTRICT NO. 5. Trustee, executor, administrator, and registrar of President or Cashier. stocks and bonds: This still left open the question of adjustment Citizens National Bank, Alexandria, Va. Clifton Forge National Bank, Clifton Forge, Va. of accounts between Federal reserve banks to Covington National Bank, Covington, Va. cover the dividends and expenses incurred by DISTRICT NO. 6. the several banks since the date of their organization. That subject was taken under further Trustee, executor, administrator, and registrar of stocks and bonds: advisement, the forms already quoted being Bessemer National Bank, Bessemer, Ala. previously sent out in order to avoid delay so Fourth and First National Bank, Nashville, Tenn. far as possible, and on June 18 the following DISTRICT NO. 7. message was telegraphed to the Federal reserve Trustee, executor, administrator, and registrar of banks affected, authorizing them to proceed as stocks and bonds: First National Bank, Story City, Iowa. rapidly as possible with the process of arrang- City National Bank, Council Bluffs. Iowa. ing the transfer: Farmers National Bank, Webster City, Iowa. Peoples State National Bank, Anderson, Ind. At conference this morning it was agreed to First National Bank, Dyer, Ind. leave the question open of adjustment of ac- First National Bank, La Porte, Ind. Rockville National Bank, Rockville, Ind. counts between the two Federal reserve banks Rushville National Bank, Rushville, Ind. and the issuance of accrued dividend certifi- Trustee, executor, and administrator: cates, and to authorize modification of joint Union County National Bank, Liberty, Ind. letter to member banks by embodying a provision to the effect that the Board will later con- DISTRICT NO. 10. sider and determine which of the Federal re- Trustee, executor, administrator, and registrar of serve banks should assume liability for accrued stocks and bonds: First National Bank of Eagle County, Eagle, dividends and will then authorize such Federal Colo. reserve bank to issue the accrued-dividend cer- Central National Bank, Carthage, Mo. tificates. Trustee and registrar of stocks and bonds: First National Bank, Horton, Kans. Further announcement will be made with First National Bank, Hutchinson, Kans. reference to the final adjustment of details First National Bank, Tulsa, Okla. First National Bank, Cheyenne, Wyo. with regard to transfers of capital stock and Trustee, executor, and administrator: reserves and the settlement of earnings and ex- First National Bank, Trinidad, Colo. Trustee: pense accounts between the banks affected. First National Bank, Woodward, Okla. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JULY 1,1915. FEDERAL RESERVE BULLETIN. 145 CIRCULARS AND REGULATIONS. The circulars and regulations given below Membership in the Federal reserve system carries were issued by the Board since the June issue with it privileges and guaranties of great value, not only to the banks themselves, but to their customers of the Bulletin: as well. It may be confidently expected that with the further development of the system and the fuller ap- CIRCULAR NO. 14, SERIES OF 1915. preciation by the public of its meaning and value, membership will come to be regarded as evidence of WASHINGTON, June 7, 1915. banking solidity, and that the access afforded by membership to the facilities and resources of the system MEMBERSHIP OF STATE BANKS. will add to the prestige of even the strongest insti- A unified banking system, embracing in its mem- tutions; so that in time the public will recognize in bership the well-managed banks of the country, small the new banking organization which is in process of and large, State and National, is the aim of the Fed- realization two principal classes of banks—those eral reserve act. There can be but one American which belong to the Federal reserve system and those credit system of nation-wide extent, and it will fall which do not, or " Member Banks " and " Nonmember short of satisfying the business judgment and expecta- Banks." tion of the country and fail of attaining its full po- The Board realizes, however, that membership also tentialities if it rests upon an incomplete foundacarries with it of necessity obligations as well as privition and leaves out of its membership any consideraleges. The Federal reserve act imposes certain fundable part of the banking strength of the country. The mental conditions governing the membership of State way must therefore be opened for State banking inbanks in the Federal reserve system, and prescribes stitutions to contribute their share to the capital and that banks not organized under Federal law must resources of the Federal reserve banks, in harmony comply with the capital and reserve requirements rewith the intent of the Federal reserve act and in aclating to national banks, and must conform to the cordance with its provisions. State banks, trust provisions of law imposed upon national banks recompanies, and national banks have their distinctive specting the limitation of liability which may be incharacters and places in the American banking orcurred by any person, firm, or corporation to such ganization, and these should be respected in cobanks, the prohibition against purchases of or loans ordinating them in the Federal reserve system. The upon stocks of such banks, the withdrawal or improblem presented is to find a basis upon which these pairment of capital, and the payment of unearned different types of banking institutions may thus be dividends, and must conform to other provisions of the associated which shall be fair to each and which Federal reserve act applicable to member banks, such will not require greater uniformity of operation than as restrictions on the amount of acceptances by such may be necessary to the attainment of the purposes banks and on transactions between such banks and of the Federal reserve act. their directors, and to such rules as the Federal Re- Appreciating fully that the strength of the Federal serve Board may prescribe. reserve system is to be measured by the quality and With respect to loans on real estate or mortgages, character of its members, rather than by their num- the Board is not disposed to assume as a matter of ber, the Federal Reserve Board is prepared to use principle either the authority or the duty to impose the broad discretionary power vested in it by the Fed- restrictions of a character calculated to embarrass eral reserve act to bring about this coordination on properly conducted State banks in applying for memthe basis of equity and practicability. The Board bership, or to impair their usefulness in a well-defined has sought, in the regulations governing the admis- field of banking. It has endeavored in the regulations sion of State banks and trust companies hereto ap- merely to provide a reasonable limitation, so that pended, first, to establish only such reasonable stand- loans or investments of this character shall not be so ards of admission as will be generally recognized excessive in amount as to impair the liquid condition as necessary to protect the Federal reserve system and of a bank. the national banks, whose membership in the system Within the limits thus described, it will be the policy is obligatory, against the admission of any bank of the Board to determine the eligibility of State banks which would be a source of weakness rather than of for membership in the Federal reserve system by strength, and, second, to prescribe such regulations means of examination. Since admission to the sysgoverning their conduct as will insure a reasonable tem will be looked upon as an evidence of the bank's conformity to fundamental principles deemed essen- strength, examinations for admission must disclose tial to the success of the new banking system. clearly the condition of an applying bank and the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

146 FEDERAL RESERVE BULLETIN. JULY 1, 1915. character of its management. These examinations therein will carry with it guaranties of safety and must, therefore, be thorough and effective, and be security which will be of inestimable value; at the under the direction of the Federal Reserve Board, but same time it recognizes the responsibilities of those the Board will endeavor to avoid unnecessary addi- intrusted with the management of the State institional expense to the banks by dispensing with sepa- tutions and has, therefore, in the appended regularate and independent examinations so far as practic- tion clearly defined the conditions upon which any able and by adopting a method of joint or supple- State institution may withdraw from membership. mentary examination in conjunction with State banking authorities. The Board plans to draw freely upon the examiners and auditors in the employ of the respective reserve banks and to use their services for REGULATION M, SERIES OF 1915. the purpose of thus supplementing examinations con- WASHINGTON, June 7, 1915. ducted by the banking departments of the several States. It is hoped, therefore, that in passing upon MEMBERSHIP OF STATE BANKS. applications for membership, the Board and the several Federal reserve banks will have the cooperation I. Statutory requirements. of State banking authorities, so that every qualified Specific provisions of the Federal reserve act apapplying bank may be admitted to membership and plicable to State banks and trust companies which all not qualified excluded. become member banks are quoted at the end of this With respect to the matter of status, there are imregulation. portant differences between the membership of national banks and of State banking institutions in the II. Banks eligible for member'ship. Federal reserve banks. Membership of national banks is not elective, but is prescribed by the law. So long A State bank or a trust company to be eligible for as a bank is a national bank it must be a member membership in a Federal reserve bank must comply bank. When it ceases to be a member bank, it ceases with the following conditions: by the same fact to be a national bank, the law hav- (1) It must have been incorporated under a special ing provided no method by which a national bank can or general law of the State or district in which it is sever its relations with a Federal reserve bank ex- located. cept by the process of liquidation. All this is set (2) It must have a minimum paid-up unimpaired forth in definite terms in the Federal reserve act. capital stock as follows: The situation of the State banks is fundamentally In cities or towns not exceeding 3,000 inhabitants, different. National banks are member banks as a $25,000. matter of necessity; State banks become member In cities or towns exceeding 3,000 but not exceeding banks as a matter of choice. Membership in a Fed- 6,000 inhabitants, $50,000. eral reserve bank is an incident in the life of a State In cities or towns exceeding 6,000 but not exceeding institution, not an essential part of its being; and its 50,000 inhabitants, $100,000.. continued existence as a State institution would not In cities exceeding 50,000 inhabitants, $200,000. be threatened or interrupted if its membership should III. Application for membership. cease, its status being fixed by the laws of its State, not, as in the case of the national banks, by the Any eligible State bank or trust company may Federal reserve act. The conditions of membership make application on Form 83, made a part of this of State institutions are, furthermore, prescribed only regulation, to the Federal reserve agent of its district in general terms in the act, the further and final for an amount of capital stock in the Federal reserve elaboration of them being left to the Federal Reserve bank of such district equal to 6 per cent of the paid- Board, which is vested with the necessary discre- up capital stock and surplus of such State bank or tionary authority. In view of this discretionary trust company.1 authority, the Board believes it a duty to define clearly Upon receipt of such application the Federal reterms and conditions upon which State banks and serve agent shall submit the same to a committee trust companies may withdraw from membership, composed of the Federal reserve agent, the governor since otherwise those charged with the management of the Federal reserve bank, and at least one other of these institutions might not feel authorized to member of the board of directors of such bank, to enter a system under which by future regulation the be appointed by such board, but no Class A director scope of their operations might be restricted. It is not to be expected that much use will be made of 1 Three per cent has already been called from national and the withdrawal privilege; indeed, it is the belief of other member banks, but the remainder of the subscription or any part of it shall be subject to call if deemed necessary the Board that as the system develops membership by the Federal Reserve Board. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JULY 1, 1915. FEDERAL RESERVE BULLETIN. 147 whose bank is in the same city or town as the apply- the Board in each case, any loans it may have at the ing bank or trust company shall be a member of such time of its admission to membership which are secommittee. This committee shall, after receiving the cured by its own stock, or any loans to one person, report of such examination as may be required by the firm, or corporation aggregating more than 10 per Federal reserve bank in pursuance of directions from cent of its capital and surplus or more than 30 per the Federal Reserve Board, consider the application cent of its capital, or any real estate loans which, and transmit it to the Federal Reserve Board with its in the judgment of the Federal Reserve Board, impair report and recommendations. its liquid condition; (4) Shall maintain such improvements and changes IV. Approval of application. in its banking practice as may have been specifically In passing upon an application the Federal Reserve required of it by the Federal Reserve Board as a con- Board will consider especially— dition of its admission, and shall not lower the stand- (1) The financial condition of the applying bank ard of banking then required of it; and or trust company and the general character of its (5) Shall enjoy all the privileges and observe all management. those requirements of the Federal reserve act and of (2) Whether the nature of the powers exercised the regulations of the Federal Reserve Board apby the said bank or trust company and its charter plicable to State banks and trust companies which provisions are consistent with the proper conduct of have become member banks. the business of banking and with membership in the VI. Withdrawals. Federal reserve bank. (3) Whether the laws of the State or district in Any State bank or trust company desiring to with which the applying bank or trust company is located draw from membership in a Federal reserve bank contain provisions likely tc interfere with the proper may do so 12 months after written notice of its intenregulation and supervision of member banks. tion to withdraw shall have been filed with the Federal If, in the judgment of the Federal Reserve Board, Reserve Board. The Board will immediately notify an applying bank or trust company conforms to all the Federal reserve bank of the receipt of such notice. the requirements of the Federal reserve act and these At the expiration of said 12 months such bank or regulations, and is otherwise qualified for member- trust company shall surrender all of its holdings of ship, the Board will issue a certificate of approval. capital stock in the Federal reserve bank, which stock Whenever the Board may deem it necessary, it will shall then be canceled and the withdrawing bank or impose such conditions as will insure compliance with trust company shall thereupon be released from its the act and these regulations. When the certificate of stock subscription not previously called. Such bank approval and any conditions contained therein have or trust company shall, immediately upon the cancelbeen accepted by the applying bank or trust company, lation of its stock, cease to be a member of the Fedstock in the Federal reserve bank of the district in eral reserve bank, and the Federal reserve bank shall which the applying bank or trust company is located then refund to such bank or trust company a sum shall be issued and paid for under the regulations of equal to the cash-paid subscription on the shares surthe Federal reserve act provided for national banks rendered, with interest at the rate of one-half of 1 per cent per month computed from the last diviwhich become stockholders in the Federal reserve dend, if earned, not to exceed the book value thereof, banks. and the reserve deposits, less any liability of such V. Powers and restrictions. member to the Federal reserve bank: Provided, That Every State bank or trust company while a member no Federal reserve bank shall, except by the specific of the Federal reserve system— authority of the Federal Reserve Board, cancel within (1) Shall retain its full charter and statutory rights the same calendar year more than 10 per cent of its as a State bank or trust company, and may continue capital stock for the purpose of effecting voluntary to exercise the same functions as before admission, withdrawals during that year. All applications, inexcept as provided in the Federal reserve act and the cluding therein any on which action may have been regulations of the Federal Reserve Board, including deferred because in excess of the aforesaid 10 per cent any conditions embodied in the certificate of approval; limitation, will be dealt with in the order in which (2) Shall invest only in loans on real estate or they were originally filed with the Board. mortgages of a character and to an extent which, con- Any State bank or trust company desiring to withsidering the nature of its liabilities, will not impair draw from membership at the expiration of the 12 its liquid condition; months' notice, notwithstanding the fact that the (3) Shall adjust, to conform with the requirements Federal reserve bank has previously canceled 10 per of the Federal reserve act and these regulations, cent of its stock during the same calendar year, may within such reasonable time as may be determined by do so. In such case, however, the Federal reserve Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

148 FEDERAL RESERVE BULLETIN. JULY 1, 1915. bank shall not be required to repay to the withdraw- of that regulation. There is no change in Circular No. ing bank or trust company the sums due as above, 9, which consists simply of appropriate extracts from until such time as its stock would have been canceled the Federal reserve act and reads as follows: had it not exercised this option. The Federal reserve Section 5 of the Federal reserve act provides that— bank shall, however, give a receipt for the stock sur- The capital stock of each Federal reserve bank shall rendered. be divided into shares of $100 each. The outstanding VII. Examinations. capital stock shall be increased from time to time as member banks increase their capital stock and surplus Every State bank or trust company, while a member or as additional banks become members, and may be of the Federal reserve system, shall be subject to such decreased as member banks reduce their capital stock examinations as may be prescribed by the Federal or surplus or cease to be members. * * * When the capital stock of any Federal reserve bank shall Reserve Board in pursuance of the provisions of the have been increased either on account of the increase Federal reserve act. of capital stock of member banks or on account of the In order to avoid duplication, the Board will exer- increase in the number of member banks the board of directors shall cause to be executed a certificate cise the broad discretion vested in it by the act in to the Comptroller of the Currency showing the inaccepting examinations of State banks and trust com- crease in capital stock, the amount paid in, and by panies made by State authorities wherever these are whom paid. When a member bank reduces its capital satisfactory to the Board and are found to be of the stock it shall surrender a proportionate amount of its holdings in the capital of said Federal reserve bank, same standard of thoroughness as national bank exand when a member bank voluntarily liquidates it shall aminations, and where in addition satisfactory ar- surrender all of its holdings of the capital stock of said rangements for cooperation in the matter of examina- Federal reserve bank and be released from its stock tion between the designated examiners of the Board subscription not previously called. In either case the shares surrendered shall be canceled and the member and those of the States already exist or can be effected bank shall receive in payment therefor, under regulawith State authorities. Examiners from the staff of tions to be prescribed by the Federal Reserve Board, the Board or of the Federal reserve banks will, when- a sum equal to its cash-paid subscriptions on the shares surrendered and one-half of 1 per centum a ever desirable, be designated by the Board to act month for the period of the last dividend, not to exwith the examination staff of the State in order that ceed the book value thereof, less any liability Of such uniformity in the standard of examination may bemember bank to the Federal reserve bank. assured. Section 6 provides: VIII. Future regulations. If any member bank shall be declared insolvent The Federal Reserve Board reserves the right to and a receiver appointed therefor, the stock held by it in said Federal reserve bank shall be canceled, withmake such amendments and adopt and issue, from out impairment of its liability, and all cash-paid sublime to time, such further regulations authorized by scriptions on said stock, with one-half of 1 per (he act as it may deem necessary, but no amendment centum per month from the period of last dividend, <»f Section VI of these regulations, relating to volun- not to exceed the book value thereof, shall be first applied to all debts of the insolvent member bank tary withdrawals, shall take effect until six months to the Federal reserve bank, and the balance, if any, after is adoption and issue by the Board. shall be paid to the receiver of the insolvent bank. Whenever the capital stock of a Federal reserve bank is reduced, either on account of a reduction in capital stock of any member bank or of the liquidation or in- CIRCULAR NO. 15, SERIES OF 1915. solvency of such bank, the board of directors shall (Superseding Circular No. 9 of 1915.) cause to be executed a certificate to the Comptroller of the Currency showing such reduction of capital WASHINGTON, June 17, 1915. stock and the amount repaid to such bank. Pursuant to these provisions of the statue the ac- CHANGES IN CAPITAL STOCK OF FEDERAL RESERVE BANKS. companying regulations have been adopted by the On January 28, 1915, the Federal Reserve Board is- Federal Reserve Board. sued Circular No. 9, series of 1915, relating to increases and decreases in the capital stock of Federal reserve REGULATION N, SERIES OF 1915. banks. The circular in question was accompanied by (Superseding Regulation G of 1915.) Regulation G on the same subject. The attached regulation (Regulation N) is now presented as superseding WASHINGTON, June 17, 1915. Regulation G, having been made necessary by the INCREASE OF CAPITAL STOCK OF FEDERAL RESERVE BANKS. adoption of new application blanks (Forms 86 and 87) to be filed by liquidating or insolvent member banks. Whenever the capital stock of any Federal reserve The only changes that have been made in Regulation bank shall be increased by new banks becoming mem- G are contained in paragraphs 2 and 3, which appear bers, or by the increase of capital or surplus of any in the attached Regulation N as paragraphs 2 and 3 member bank and the allotment of additional capital Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JULY 1, 1915. FEDERAL RESERVE BULLETIN. 149 stock to such bank, the board of directors of such ing to the indebtedness of the insolvent member bank Federal reserve bank shall certify such increase to to such Federal reserve bank all cash-paid subscripthe Comptroller of the Currency on Form 58, which is tions made by it on the stock canceled with one-half made a part of this regulation. of 1 per centum per month from the period of last dividend, if earned, not to exceed the book value DECREASE OF CAPITAL STOCK OF FEDERAL RESERVE BANKS. thereof, and the balance, if any, shall be paid to the I. Whenever a member bank reduces its capital duly authorized receiver of such insolvent member stock or surplus, and, in the case of reduction of its bank. capital, such reduction has been approved by file III, Whenever a member bank goes into voluntary Federal Reserve Board in accordance with the pro- liquidation and a liquidating agent is appointed, such visions of section 2 of the Federal reserve act, it shall agent shall file with the Federal reserve bank of which file with the Federal reserve bank of which it is a it is a member an application on Form 86, which is member an application on Form 60, which is made a made a part of this regulation, for the surrender and part of this regulation. When this application has cancellation of the stock held by and for the refund been approved, the Federal reserve bank shall take of all balances due to such liquidating member bank. up and cancel the receipt issued to such bank for Upon approval of this application by the Federal Recash payments made on its subscription and shall serve Board the Federal reserve bank shall accept issue in lieu thereof a new receipt after refunding and cancel the stock surrendered, and shall adjust to the member bank the proportionate amount due accounts between the liquidating member bank and such bank on account of the subscription canceled. the Federal reserve bank by applying to the indebted- The receipt so issued shall show the date of original ness of the liquidating member bank to such Federal issue, so that dividends may be calculated thereon. reserve bank all cash-paid subscriptions made by it II. Whenever a member bank shall be declared in- on the stock canceled with one-half of 1 per centum solvent and a receiver appointed by the proper au- per month from the period of last dividend, if earned, thorities, such receiver shall file with the Federal re- not to exceed the book value thereof, and the balance, serve bank of which the insolvent bank is a member if any, shall be paid to the duly authorized liquidating an application on Form 87, which is made a part of agent of such liquidating member bank. this regulation, for the surrender and cancellation of IV. Whenever the stock of a Federal reserve bank the stock held by and for the refund of all balances shall be reduced in the manner provided in Paragraphs due to such insolvent member bank. Upon approval I, II, or III of this regulation the board of directors of this application by the Federal Reserve Board the of such Federal reserve bank shall, in accordance Federal reserve bank shall accept and cancel the stock with the provisions of section 6, file with the Compsurrendered, and shall adjust accounts between the troller of the Currency a certificate of such reduction member bank and the Federal reserve bank by apply- on Form 59. which is made a part of this regulation, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

150 FEDERAL RESERVE BULLETIN. JULY 1, 1915. LAW DEPARTMENT. Several States have, since the passage of the trust companies. In case of any person, firm Federal reserve act, passed laws specifically au- or corporation transacting a banking business and accepting any trust under the provisions thorizing State banks to subscribe for stock in of this act, the president or cashier of such a Federal reserve bank and to become members bank is authorized to receive and execute the of such bank. A number of States have also same in the name of the bank. passed laws expressly authorizing national Iowa.—The last session of the Iowa Legisbanks to exercise the powers of trustee, exlature passed laws authorizing State banks and ecutor, administrator, and registrar of stocks trust companies to become members of a Fedand bonds. eral reserve bank and authorizing national For the convenience of those banks which banks to exercise the same powers as are conmay be interested, a list of the States which ferred upon trust companies and State and have passed such laws is given below. There savings banks. are five other States from which no report Be it enacted by the General Assembly of the has been received, so this list is not necessarily State of Iowa: complete. SECTION 1. That any State bank, savings bank or trust company organized under the Colorado.—The State legislature, at its last laws of this state is authorized and empowered, session, passed a law, effective July 12, 1915, upon a vote of the shareholders thereof ownauthorizing State and National banks to act ing not less than fifty-one (51) per cent of the as trustee, executor, administrator, and regis- capital stock of such State bank, savings bank trar of stocks and bonds. or trust company, to become a member of the Federal reserve bank in the Federal reserve Idaho.—An act approved March 11, 1915, district in which such banks or trust companies authorizes any State bank to subscribe for are located, and to incur liability therefor. stock in a Federal reserve bank. Be it enacted by the General Assembly of Indiana.—The following act of the Legisla- the State of Iowa: ture of Indiana, giving national banks the right SECTION 1. That the law as it appears in section eighteen hundred and eighty-nine-d, to accept and execute " trusts of any and every supplement to the code, 1913, be and the same description," was approved on March 8, 1915: is hereby amended by adding a paragraph at the end of said section, as follows: Be it enacted by the General Assembly of 9. When so authorized by any law of the the State of Indiana, That every person, firm, United States now in force or hereafter enor corporation transacting a banking business acted, national banks may exercise the same subject to the provisions of an act entitled, powers and perform the same duties as are "An act to regulate and supervise the busiby this section conferred upon trust companies, ness of banking by individuals, partnerships State and savings banks. or unincorporated persons," approved March eighth, nineteen hundred and seven, and every Kentucky.—The Legislature of Kentucky at corporation transacting a banking business as its 1914 session passed the following act, auprescribed in "An act to authorize and regulate thorizing State banks and trust companies to the incorporation of banks of discount and subscribe for stock in a Federal reserve bank: deposit in the State of Indiana," approved Any bank or trust company organized under February seventh, eighteen hundred and the laws of this Commonwealth may subseventy-three, and all acts amendatory or supscribe for and own stock of the Federal reserve plemental thereto, and every national bank bank with the Federal reserve district where coming within the United States Federal resuch bank or trust company is located and may serve act shall be empowered by this act to take any steps necessary to become a member accept and execute trusts of any and every deof such Federal reserve bank. scription which may be committed or transferred to them, under the same rules and regu- Maine.—A law, permitting trust companies lations as now govern like powers in loan and to subscribe for stock in a Federal reserve bank, Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JULY 1, 1915. FEDERAL R*SERVE BULLETIN. 151 was passed at the last session of the legislature. lute property of such corporation. Whenever It is to be noted in this connection that trust said reserve shall be below said percentage of such deposits, such corporation shall not furcompanies are the only form of State banks in ther diminish the amount of its legal reserve Maine, except savings banks. by making any new loans until the required CHAPTER 262.—An act to amend section eighty of chap- proportion between the aggregate amount of ter forty-eight of the Revised Statutes, as amended such deposits and its cash reserve shall be reby chapter fifteen of the public laws of nineteen stored: Provided, however, That any trust hundred five, allowing trust companies to become company may become a stockholder in a Fedstockholders in Federal reserve banks. eral reserve bank within the Federal reserve Section eighty of chapter forty-eight of the district where said trust company is situated, Revised Statutes of nineteen hundred three and while such trust company continues as a as amended by chapter fifteen of the public laws member bank under the provisions of the of nineteen hundred five is hereby amended United States ' Federal Reserve Act,' approved by adding after the word " restored " in the next December twenty-third, nineteen hundred to the last line of said section the following: thirteen, or any acts in amendment thereof, shall « Provided, however, That any trust company be subject to the provisions of said ' Federal Remay become a stockholder in a Federal reserve serve Act,' and any amendments thereof relabank within the Federal reserve district where tive to bank reserves in substitution for the resaid trust company is situated, and while such quirements of this section. Every such trust trust company continues as a member bank company may have and exercise any and all of under the provisions of the United States the corporate powers and privileges which may 'Federal Reserve Act,' approved December be exercised by member banks under provisions twenty-third, nineteen hundred thirteen, or of the ; Federal Reserve Act' or any acts in any acts in amendment thereof, shall be subject amendment thereof or in addition thereto. All to the provisions of said ' Federal Reserve Act' provisions of charters in conflict with this secand any amendments thereof relative to bank tion are void." reserves in substitution for the requirements of Approved March 31, 1915. this section. Every such trust company may Massachusetts.—On May 19, 1914, the Massahave and exercise any and all of the corporate powers and privileges which may be exercised chusetts Legislature passed the following act by member banks under provisions of the authorizing trust companies to become member ' Federal Reserve Act' or any acts in amend- banks under the provisions of the Federal rement thereof or in addition thereto," so that serve act: said section as amended shall read as follows: CHAP. 537: " SEC. 80. Every trust and banking com- SECTION 1. A trust company which becomes pany having authority to receive money on a stockholder in a Federal reserve bank within deposit shall at all times have on hand in the the Federal reserve district where such trust lawful money or national bank notes of the company is situated and while such trust com- United States, as a cash reserve, an amount pany continues as a member bank under the equal to at least fifteen per cent of the aggre- provisions of the United States Federal Reserve gate amount of its deposits which are subject Act approved December twenty-third, nineteen to withdrawal upon demand or within ten hundred and thirteen, or any acts in amenddays: Provided, That in lieu of such cash re- ment thereof, shall be subject to the provisions serve, two-thirds of said fifteen per cent may of said Federal Reserve Act and any amendconsist of balances payable on demand, due ments, thereof relative to bank reserves, in subfrom any national bank or trust company stitution for the requirements of sections eight, created under the laws of this State, or from nine and ten of chapter five hundred and any trust company located in any of the other twenty of the acts of the year nineteen hun- New England States or New York and ap- dred and eight, as amended by chapter three proved by the bank examiner in writing; and hundred and seventy-seven of the acts of the one-third of said fifteen per cent may consist year nineteen hundred and ten. Every such of the bonds of the United States, the District trust company may have and exercise any and of Columbia, and any of the New England all of the corporate powers and privileges States and the States of New York, Pennsyl- which may be exercised by member banks vania, Maryland, Ohio, Indiana, Kentucky, under the provisions of said Federal Reserve Michigan, Wisconsin, Minnesota, Iowa, Illi- Act or any acts in amendment thereof or in nois, Missouri, Kansas, and Nebraska, the abso- addition thereto. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

152 FEDERAL RESERVE BULLETIN. JULY 1, 1915. There are no State banks, as distinguished Federal Reserve Bank of the Federal Reserve from trust companies and savings banks, in District in which said bank or trust company is located and may invest in and hold stocK Massachusetts. therein. Michigan.—The State legislature has passed Section 2. This act shall take effect and be in a law giving to State banks the right to pur- force from and after its passage. chase stock in a Federal reserve bank or to do Mississippi.—The Mississippi Banking Law, any other act required to be done by a bank 1914, provides in section 64: to become a member bank under the Federal Banks forbidden to hold stock in otherreserve act. banks.—No part of the stock of any bank, ex- The people of the State of Michigan enact: cept regional reserve banks, doing business in # % * * * this State, shall be owned by any bank under SEC. 4. Upon making and filing the articles the provisions of this act. of incorporation required by this act the bank Missouri.—Article II, section 66, of the Bankshall become a body corporate, and as such ing Laws of Missouri, Revision 1915, provides shall have power: * * * * * that State banks shall have the right— Seventh. To exercise by its board of directors To purchase and hold, for the purpose of beor duly authorized officers or agents, subject to coming a member of a Federal reserve bank, so law, all such power as shall be necessary to much of the capital stock thereof as will carry on the business of banking by discount- qualify it for membership in such reserve bank ing and negotiating promissory notes, drafts, pursuant to an act of Congress, approved Debills of exchange and other evidences of debts, cember twenty-third, nineteen hundred and by receiving deposits, by buying and selling thirteen, entitled the "Federal reserve act," exchange, coin and bullion, and by loaning and any amendments thereto; to become a memmoney on personal and real security, as pro- ber of such Federal reserve bank, and to have vided hereinafter, to purchase capital stock in and exercise all powers, not in conflict with the a Federal reserve bank, or do any other act laws of this State, which are conferred upon required to be done by a bank to become a any such member bank by the " Federal reserve member bank under the Federal Reserve Act act " and any amendment thereto. Such mempassed by the Sixty-third Congress of the ber banks and its directors, officers and stock- United States, or any amendment thereto: holders shall continue to be subject, however, Provided, however, That the amount of re- to all liabilities and duties imposed upon them serve required to be kept on hand by any such by any law of this State and to all the provibank becoming a member bank under the sions of this chapter relating to banks. said Federal Reserve Act shall be as fixed Article III, section 127, provides that trust by said Federal Reserve Act or any amendment thereto, and not as fixed by the pro- companies shall have the right— visions of this act; but no such bank shall To purchase and hold, for the purpose of betake or receive more than the rate of interest coming a member of a Federal reserve bank, so allowed by law in advance on its loans and dismuch of the capital stock thereof as will counts: Provided, That this restriction shall qualify it for membership in such reserve bank, not authorize any transaction for a less sum pursuant to an act of Congress, approved Dethan fifty cents; and no bank shall transact cember twenty-third, nineteen hundred and any business except such as is incidental and thirteen, entitled the "Federal reserve act," necessarily preliminary to its organization unand any amendments thereto; to become a memtil it has been authorized by the commissioner ber of such Federal reserve bank, and to have of the banking department to commence the and exercise all powers not in conflict with the business of banking. laws of this State, which are conferred upon Minnesota.—A law has been passed, approved any such member by the Federal reserve act. March 6, 1915, authorizing State banks and Such trust company and its directors, officers and stockholders shall continue to be subject, trust companies to become members of a Fedhowever, to all liabilities and duties imposed eral reserve bank: upon them by any law of this State and to all Section 1. Any incorporated State Bank or the provisions of this chapter relating to trust Trust Company may become a member of the companies. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JULY 1,1915. FEDERAL RESERVE BULLETIN. 153 Montana.—Section 23 of chapter 89, Session New Jersey.—Chapter 159, Laws of 1914, au- Laws of 1915, of the State of Montana, au- thorizing State banks and trust companies to thorizing any State bank to become a member become member banks, provides that— bank, provides: 1. It shall be lawful for any trust company or State bank heretofore or hereafter incor- Any bank is hereby authorized and emporated under the laws of this State, to become powered to join or associate itself with the a member of the Federal Reserve Bank, organ- National Reserve Association of the United ized or to be organized in the Federal Reserve States, or any branch thereof, and nothing District in which such trust company or State herein contained shall prevent or prohibit any bank is located, under the provisions of the bank from joining or associating itself with pet of Congress known as the Federal Reserve any such association or branch thereof or from Act, approved December twenty-third, one investing any part of its capital or surplus in thousand nine hundred and thirteen; and such the stock of such association or any branch trust company or State bank may subscribe for, thereof, in accordance with the terms and propurchase, hold, and surrender, from time to visions of the Act of Congress creating such time, such amounts of the capital stock of such association. Any bank joining or associating Federal Reserve Bank as such trust company itself with such association or branch shall be or State bank may deem advisable or as may permitted to conform to and transact its busibe required under said Federal Reserve Act, ness in accordance with the terms and proor any amendment thereof, in order to obtain visions of the Act of Congress creating the and continue such membership, and upon the same, and the rules and regulations of such purchase of such stock, to assume the liabilities association or branch thereof. and become entitled to the benefits recited in said Federal Reserve Act. Nebraska.—At the last session of the Ne- 2. This act shall take effect immediately. braska Legislature a laAv was passed authoriz- Approved, April 14, 1914. ing State banks and trust companies to become New York.—Article III, section 106, subdimember banks: vision 4, relating to the powers of State banks, Any bank or trust company, incorporated provides that such banks shall have the under the laws of this State, shall have power right— to subscribe to the capital stock, and become a member of a Federal reserve bank created and To purchase and hold, for the purpose of organized under an Act of Congress of the becoming a member of a federal reserve bank, United States, approved December twenty- so much of the capital stock thereof as will third, nineteen hundred and thirteen, and qualify it for membership in such reserve bank known as the Federal Reserve Act, and shall pursuant to an act of congress, approved Dehave power to assume such liabilities and to cember twenty-three, nineteen hundred and exercise such powers as a member of such Fed- thirteen, entitled the "federal reserve act"; eral reserve bank as are prescribed by the pro- to become a member of such federal reserve visions of said act, or amendments thereto; bank, and to have and exercise all powers, and, so long as such bank shall remain a mem- not in conflict with the laws of this state ber of the Federal reserve system created by which are conferred upon any such member said Act of Congress, it shall be subject to ex- bank by the federal reserve act. Such memamination by the legally constituted authori- ber bank and its directors, officers, and stockties and to all provisions of said Federal re- holders shall continue to be subject, however, serve act and regulations made pursuant there- to all liabilities and duties imposed upon them to by the Federal Reserve Board which are ap- by any laws of this state and to all the proplicable to such banks as members of the Fed- visions of this chapter relating to banks. eral reserve system; and the State authorities Article V, section 185, subdivision 12, relatmay, in their discretion, accept examinations ing to the powers of trust companies provides and audits made under the provisions of the Federal reserve act in lieu of examinations re- that every trust company shall have the right— quired of banks organized under the laws of To purchase and hold, for the purpose of this State. becoming a member of a federal reserve bank. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

154 FEDERAL RESERVE BULLETIN. JULT 1, 1915. so much of the capital stock thereof as will the act of the 63rd Congress of the United qualify it for membership in such reserve bank, States entitled "An Act to provide for the pursuant to an act of congress approved De- establishment of Federal reserve banks, to cember twenty-three, nineteen hundred and furnish an elastic currency, to afford means of thirteen, entitled the " Federal Reserve Act"; rediscounting commercial paper, to establish to become a member of such federal reserve a more effective supervision of banking in the bank, and to have and exercise all powers, United States, and for other purposes," apnot in conflict with the laws of this state, proved by the President of the United States which are conferred upon any such member on December 23rd, 1913. by the federal reserve act. Such trust com- SEC. 2. Every state bank, in addition to the pany and its directors, officers and stockhold- powers, rights and privileges possessed by it ers shall continue to be subject, however, to under the laws of Ohio shall have the right all liabilities and duties imposed upon them and power to become a member bank under by any law of this state and to all th§ pro- the Federal Reserve Act upon the terms and convisions of this chapter relating to trust com- ditions set forth in said Federal Reserve Act, or panies. hereafter provided by law, in order to become a member bank as contemplated by said Fed- North Dakota.—The last session of the North eral Reserve Act. Every state bank which be- Dakota Legislative Assembly amended section comes a member bank shall have the right and 5187 of the Compiled Laws of 1913 to read as power to do everything required of or granted follows, permitting State banks to become by said Federal Reserve Act to member banks which are organized under state laws; and member banks: compliance by state banks with the reserve No bank shall as principal employ its money requirements of said Federal Reserve Act shall or other of its assets, directly or indirectly in be accepted in lieu of the reserve requirements trade or commerce, nor employ or invest any of provided by the laws of Ohio. Nothing conits assets or funds in the stock of any corpora- tained in this section of this act shall in any tion, bank, partnership, firm or association, way or manner affect or have reference to nor shall it invest any of its assets in specula- state banks which do not become member tive margins of stocks, bonds, grain, provi- banks under said Federal Reserve Act except as sions, produce or other commodities, except provided in this act. that it shall be lawful for banks to make ad- SEC. 3. No state bank or national bank vances for grain or other products in store or shall act as administrator, executor, trustee or in transit to market, Provided, nevertheless, registrar of stocks and bonds in this state: that this Act shall not be construed as in any Provided, however, that trust companies orway preventing a bank from investing such ganized under the laws of Ohio shall have the part of its funds in stock of the Federal Reserve same powers in the acceptance and execution Bank of this district as may be necessary to of trusts which are now conferred upon them become a member of the Federal Reserve Asby law, and other state banks and national sociation and from carrying such stock among banks may have the same powers in the acceptits assets. ance and execution of trusts which are now Ohio.—Section 9764, subsections 1, 2, and 3, conferred by law upon trust companies, upon such state banks and national banks complyhas been amended to read as follows, permiting with all the requirements, regulations and ting State banks to become member banks and conditions imposed by the laws of Ohio upon authorizing national banks to act as trustee trust companies in the matter of the acceptance and registrar: and execution of trusts. SECTION 1. Wherever the term "statebank" Oregon.—Section 4576 of Lord's Oregon Laws is used in this act the said term shall be held has been amended by the 1915 Legislative Asto include every corporation or association havsembly to read as follows: ing the power to receive and receiving money on deposit, chartered or incorporated under Sec. 4576 * * * (d) Hereafter no State any general or specific law of Ohio, but shall bank shall invest any of its assets in the capital not include building and loan associations; and stock of any other corporation except in the wherever the term "Federal Reserve Act" is capital stock of a Federal Reserve Bank, and used in this act the same shall be held to mean except such as it may acquire or purchase to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JULY 1, 1915. FEDERAL RESERVE BULLETIN. 155 save a loss on preexisting debt, and stocks so Texas.—Senate bill No. 5, passed by the acquired or purchased shall be sold within Third Called Session of the Thirty-third Legtwelve months from the date acquired or purislature, provides in section 1 that— chased: Provided, that a further time may be granted by the Superintendent of Banks. All banks or bank and trust companies incorporated under the laws of Texas shall have South Carolina.—On February 18, 1914, an authority to become members of Federal React was passed authorizing State banks and serve Banks under the terms and limitations as trust companies to become member banks. It may be prescribed by the laws of the United provides: States and such rules and regulations relative thereto as may be promulgated by lawful au- 1. That any bank, banking association or trust thority. company chartered and engaged in the banking business under the laws of this State may The act further specifies the reserve requireassociate itself with any national reserve assoments by which State banks which become ciation of the United States, or any branch members of a Federal reserve bank shall be thereof under any law now existing, or hereafter enacted by the Congress of the United governed. They are similar to those of section States; and may invest such part of its capital 19 of the Federal reserve act. or surplus therein as may be necessary to ac- It also provides in the act that— quire and preserve its membership in such association. State banks becoming members of a Federal 2. That all Acts or parts of Acts inconsistent Reserve Bank shall have authority to conform herewith be, and the same are, repealed. to the Federal Reserve Law now, or as hereafter enacted, and all rules and regulations promul- South Dakota.—An act approved March 6, gated relative thereto by lawful authority; and 1915, authorizing national banks to act as shall likewise be subject to all limitations of trustee, executor, administrator, or registrar of law and to such rules and regulations now or stocks and bonds provides that— hereafter enacted or promulgated. SEC. 1. It shall be lawful for national There are other sections of the act relating banks when authorized by the laws of the in more detail to State banks becoming mem- United States to act as trustee, executor, or bers of a Federal reserve bank. administrator of estates or trusts or as registrar of stocks and bonds: Provided further, Utah.—Chapter 47, section 1, Session Laws that State banks may act in similar capacity of 1913, provides that— under such rules and restrictions as the Department of Banking and Finance may pre- SECTION 1. Holding stock in other corporations lawful—Proviso.—That any bank or scribe. loan, trust, and guaranty company or associa- SEC. 2. All acts or parts of acts in conflict tion, organized under the laws of the State of with the provisions of this act are hereby re- Utah, may purchase, own, hold, and sell or pealed. otherwise dispose of any of the shares of the Article II, section 36, of the Bank Guaranty capital stock of any other bank, loan, trust, and guaranty association or other corporation; Law, enacted in 1915, provides in part that— provided such purchase shall be authorized by Any bank organized under the laws of this the executive committee and approved by the state may become a member of a Federal Re- Board of Directors; and in case the purchase is serve Bank, pursuant to the provisions of the of stock in any other banking corporation the Federal Reserve Act and any Act of Congress approval of said purchase must also be had supplemental thereto or amendatory thereof, from the State Bank Commissioner: And proand after becoming such member and share- vided further, That nothing in this act shall holder it may comply with, and shall be sub- be so constructed (construed) as to permit the ject to said Federal Reserve Act and such establishment, maintenance or control of any other Acts of Congress, anything in the laws branch bank or loan, trust or guaranty comof this state to the contrary notwithstanding. pany in the State. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

156 FEDERAL RESERVE BULLETIN. JULY 1,1916. Vermont.—At the last session of the legisla- shall be transferred on the books of the bank ture a law was enacted providing that national in such a manner as the by-laws thereof shall direct. No bank shall be the purchaser of its banks may act as trustee, executor, adminisown capital stock, or accept its capital stock, trator, and registrar of stocks and bonds. A or any part of it, as security for loans. No copy of the law is not available at the present bank shall subscribe for or purchase the stock time, so can not be quoted here. of any other banking corporation, except a Federal Reserve Bank of which such bank Virginia.—In an act approved March 2,1914, shall become a member, and then only to the authorizing State banks to become member extent required by such Federal Reserve Bank. banks, it was provided— Section 3346 of .Remington and Ballinger's That the banks heretofore and hereafter Annotated Codes and Statutes of Washington chartered by the State of Virginia, be and they was amended in order to authorize national are hereby empowered to become member banks to act as trustee, executor, administrabanks of the federal reserve banks of the United States, as authorized by an act of con- tor, and registrar of stocks and bonds. It is gress entitled "An act to provide for the estab- provided— lishment of federal reserve banks, to furnish an elastic currency, to afford means of redis- That national banks, having a paid-up counting commercial paper, to establish a more capital of $50,000 or more when authorized or effective supervision of banking in the United permitted so to do by or under any act of the States," and for other purposes, approved De- Congress of the United States, may exercise cember twenty-third, nineteen hundred and any of the powers conferred upon trust comthirteen; or as may be authorized by any panies organized under this act.—Chapter 38. amendment to said act of congress: Provided, Laws 1915. That nothing herein contained shall be con- In the following States, though there has strued as requiring said State banks to become been no specific legislation enabling State banks such member banks. to subscribe for stock in a Federal reserve Inasmuch as it is of the greatest importance that State banks may have the right to sub- bank, the State authorities have ruled that scribe at the earliest possible moment to the State banks may subscribe for such stock unstock of federal reserve banks, an emergency der the laws as they exist at the present time: exists and this act shall take effect from and Alabama, Arkansas, Delaware, Georgia, Illiafter its passage. nois, Indiana, Kansas, Maryland, North Caro- In an act approved March 27, 1914, author- lina, Pennsylvania, Tennessee, Wisconsin, and izing national banks to act as trustee, executor, Vermont. The State authorities have ruled in administrator, or registrar of stocks and bonds, Montana and Rhode Island that trust comit was provided— panies, as distinct from State banks, are eligi- That all national banks which have been, or ble to subscribe for stock in a Federal reserve hereafter may be, permitted by law to act as bank, but that State banks are ineligible. trustee and in fiduciary capacities, shall have No laws relating either to the right of State all the rights, powers, privileges and immunibanks to subscribe for stock in a Federal reties conferred upon trust companies by an act serve bank or to the eligibility of national of the General Assembly of Virginia, entitled "An act to provide how trust companies may banks to act as trustee, executor, administrator, be incorporated, and to provide for general or registrar of stocks and bonds have been powers for the purpose of doing a trust busi- passed in any of the following States: Alaness in this State in addition to a general bankbama, Arkansas, Connecticut, Delaware, Floring business." ida, Georgia, Illinois, Kansas, Maryland, New Washington.—Section 3324 of Eemington and Hampshire, Oklahoma, Pennsylvania, Rhode Ballinger's Annotated Codes and Statutes of Island, or Tennessee, and, owing to the absence Washington was so amended by the 1915 ses- of information, no report can be made at this sion of the legislature as to read as follows: time regarding the question of express legis- The shares of stock of such incorporated lation in Arizona, California, Louisiana, New bank shall be deemed personal property and Mexico, and Nevada. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

.JULY 1, 1915. FEDERAL RESERVE BULLETIN. 157 GENERAL BUSINESS CONDITIONS. The reports from the cotton mill districts show business in that line, for the most part, General ^business and banking conditions are satisfactory, although the dry goods market described in reports made by Federal reserve does not seem to be quite as firm as it has been agents for the 12 Federal reserve districts. during the past few weeks. The situation in Below are given in detail digests of condi- reference to the dyestuffs is reported as being tions in the various districts substantially as rather acute, and in certain lines has caused reported by Federal reserve agents. curtailment. There seems to be a recession of business in DISTRICT NO. 1—BOSTON. the wool, woolens, and worsted trade since the 1st of May. The high price of wool has been Weather conditions, which have been unseta restriction. Uncertainty that the price of tled, and the wave of economy, which is afraw material will be maintained and the unfecting all classes, have no doubt been imsatisfactory condition of the goods market are portant factors in affecting general business influencing the manufacturers to go slow, many during June. The latter factor has been feeling that the present demand for wool has noticeably felt in the mill towns where, while been largely fictitious and due to a considerable increased deposits in savings banks are reextent to the congestion of shipments from ported, the business of the local department foreign ports. stores is not satisfactory, and manufacturers of cheap jewelry, dependent on department DISTRICT NO. 2—NEW YORK. store trade, report unusually poor business. Bankers in this district outside of New York The increased surplus in reserves shown by City report that crops in general have a good the New York and Boston clearing house start, notwithstanding the wet, cold, unseasonbanks due to the lack of demand from local able weather which prevailed during the month commercial borrowers, the dullness of the of May. Peaches, small fruits and vegetables stock market, and the scarcity of the supply of were seriously affected by frost in the northern commercial paper in the hands of note brokers counties. Dairy business is very satisfactory, has affected money rates. While demand with cheese selling at record prices. Frequent money to call brokers holds at 3 per cent rains have made good pasturage. Orders have banks are finding it difficult to maintain a 4 caused increased activity in many industries per cent rate to their best commercial cus- and better employment for labor. Strikes are tomers, and are more inclined to shade that reported in southern and northern sections of rate. Note brokers' commercial paper is 3^ the district. Bank deposits are generally into 4| Per cent; savings bank mortgages, 4J to creased ; collections are fair, with but light de- 5 per cent; 90-day bank acceptances, 2-| to 2§ mand for loans. per cent-; town notes, from 2f to 3J per cent; In New York City trade was also somewhat Boston bank rate to country banks, 3-| to 4 per retarded by the unseasonable weather, but from cent. a number of large houses it is gathered that The shoe and leather business is still very mercantile lines in general continue to show an dull and while prices of leather as a rule are improving trend and a reasonably satisfactory well maintained, tanners are keeping their pro- outlook. duction just sufficient to meet the actual de- Exports from this port in May were $102,mands. The shoe manufacturers as a rule re- 238,195, against $66,008,905 in May, 1914. Import no better business, but on the other hand ports last month were $78,415,038, as compared state that the situation is not getting Avorse with $87,508,546 in May, 1914. Since Januand that the underlying tone is fairly healthy. ary 1, exports are $139,133,000 higher than last Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

158 FEDEEAL RESERVE BULLETIN. JULY 1,1915. year, and imports $166,039,000 lower. Exports vantage of brighter prospects, and are looking show more demand for goods for civilians. A to the future more cheerfully than a few large shrinkage appears in imports of precious months ago. stones. Orders are being received in greater volume More new companies were incorporated dur- than last month for supplies for export, and ing the month than in May last year, but the this business is not only helping to restore configures of new incorporations for the last five fidence but is spreading business to other allied months are still far behind those of the cor- industries. Many large concerns are turning responding periods of recent years. Building their attention to this new business, which usupermits issued last month show a decline in ally necessitates the installation of machinery number of over 50 per cent. Failures in the or additions to plants. This has had a favordistrict increased 66 in number over May, 1914, able effect upon concerns engaged in the manubut the liabilities decreased about 50 per cent. facture of machinery, tools, and building mate- Trading in bonds and stocks fell off consid- rials, with the result that the steel industries erably from the preceding month. show a decided gain over last month. Condi- Transactions through the New York Clear- tions of employment are improved, and the ining House in May totaled $7,238,531,558, which crease in pay roils, with the corresponding increase in purchasing power, have made the is $1,396,623,951 less than a year ago. Offerhome trade better. ings of bankers' acceptances and commercial paper were lighter. Loans to other countries Most domestic manufactories are operating amounting to $247,500,000 have been reported at about the same capacity as last month, exas negotiated here during the past five months. cepting the steel industries. Shipyards are ex- Nevertheless money continues to accumulate ceedingly busy, and will be for months to come. at this center. The movement of gold inward Anthracite-coal mining is close to the minimum since the beginning of the year is reaching un- usual during the summer months, but there is paralleled proportions; $112,250,000 has thus an increased demand for bituminous coal. Alfar been received from other countries, chiefly though some of the large railroad shops are opfrom Canada on London account. This move- erating at only 75 per cent of capacity, the number on the pay rolls is being greatly inment has not stopped the downward tendency creased. of rates for sterling and continental bills, which are falling to unprecedented levels. The total The demand for wool is increasing, and of the excess reserves of the clearing-house prices are rising. Cotton yarn does not show members on June 19 was $200,400,000, a gain much change. The demand for hosiery, notions, and dry goods is improving, but the deof $30,220,000 since May 1. The result is an mand for silks has fallen off somewhat. Imeasier money market, with rates generally oneprovement is noted in hides and leather. The eighth to one-fourth per cent lower than they chemical and dyestuff situation remains unwere a month ago. Prime commercial paper changed, with prices high and supply low. finds markets ranging from 3J to 4 per cent, Electrical supplies are in demand, and busiacceptances, 2£ to 2f per cent. ness is good in paints and wall paper. DISTRICT NO. 3—PHILADELPHIA. Crop reports are very favorable, and there is The largest surplus reserves held by the evidence that prices will be better this year banks in six months and easy rates for money, than last. with little demand for funds, are the charac- Money-market conditions are about the same teristic financial features in this district. Do- as last month. There is very little demand for mestic business is still below normal, but manu- money, and the rates are easy, call money being facturers and jobbers are prepared to take ad- quoted from 3J to 4 per cent, time money 4 to Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JULY 1, 1915. FEDERAL RESERVE BULLETIN. 159 44 per cent, and commercial paper 3| to 4J DISTRICT NO. 5—RICHMOND. per cent. The supply of commercial paper is Little change has been observed in this dis« extremely limited, and new names are not aptrict either in general trade conditions or in pearing in the market to any extent. The particular lines of business activity in the last available amount of loanable funds keeps 30 days. It can fairly be said that any progress steadily increasing. Bank clearings show a heretofore evidenced has been held, although slight increase over last month. Investment no material further development is shown, as purchasing of bonds is reported in greater indeed might naturally be expected in a terrivolume than for some time. tory so largely agricultural and during a DISTRICT NO. 4-—CLEVELAND. period immediately preceding the earliest Business in some large industrial plants with movement of its farm products. special lines is almost booming. General busi- Eetail trade generally is quiet, reflecting ness is only fair. Coal and pig-iron activities economies practiced by ultimate consumers. are still unsatisfactory but improving. The These are manifest particularly in cotton and automobile manufacturing and rubber indus- tobacco territories. tries are working to capacity. Orders for do- Some of the cotton mills claim to be making mestic consumption of sufficient size to cause money, but it is probably the fact that most of comment are reported by a number of comthem are satisfied with nominal profits. panies. An instance of the latter is found in Lumber is in poor position, with little prosthe increased activity in plants of the American pect of improvement in the immediate future. Locomotive Co. Tobacco has been overplanted. Stands are ex- Collections are not as good as they were 30 cellent, but prospects point at the moment to days ago. Landlords report payments from a yield which, in connection with the great tenants slower for June than for any month quantity of the staple now being carried by since January. Banks doing a savings business warehousemen, suggests prices in the future notice the closing of an unusual number of which will not be acceptable to the growers. accounts by small depositors although aggre- Diversification should help a generous number gate totals of savings deposits are maintained. of farmers who have undertaken it, even should Money has a firmer tendency, a. better deit happen that the price of grains be lower than mand being reported in two of the large centhe high-water marks reached by them some ters of the district. In three other centers months ago. funds are fairly plentiful, but the offering of While the banks at our centers probably are cheap money is not being pressed as was the holding very little more than reserve requirecase 60 days ago. There are indications from ments demand, it is also true that they are not some sections of demands for crop-moving being called upon for fresh credits in any funds. large way. The interior banks, having met the While weather conditions have not been conspring demands of their customers, will reducive to seasonable trade in mercantile lines quire very little further aid until possibly the they have not been detrimental to crop prosactual movement of the larger staples will depects, except corn, which is backward due to mand currency against temporary credits. cold, wet weather. The outlook for an unusually prosperous season for farm products There is no demand from any large direction still continues. for further liquidation, suggesting that credi- Deposits in commercial banks are running tors are satisfied both with immediate condistrong and a hopeful feeling for improved con- tions and prospects. In other words, the genditions exists in all the industrial communities eral situation seems to be sound and in position in the district. promptly to develop as conditions permit. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

160 FEDERAL RESERVE BULLETIN. JULY 1,1915. DISTRICT NO. 6—ATLANTA. Money for active commercial purposes remains easy, with usual rates prevailing; but Conservatism appears to be the dominant little or no funds for permanent investments feature in nearly all lines of commerce and are offered. Real estate agents in the cities trade in the sixth district, with a steady and report their business as extremely dull. sound improvement in the economic situation. While the merchants are beginning to replenish DISTRICT NO. 7—CHICAGO. their somewhat depleted stocks, they are closely limiting themselves to immediate needs and Business in the seventh district has made are not buying in large quantities. steady although slow progress during the past The situation in the cotton-manufacturing month. Labor troubles in the building trades, industry continues good, with mills operating however, still continue. at more than normal output. There is still a Excessive rains in the early weeks of June large amount of cotton held in warehouses and proved a drawback in leading retail lines and compresses, holders not desiring to sell on fallhad an injurious effect on the fruit crop in ing prices: and owing to the almost complete Michigan and on some farm crops in the disclosing of the export trade due to war conditrict. Notwithstanding this, late advices intions, very little cotton has been moved during dicate unprecedented cereal prospects. the past month. This good outlook has imparted confidence Building operations are below normal, with in the future of manufacturers and distribulittle improvement in the building-materials tors. More activity has developed in all iron lines or in the lumber industry. This, together and steel lines—both in actual dealings and in with the lack of cotton shipments, has conorders for forward deliveries. The spreading tributed largely to the decreased railroad earnof work and improving calls for supplies are ings during the month of May and June. Rereflected in other lines and further gains have ports indicate a surplus of idle cars. June 30 been made in reducing idle factory capacity marks the end of the fiscal year, and the roads and increasing the demand for labor. Dishave let no contracts for construction work or tribution of general merchandise has been fair, rolling stock. There is a slight tendency to imjobbers reporting a good demand for textiles provement in - passenger traffic over the preand other staples. Primary movements of vious month, and while the fruit and melon grain have fallen off, due to weather intercrops are beginning to move, no great improveruptions and lessened export sales. ment is looked for until cotton begins to come Money was without special change—commerupon the market. cial paper (brokers) rates averaging around The farmers are somewhat behind in their 3^ per cent. work owing to rains, but general reports indi- Orders of goods for export have been recate the crops are in a healthy condition. The sponsible for some of the increase in activity production of cotton is likely to be far less in this district, but this tendency has been offthan last year owing to the large curtailment set by the hesitation due to the condition of of commercial fertilizers. our diplomatic relations. Such hesitation is Business is reported fairly good in the iron also partly responsible for reduced investment and coal industry. The naval stores lines show in securities and in permanent improvements. a very slight improvement, with prices low. The cattle industry is increasing greatly in DISTRICT NO. 8—ST. LOUIS. the cotton section of this district; many silos are being built and dipping vats are becom- The output of the manufacturers who have ing numerous. no products available for export to Europe Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JULY 1,1915. FEDERAL RESERVE BULLETIN. 161 seems to be still below normal, although the DISTRICT NO. 9—MINNEAPOLIS. somewhat more active condition <*f the jobbing Dull and overcast weather, with an unusual trade would seem to be an indication that these amount of rain following after a cold and interests will improve in the course of the next rainy May, has undoubtedly damaged the few months. Stocks of goods in the hands of northwestern corn crop. Many fields have retail merchants appear to be low, and they are been replanted, and in some sections corn has buying a trifle more freely. Prices seem to been replanted the second time. Over most of have advanced in some lines during the last Wisconsin, Minnesota, North and South Dafew months, and the undertone of general kota the ground has been so wet as to interfere merchandise continues strong, with a fairly with cultivating corn and the crop has made well-defined feeling of confidence. very little progress. While it is generally ad- The dry period, which caused some uneasi- mitted among experts that damage has ocness in April and the early part of May, was curred, it is yet too early to estimate it. July broken by general rains about May 20, and the and August are the corn months, and with a rainfall now approaches the normal for the change of weather and more sunshine, corn year. The season thus far has been favorable may yet be a very fair crop. for agricultural development. It has been es- Small grains have suffered no damage of pecially favorable for truck-farm products and consequence with the exception of rye, which the small-fruit crops. A few sections of this will be a light crop. Wheat is in excellent district have reported some damage to wheat, condition, and it has been impossible to subbut this does not seem to have been serious. stantiate reports of any serious damage in any The corn crop appears to have developed in a part of the district. With the exception of a normal and satisfactory manner. There seems rather poor outlook for corn, crop conditions to have been a decrease in the tobacco acreage promise very well. in Kentucky and Tennessee, with a correspond- Business has responded, to a considerable ing gain in the grain acreage. The outlook for extent, to the promises of a good year in the the cotton crop is reported to be favorable. agricultural districts. Retail trade is active The live-stock market in this district continues and collections are good. In the manufacturto show considerable activity, owing to the puring centers a good many concerns are still chase of horses and mules for export. running on short time, but there is a feeling There has been little change in bank rates in that June is developing a slight change for the the past month. Money continues plentiful, better. The lumber trade, which has shown with rates still somewhat lower than the norno signs of recovery for several months, is mal. Bank reserves in this district continue to somewhat more active but is still very much be held largely in excess of the legal requiredepressed. ments, and banks are therefore still in the A noticeable feature is an increasing demand market for investments for their surplus funds. for bank accommodation over practically the Commercial paper seems to be somewhat more entire district, with the prospect that during active, due to the fact that rates are a trifle the next 30 days money will be in active dehigher. The demand from country banks for mand in support of a larger volume of comlines of credit, to be used in moving crops, mercial business. The wholesale trade is in seems to be beginning to have its effect on the good condition. market, and indications are that rates may be There is a stiff demand for horses throughhigher in a comparatively short time. out the western Dakotas and Montana, and There seems to have been little change in Montana promises to market the annual wool business conditions in this district during the clip during the next 30 days at prices that are last 30 days. at least as good as the State has ever seen be- Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

162 FEDERAL RESERVE BULLETIN. JULY 1,1915. fore. Some contracts have already been made The live-stock market and the packing inat prices ranging from 26 to 28 cents, and the dustry are normal, while wholesalers and reprevailing opinion on the part of experts in tailers report brisk trade with fair collections. touch with the situation is that the bulk of the Farm implements and automobiles are vying clip will bring a price of 26 cents, or from 8 with each other for record of sales, the tendto 10 cents better than the price of former ency being a trifle in favor of the latter. The years. horse and mule market is active and strong, the The optimism which was a feature of the foreign demand having taxed this district to business situation last month has not decreased, the utmost. but, if anything, has grown and business men There seems to be a surplus of harvest generally are looking forward to good harvests laborers and some towns are reported as overand a very active fall business. The greatest run with an influx of idle men. However, the need of the Northwest at this time is warm and district is free of labor troubles, and there will pleasant weather and a period of rapid growth be employment for all, although the wet spring for the grain crops and especially corn. has naturally retarded all seasonal activities. Immense sums of money are being expended DISTRICT NO. 10—KANSAS CITY. throughout the district in civic improvements Financial conditions prevailing throughout and building, and labor in all trades is fully District No. 10 are above normal for this sea- employed. This is especially true of Kansas son of the year. In many portions of the dis- City, where only recently a large bond issue trict bank deposits are increasing, while in all was voted, the proceeds of which, together with parts of the district the supply of loanable large extensions by public utility corporations, funds far exceeds the local demand. augurs well for the wage earner. Generally speaking, crop conditions are ex- DISTRICT NO. 11—DALLAS. cellent, although excessive rains, accompanied in some parts of the district by hail, have During the past 30 days no untoward degreatly damaged what promised to be record velopment of real significance has transpired crops. The damage on this account will aggre- with the exception of excessive rainfall in two gate a huge total. Rivers and streams in Okla- or three of our wheat-growing counties. The homa, Kansas, and Nebraska have been out of progress of crops in general has been entirely their banks, with the result that low lands favorable. have been flooded. Southern and central Texas have completed The outlook for all kinds of fruits, berries, the gathering of their oats with undoubtedly and melons was never better, and these prod- the largest yield ever known to the State. The ucts are already reaching the markets and com- price, however, has fallen. The farmer grows manding good prices. The wheat harvest has his crop, and having no place to care for it, begun in the southern portion of the district, throws it on the market at any price it will and will continue northward into Nebraska and bring. In this connection the bankers of the the Dakotas during the next 30 to 40 days. The State are undertaking an aggressive campaign harvest is being greatly retarded, however, by to secure the erection of warehouses. While reason of excessive moisture. this is primarily aimed in the interest of cot- The lead and zinc industry is experiencing ton, the lesson ought to hold in general. The the greatest activity known in its history, zinc present crops of the district have been procommanding the unprecedented price of as duced at a very low cost. high as $145 per ton. The coal mining indus- The harvesting of wheat is well under way try is normal for this season. in certain sections. Estimates indicate from Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JULY 1, 1915. FEDERAL RESERVE BULLETIN. 163 eighteen to twenty million bushels. The loss European account. It is asserted business conthrough recent floods is estimated as high as ditions in the Northwest can not be good until 20 per cent. lumber and shingles, upon which principal The condition of the corn crop is most favor- pay rolls there depend, can be marketed at a able. All through southern and central Texas profit. As elsewhere, chief attention to a major it has reached maturity, and there is a larger industry results in feast or famine. Famine yield than ever known before. Through cen- impels diversification. An element of this tral and northern sections the condition is ex- has been the recent rapid development of hog cellent One or two additional rains will ma- raising. Formerly the pork consumed was alture the crop most bountifully. most wholly shipped in. This and other meats are now almost entirely local. The condition of cotton is not*entirely satisfactory. In some sections the outlook is bright, The live-stock industry is prosperous. Wool but as a whole the crop is about two weeks late is being contracted for at very high prices. and decidedly spotted. There has undoubtedly Large numbers of range horses have sold to been a very material reduction in the area de- Europe at fancy prices. Barley is reported voted to it. The boll weevil, too, is reported to in excellent condition. Apparently, for lack be active in some sections. of ships, that taken for Europe must go by rail to Atlantic seaboard. Wheat acreage has A splendid forage crop has been matured been importantly increased. Unusual May almost over the entire district. The far westrains made the hay crop probably the heaviest ern end of the district is in excellent condition, in 10 years, and most favorable to live stock owing to satisfactory prices for cattle and the and dairying. Large amounts of butter are fact that the mining interests have been very being shipped to Australia. much stimulated through the rise in the price Petroleum is not in worse situation than for of copper. several months past. Domestic consumption Loans of the Dallas bank on June 22 were of lubricants and fuel oil, a barometer of in- $6,262,000, a figure which has varied very little dustrial activity, reported 15 to 20 per cent less during the past month. This indicates that dethan last year. Because of the war nitrate mand still remains light and that the prevailshipments from South America to Europe have ing rates are, for all needs and purposes, satisceased. This stopped export of fuel oil from factory. California to South America, Domestic con- Reports from correspondents show that the sumption of refined products and their export •country banks are still fairly well provided to Orient well maintained, thus measurably offwith funds. This is, however, an abnormal setting unfavorable factors. year. Business generally is reported running Gathering of crops is quite general throughto better advantage, and while not in large out the district, and will continue throughout volume the merchants appear to be doing fairly the year. Taken together, a huge total of fresh well. They are buying less in quantity and are fruits, berries, melons, and vegetables is marmore careful of their commitments. There are keted. The Valencia orange crop of good volcomparatively few failures, and on the whole ume is now going forward at satisfactory there prevails a better temper with the public prices. Growing oranges have set well, giving and with the business world in general. good promise of coming crop. DISTRICT NO. 12—SAN FRANCISCO. From December to May deposits of national and State banks in this district increased ap- The lumber industry is very depressed, and proximately $17,500,000, while loans and inlack of bottoms hampers exports, although re- vestments decreased approximately $11,000,000. port comes from Portland of several million This emphasizes the fact that credit conditions feet clear spruce taken at advancing prices for are easy. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

164 FEDERAL RESERVE BULLETIN. JULY 1,1915. IMPORTS AND EXPORTS OF GOLD. Imports of gold, by customs districts, Jan. 1 to June 18, 1915. [In thousands of dollars.] Jan. 1 to May 21. Om fine! bftSA bullion Bullion, refined, and bars . TTnitarl ^tfttfiS OO1H Total . ... For week ending May 28. Orft and b&so bullion United States mint or assay office bars "Rnllinn refined TTnitftd States coin Total For week ending June b. Ore and base bullion Bullion refined United States coin Total For week ending June 11. Ore and base bullion Bullion refined United States coin Foreign coin Total For week ending June 18. Ore and base bullion Bullion, refined United States coin Foreign coin Total Jan. 1 to June 18. Ore and base bullion United States mint or assay office bars Bullion, refined United States coin Foreign coin Total weN dna eniaM .erihspmaH 1 1 1 1 .dnalyraM 50 50 "**50" 50 .kroY weN 60 4,363 10,633 3,663 18,719 158 2,507 12 2,677 26 190 2,006 7 2,229 57 95 150 23 325 6 263 5 9 283 149 5,069 15,301 3,714 24,233 .ociR otroP ri 10 7 10 I 27 9 9 .... 10 9 10 I 29 .snaelrO weN 159 159 15 15 12 12 3 3 189 189 .anozirA 146 311 457 1 1 2 1 4 5 148 316 464 .osaP lE 56 1,099 1,155 3 14 17 1 2 3 18 18 2 2 4 62 14 1,121 1,197 .aksalA 490 490 157 157 1 366 367 158 856 1,014 .ocsicnarF naS .4, Is Q Xi V« 42 6,256 21 8,224 14,543 52 750 .notgnihsaW 1 434 6 7 1,858 233 ! "*"l 802 .... 233 88 9 9 88 53 435 1 000 .... 1,435 53 111 152 81 152 j.... 192 42 i 7 1,969 6,904 .... 449 21 6 9 974 16,941 7 2,424 .olaffuB 3 •a 1,744 80 9 1,753 80 111 111 90 90 98 98 95 95 .... 2,138 80 9 2,147 80 .nagihciM 660 660 18 18 47 47 13 13 37 37 775 775 .ecnerwaL .tS 1,952 37,073 495 39,520 4,919 4,919 8,ii7 8,117 15,218 15,219 15,814 15,814 1,952 81,141 496 83,589 .tnomreV 3 3 — 3 3 j .latoT 4,439 14,849 47,753 12,442 79,483 380 14 210 [7,426 762 8,792 & !• 265 202 10,123 7 10,597 378 P* 548 15,370 1,024 17,320 * r256 15,819 \9 16,952 wm 5,718 14 16,677 96,491 14,244 133,144 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JULY 1, 1915. FEDERAL RESERVE BULLETIN. 165 Exports of gold, by customs districts, Jan. 1 to June 18,1915. [In thousands of dollars.] Maine Du- H N a a n e m d w p- Y N o e r w k. Hawaii.Alaska. F c S i r s a a c n n o - . i W ng a t s o h n - .Buffalo.Dakota. M ig i a c n h . - l a S u n u t d h - r L e S n a t w c . e - . m V o e n r- t. Total. shire. perior. Jan. 1 to May 21. Ore and base bullion 1 118 119 United States mint or assay office bars 3 5 8 Bullion, refined 2 2 2 17 1 2 6 32 United States coin 3,281 16 16 31 3 1 4 3,352 Foreign coin 935 5 940 Total 2 4,216 16 3 16 151 28 1 1 11 6 4,451 For week ending May 28. Ore and base bullion 21 21 United States mint or assay office bars 1 1 United States coin 20 12 2 34 Foreign coin 132 3 135 Total 132 20 33 2 4 191 For week ending June 4. Bullion refined 1 1 Foreign coin.. . 125 125 Total 125 1 126 For week ending June 11. Bullion, refined 4 4 United States coin 25 1 26 Foreign coin 125 125 Total 150 4 1 155 For week ending June 18. Bullion, refined 1 1 United States coin 20 20 Foreign coin 133 133 Total 153 1 154 Jan. 1 to June 18. Ore and base bullion 1 139 140 United States mint or assay office bars.. 3 6 9 Bullion, refined 2 2 2 17 4 1 3 7 38 United States coin 3,326 16 36 43 5 1 5 3,432 Foreign coin 1,450 5 3 1,458 Total 2 4,776 16 3 ! 3fi 184 30 4 1 1 17 7 5,077 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

166 FEDERAL RESERVE BULLETIN. JULY 1,1915. DISTRIBUTION OF REDISCOUNTS. for May shows that the banks handled during the latter month a larger percentage of 30-day The character of the rediscount business of paper and of agricultural paper maturing the several reserve banks is indicated to some after 90 days. The three southern banks reextent by the following tables giving the dis- port about 75 per cent of the latter class of tribution of the rediscounted paper, exclusive business. There seems to be a rather close of acceptances, by sizes and maturities. connection between the distribution of dis- The average size of the 9,558 notes redis- counts by sizes and maturities, as normally counted by all the twelve reserve banks during the larger-size notes are also of the shorterthe month of May was about $1,271. The maturity class. An illustration of this fact is averages vary between $908 for the Dallas presented by the figures of the San Francisco bank and $4,930 for the San Francisco bank. bank, whose percentage of 30-day paper from Of the total number of notes rediscounted less than 6 per cent in April increased to over about 27.5 per cent, and of the total amount 30 per cent in May, apparently as the result about 54 per cent were notes in amounts of of discounting a relatively large amount of $1,000 to $2,500. The latter percentage varied notes of the largest size. between 66.6 per cent for St. Louis and 24.5 The table showing the distribution by maper cent for San Francisco. The number of turities also gives the number of banks in each small notes (up to $250) constituted over state and district for which paper was redis- 30 per cent of the total number of notes dis- counted during the two months. This numcounted, representing 3.5 per cent of the total ber increased from 617 to 796, but is still less amount of the rediscounts. Nearly 88 per than 10 per cent of the total number of memcent of the entire number of notes up to $250 ber banks. The largest percentages of banks was handled by the three southern banks. accommodated are shown for the three south- A comparison of the April figures with those ern bank districts. Commercial paper, exclusive of acceptances, rediscounted by each of the Federal reserve banks, during the month of May, 1915, distributed by sizes. NUMBER OF PIECES AND AMOUNTS. [In thousands of dollars.) Over $100 to Over $250 to Over $500 to Over $1,000 Over $2,500 Over $5,000 Over To $100. $250. $500. $1,000. to $2,500. to $5,000. to $10,000. $10,000. Total. Bank. +5 §ft It a-g a 3ft B It 3 ft Boston- 1.6 11 4.8 26 21.6 23 41.5 74.3 47.5 91 191.3 1.6 New York... 0.2 41 6.9 42 15.0 44 31. 46 70.0 81.9 30.4 206 236.0 1.9 Philadelphia 33 5.9 54 20.7 59 50. 73 128.9 97.6 49.4 15.0 251 368.1 3.1 Cleveland 24 4.3 41 15.4 39 28.6 59 96.2 101.1 88.5 96.6 213 431.3 3.5 Richmond.. 19.8 586 102.2 523 211.7 482 392.1 450 801.6 1,303.0 498.2 252.2 2,697 3,580.8 29.5 Atlanta 17.5 445 78.1 357 137.0 359 280.8 344 611.9 810.2 288.3 15.0 1,985 2,238.8 18.4 Chicago .8 31 9.6 66 25.9 70 58.4 89 156.4 111.9 58.5 25.0 306 446.5 3.7 St. Louis 2.8 84 13.5 84 30.4 64 48.2 83 136.3 122.0 34.9 395 388.1 3.3 Minneapolis. .3 35 6.3 59 21.4 83 57.1 74 108.4 82.3 59.0 283 334.8 2.8 Kansas City. 1.6 14 2.5 21 7.7 20 15.4 43 69.1 45.5 66.0 144 207.8 1.7 Dallas 17.5 785 130.2 654 232.3 436 307.6 353 556.7 644.6 396.4 199.4 2,736 2,484.7 20.2 San Francisco. 1.3 21 8.4 38 25.8 50 79.5 223.9 253.0 645.6 251 1,237.5 10.3 Total... 861 61.1 2,094 362.4 1,933 730.7 1,720 1,317.8 1,687 2,856.51942 3,698.3 250 1,870.1 71 1,248.8 9,55812,145.71 100.0 PERCENTAGES OF AMOUNTS OF EACH CLASS TO TOTAL. Over Over Over Over Over Over Bank. To $100. $100 to $250 to $500 to $1,000 to $2,500 to $5,000 to Over Total. $250. $500. $1,000. $2,500. $5,000. $10,000. $10,000. Per cent. Per cent. Per cent. Per cenL Per cent. Per cent. Per cent. Per cent. Per cent. Boston . 0.9 2.5 11.3 21.7 38.8 24.8 100.0 New York 0.1 2.9 6.4 13.4 29.7 34.7 12.8 100.0 Philadelphia 1.6 5.6 13.8 35.0 26.5 13.4 4.1 100.0 Cleveland .2 1.0 3.6 6.6 22.3 23.4 20.5 22.4 100.0 Richmond .6 2.9 5.9 10.6 22.4 36.6 13.9 7.1 100.0 Atlanta 3.5 6.1 12.6 27.3 36.2 12.9 .7 100.0 Chicago .2 2.2 5.8 13.1 35.0 25.0 13.1 5.6 100.0 St Louis .7 3.5 7.8 12.4 35.1 31.5 9.0 100.0 Minneapolis . .1 1.9 6.4 17.1 32.4 24.5 17.6 100.0 Kansas City .8 1.2 3.7 7.4 33.3 21.9 31.7 100.0 Dallas . . .7 5.3 9.4 12.4 22.4 25.9 15.9 8.0 100.0 San Francisco .1 .7 2.1 6.4 18.1 20.4 52.2 100.0 Total .5 3.0 6.1 10.8 23.5 30.5 15.4 10.2 100.0 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JULY 1, 1915. FEDERAL RESERVE BULLETIN. 167 Amounts of paper rediscounted during April and May by each of the Federal reserve banks, distributed by States, and maturities as of date of rediscount. [In thousands of dollars.] Number of member banks. Districts and States. District No. 1—Boston: ConnGcticut Maine New Hampshire "Rhode Island Vermont Total Diltrict No. 2—New York- District No. 3—Philadelphia: Dfcla.wa.T6 New Jersey Pennsylvania Total District No. 4—Cleveland: Kentucky Ohio Pennsylvania.. West Virginia Total District No. 5—Richmond: District of Columbia Maryland . North Carolina Smith Carolinfv Virginia West Virginia Total District No. 6—Atlanta: Florida.. . . . . Georgia Louisiana Mississippi Tennessee... Total. District No. 7—Chicago: Illinois Indiana . Iowa Michigan Wisconsin Total District No. 8.—St. Louis: Arkansas Illinois Indiana Kentucky Mississippi Missouri Tennessee Total .lirpA 75 70 171 56 19 48 439 479 25 201 533 759 72 379 302 9 762 14 100 79 70 137 108 508 93 56 114 5 18 96 382 314 197 348 72 50 981 59 156 61 69 15 80 20 460 .yaM Number of banks accom- modated. 74 70 170 56 18 48 436 479 25 201 532 758 72 379 301 9 761 13 100 80 70 136 108 507 92 56 114 5 18 97 382 313 197 348 73 49 980 58 156 61 69 16 79 20 459 .lirpA 9 1 1 6 13 18 1 10 8 19 4 19 8 1 25 1 1 39 36 37 11 125 15 17 42 1 9 27 104 11 5 13 9 1 32 5 14 9 1 8 3 36 .yaM Paper maturing within 30 days. 9 3 9 5 12 18 1 19 11 24 q 94 1Q 2 54 1 49 40 38 9 130 97 18 50 1 1 33 130 13 11 20 3 1 48 17 1 1 7 5 43 .lirpA 12.8 134 9 5.7 153.4 54.2 36.0 10.0 46.0 19.3 14.7 29.4 3.0 66.4 138.2 136.7 59.0 29.4 363.3 20.5 38.9 37.2 20.0 57.5 174.1 3.3 1.5 11.7 7.0 23.5 1.3 8.2 4 2 8 17.6 30.3 .yaM Paper maturing after 30 days but within 60 days. 25 0 27.5 52.5 26.3 3 53.4 26.0 79.7 33.5 49.7 24.4 1.5 109.1 123.3 275.4 138.5 11.6 548.8 40.3 29.7 46.5 11.0 46.4 173.9 5.5 7.9 17.1 14.1 44.6 5.0 3*i 1 0 5.9 26.0 41.0 .lirpA 27.8 44.0 10.0 49.3 131.1 55.2 2 0 47.9 18.8 68.7 93.4 51.9 27.8 1.0 174.1 35.8 11.6 360.5 392.3 265.2 55.8 1,121.2 74.9 74.5 209.0 36.1 23.7 333.5 751.7 17.6 2.9 31.9 15.1 67.5 3.2 17.4 20 0 11 5 21.1 32.5 105.7 .yaM Paper maturing after 60 days but within 90 days. 9.0 17.2 31.4 41.6 99.2 63.1 9.3 101.9 59.1 170.3 23.2 101.5 30.6 2.5 157.8 6.8 346.8 311.0 456.3 31.0 1,151.9 162.0 113.5 280.4 68.5 31.5 285.9 941.8 20.2 13.7 81.5 6.5 2.8 124. 7 7.2 34.7 8 5.6 15.7 43.4 107.4 .lirpA 16.0 10.1 15.0 41.1 107.0 5.6 127.6 30.6 163.8 47.4 66.1 30.6 3.0 147.1 67.5 34.9 577.1 395.4 292.8 63.0 1,430.7 129.4 155.1 235.6 25.2 77.9 127.2 750.4 59.1 10.5 28.1 2.0 99.7 6.4 14.9 45.6 20 0 4.5 10.5 5.7 107.6 .yaM Paper maturing after 90 days. 18.5 2.0 10.4 30.9 142.9 58.6 52.0 110.6 26.9 59.3 34.0 120.2 23.7 538.3 476.4 404.2 67.8 1,510.4 188.4 128.4 226.6 1.0 31.0 163.3 738.7 47.7 33.4 32.2 2.9 116.2 29.4 38.5 11.5 5 1 26.6 23.6 134.1 .lirpA • 9.7 .3 10.0 36.2 .9 37.1 0.6 41.9 139.1 64.0 5.4 251.0 58.3 12.5 93.0 5.0 12.2 181.0 31.4 9.7 27.8 2.5 3.7 75.1 3.2 18.6 15.6 37.4 .yaM Total commer- cial paper * rediscounted. 8.7 8.7 3.7 5.5 2.0 7.5 3.0 39.8 1.4 44.2 1.0 93.2 228.8 44.1 2.6 369.7 133.3 19.2 207.0 24.9 384.4 62.5 17.3 69.6 11.6 161.0 40.9 43.8 1.0 19.2 .7 105.6 .lirpA 56.6 10.1 178.9 10.0 70.0 325.6 216.4 7.6 221.2 59.7 288.5 160.1 168.9 88.7 7.0 424.7 103.3 47.1 1,117.7 1,063.5 681.0 153.6 3,166.2 283.1 281.0 574.8 61.3 126.6 530.4 1,857.2 • 111.4 24.6 99.5 26.6 3.7 265.8 14.1 59.1 65.6 31 9 4.5 50.0 55.8 281.0 .yaM 27.5 27.9 56 4 79.5 191.3 236.0 9 6 219.4 139.1 368.1 86.6 250.4 90.3 4.0 431.3 —— 31.5 1,101.6 1,291.6 1,043.1 113.0 3,580.8 524 0 290 8 760. § 69.5 73.5 520.5 2,238. 8 135.9 72.3 200.4 20.6 17.3 446.5 77.5 122.0 11.5 9 0 7.6 66.8 93.7 388.1 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

168 FEDERAL RESERVE BULLETIN. JULY 1,1915. Amounts of paper rediscounted during April and May by each of the Federal reserve banks, distributed by States, and maturities as of date of rediscount—Continued. [In thousands of dollars.] Number of member banks. Districts and States. District No. 9.—Minneapolis: Michigan 31 Minnesota 276 Montana 65 North Dakota 152 South Dakota 110 Wisconsin 86 Total 720 District No. 10.—Kansas City: Colorado . - 122 Kansas 214 Missouri 52 Nebraska 215 ffiH New Mexico 10 p" Oklahoma 187 Wyoming 33 Total 833 District Ne. 11.—Dallas: Arizona Louisiana 26 New Mexico 28 Oklahoma 163 Texas 537 Total 760 District No. 12.—San Francisco: Alaska 1 Arizona . 266 Idaho 57 Nevada 10 Oregon 86 Utah 23 Washington 78 Total 528 RECAPITULATION. Districts: No 1 Boston 439 No 2 New York 479 No 3 Philadelphia 759 No 4—Cleveland 762 No 5 Richmond 508 No 6—Atlanta 382 No 7 Chicago • . ... 981 No 8—St Louis 460 No 9—Minneapolis 720 No. 10—Kansas City 833 No. 11—Dallas 760 No 12—San Francisco 528 Total 7,611 .yaM Number of banks accommodated. 31 277 65 153 110 87 723 122 214 52 214 10 188 33 833 6 26 28 163 537 760 1 265 57 10 86 23 78 527 436 479 758 761 507 382 980 459 723 833 760 527 7,605 .lirpA 7 6 2 5 23 ? 14 5 12 1 6 1 41 4 5 29 100 138 28 8 3 1 3 43 13 18 19 1?ft 104 3? 36 ?3 41 138 43 617 8.1 .yaM Paper maturing within 30 days. 1 8 10 q 5 6 39 3 ft 6 1 10 27 6 4 23 120 153 24 5 6 3 38 12 18 24 54 130 130 48 43 3Q 153 38 716 9.4 .lirpA 7.5 3.8 11.3 12.4 54.1 32.9 8.6 108.0 84.4 11.9 84.6 180.9 33.1 2.0 35.1 153.4 54.2 46.0 66.4 363.3 174.1 23.5 30.3 11.3 108.0 180.9 35.1 1,246.5 11.6 .yaM Paper maturing after 30 days but within 60 days. 5.0 9.7 2.0 26.1 42.8 2.0 14.2 1.5 2.8 20.5 12.0 3.9 12.2 89.9 118.0 350.2 4.1 20.0 374.3 52.5 26.3 79.7 109.1 548.8 173.9 44.6 41.0 42.8 20.5 118.0 374.3 1,631.5 13.4 .lirpA 27.7 0 5 27.1 55.3 10.0 58.2 68.7 35.3 5.4 177.6 57.3 21.4 91.5 520.4 690.6 199.5 7.7 i.6 14.8 6.8 229.8 131.1 55.2 68.7 174.1 1,121.2 751.7 67.5 105.7 55.3 177.6 . 690.6 229.8 3,628.5 33.9 .yaM Paper maturing after 60 days but within 90 days. 25.0 8.5 11.1 67.1 111.7 5.1 9.0 52.0 4.1 12.0 82.2 58.4 10.1 32.8 475.0 576.3 164.6 24.9 19.4 5.5 214.4 99.2 63.1 170.3 157.8 1,151.9 941.8 124.7 107.4 111.7 82.2 576.3 214.4 3,800.8 31.4 .lirpA 16.0 2.2 20.2 38.4 19.9 1.0 58.7 19.6 6.3 104.9 92.7 52.4 118.3 684.5 947.9 209.4 20.7 6.0 17.4 9.9 263.4 41.1 107.0 163.8 147.1 1,430. 7 750.4 99.7 107.6 38.4 104.9 947.9 263.4 4,202.0 39.2 ,yaM Paper maturing after 90 days. 10.5 17.4 5 0 4.1 4.2 41.2 5.5 9.9 16.5 26.8 58.7 89.7 10 0 97.9 564.7 762.3 484.7 52.5 17.5 10.2 564.9 30.9 142.9 110.6 120.2 1,510.4 738.7 116.2 134.1 41.2 58.7 762.3 564.9 4,331.1 35.6 .lirpA 9.9 40.0 15 0 8.4 .7 74.0 7.3 1.6 18.3 4 6 36 1 5.5 73.4 11 8 182.1 638.6 832.5 44.0 6.2 7.3 5.2 4.4 67.1 10.0 37.1 251.0 181.0 75.1 37.4 74.0 73.4 832.5 67.1 1,638.6 15.3 .yaM Total commercial paper rediscounted. 32.3 45.0 44 1 17.7 139.1 6.9 1.9 12.7 12.9 4 9 7.1 46.4 19.8 43 5 126.0 838.8 1,028.1 51.4 4.3 6.3 21.9 83.9 8.7 3.7 7.5 44.2 369.7 384.4 161.0 105.6 139.1 46.4 1,028.1 83.9 2,382.3 19.6 .lirpA 61.1 42.2 15 5 8.4 51.8 179.0 22.4 139.5 104.2 120.9 4 6 60 5 11.8 463.9 234.4 85 6 403.8 1,928.1 2,651.9 486.0 36.6 14.3 37.4 21.1 595.4 325.6 216.4 288.5 424.7 3,166.2 1,857.2 265.8 281.0 179.0 463.9 2,651.9 595.4 10,715.6 100.0 .yaM 30.0 61.0 62 4 49 1 34.9 97.4 334.8 12 0 18.4 88.8 35.0 4 9 48 7 207.8 179.9 67 5 268.9 1,968.4 2,484.7 1,050.9 85.8 63.2 37.6 1,237.5 191.3 236.0 368.1 431.3 3,580.8 2,238.8 446.5 388.1 334.8 207.8 2,484.7 1,237.5 12,145.7 100.0 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JOLY 1, 1915. FEDERAL RESERVE BULLETIN. 169 ACCEPTANCES. Acceptances, by classes, held by the Federal reserve banks each week. Nonmember banks' Member acceptances. Date. a b c a c n e k p s t- ' . P b r a i n v k a s te . Total. ances. Trust State companies. banks. 1915. May 31 $5,294,000 $3,774,000 $10,000 1110,000 $9,188,000 June 7-. . . . 5,242,000 4,516,000 10,000 192 000 9 960 000 June 14 4,690,000 5,080,000 10,000 131,000 9,911,000 June 21 5,047,000 4,828,000 146,000 10,021,000 Acceptances indorsed by member banks: Member banks' acceptances, $1,686,000; trust companies' acceptances, $120,000; private banks' acceptances, $20,000; total, $1,826,000. Amounts of acceptances held by the several Federal reserve banks at close of business on Fridays from May 28 to June 18,1915. [In thousands of dollars.] B to o n s- . Y N o e r w k. d P el h p i h la i - a. C la le n v d e . - m R o ic n h d - . la A n t t - a. c C a h g i- o. Lo S u t. is. M ap i o n l n is e . - C K s i a a t n y s - . Dallas. F c S i r s a a c n n o - . Total. Acceptances maturing within 30 days: May 28 $791 $1,294 $298 $102 $365 $45 $36 $47 $405 $3,383 June 4 798 1,529 333 120 442 40 57 60 694 4,073 June 11 1,168 1,684 183 189 517 100 138 140 742 4,861 June 18 856 1,666 233 168 434 300 133 304 742 4,836 Acceptances maturing after 30 days ... but within 60 days: May 28 530 1,545 450 148 364 281 126 398 574 4 416 June 4 742 1,599 415 128 237 267 107 411 260 4,166 June 11 603 1,151 423 101 236 218 49 360 141 3,282 June 18 657 829 328 49 74 18 25 308 137 2,425 Acceptances maturing after 60 days but within 90 days: May 28 587 333 109 15 17 13 208 124 1,406 June 4 441 1,029 134 9 11 11 175 124 1,934 June 11 430 1,892 132 16 36 44 17 173 216 2,956 June 18 326 1,867 434 16 36 44 17 27 134 2,901 Total: W May 28 1,908 3,172 857 265 729 343 175 653 1,103 9,205 June 4 1,981 4,157 882 257 679 318 175 646 1,078 10,173 June 11 2,201 4,727 738 306 789 362 204 673 1,099 11,099 June 18 1,839 4,362 995 233 544 362 175 639 1,013 10,162 Distribution of acceptances held by Federal reserve banks according to schedules on hand June 21,1915, by classes of acceptors and sizes. To $5,000. O to v e $ r 1 0 $ , 5 0 , 0 0 0 0 . 0 O t v o e $ r 2 $ 5 1 ,0 0 0 ,0 0 0 . 0 O to v e $ r 5 $ 0 2 ,0 5 0 ,0 0 0 . 0 O to v e $ r 1 0 $ 0 5 , 0 0 , 0 0 0 0 . 0 Over $100,000. Total. Class of acceptors. c P en er t. Members banks.. $114,709 $427,259 108 $1,806,168 39 $1,501,822 $883,000 $315,000 249 $5,047,958 504 Trust companies. 61 141,594 377,693 1,649,515 ~~ 1,327,845 818,106 513,818 242 4,828,571 481 Private banks 106,769 39,472 8 146,241 15 Total 97 256,303 103 804,952 199 3,562,452 2,869,139 21 1,701,106 828,818 49910,022,770 Percent. 2.6 8.0 35.5 28.6 17.0 8.3 100.0 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

170 FEDERAL RESERVE BULLETIN. JULY 1,1915. Resources and liabilities of each of the Federal reserve banks and of the Federal reserve system at close of business on Fridays, May 28 to June 25. [In thousands of dollars.] RESOURCES. Boston. Y N o e r w k. d P el h p i h la ia - . ; | C la le n v d e . - m R o ic n h d - . la A n t t - a. Chicago. Lo S u t. is. M ap i o n l n is e . - K C an it s y a . s Dallas. F c S i r s a a c n n o - . sy T s f o o t t e r a m l . Gold settlement fund, credit balances: May 28 $1,015 $7,604 $1,361 $1,658 $1,863 $1,807 $1,086 $1,003 81,114 $1,605 $1,264 $2,046 $23,426 June 4 1,604 5,900 2,245 1,890 2,152 1,682 1,117 2,430 1,083 1,509 1,228 2,010 24,850 June 11 2,110 8,630 2,222 2,046 2,262 1,555 1,083 2,172 1,224 2,249 1,470 1,927 28,950 June 18 3,574 3,599 1,780 2,695 2,416 1,749 5,013 1,869 1,286 2,514 1,612 1,253 29,360 June 25 3,419 4,478 1,863 3,288 2,609 1,581 4,485 2t113 1,103 3,150 2,268 1.003 31,360 Gold coin and certificates in vault: May28 13,097 95,860 17,471 15,511 5,529 3,900 34,132 8,090 7,427 7,575 4,725 220,214 June 4 12,128 97,445 14,906 ! 15,334 5,432 3,909 34,449 8,096 7,235 7,175 4,226 7,330 217,665 June 11 12,636 99,778 15,457 ! 14,743 5,353 3,951 30,254 8,100 7,244 7,210 4,237 8,318 217,281 June 18 12,688 100,034 16,659 14,162 5,215 3,824 29,822 8,120 7,104 6,730 3,766 9,037 217,161 June 25 12,824 107,985 15,718 13,825 4,925 3,781 29,982 8,121 7,078 6,682 3,771 9,135 223,827 Legal tender notes, silver, I etc.: May28 1,113 I 21,223 3,112 767 95 242 3,148 1,241 457 576 9 31,989 June 4 817 ! 24,961 2,366 769 94 245 3,796 1,239 457 569 17 35,337 June 11 629 35,224 2,841 766 89 324 2,450 1,204 463 627 7 44,632 June 18 758 38,948 2,962 821 105 379 2,684 1,126 465 657 3 48,916 June 25 348 37,619 3,295 853 103 276 3,122 1,075 468 682 3 47,848 Total reserves: May28 15,225 124,687 21,944 17,936 7,487 5,949 38,366 10,334 8,547 9,637 6,565 8,952 275,629 June 4 14,549 128,306 19,517 17,993 7,678 5,836 39,362 11,765 8,325 9,141 6,023 9,357 277,852 June 11 15,375 143,632 20,520 17,555 7,704 5,830 33,787 11,476 8,476 9,922 6,334 10,252 290,863 June 18 17,020 142,581 21,401 17,678 7,736 5,952 37,519 11,115 8,398 9,709 6,035 10,293 295,437 June 25 16,591 150,082 20,876 17,966 7,637 5,638 37,589 11,309 8,185 10,300 6,721 10,141 303,035 Commercial paper: May 28 319 425 638 759 7,412 4,469 724 591 604 6,148 1,738 24,747 June 4 337 416 812 735 7,187 4,259 912 663 697 582 6,171 1,765 24,536 June 11 371 468 711 786 7,282 4,345 986 643 814 589 6,152 1,760 24,907 June 18 329 510 624 819 7,299 4,433 1,130 697 941 570 6,297 1,778 25,427 June 25 296 540 653 784 7,378 4,399 1,187 744 1,082 611 6,455 1,867 25,996 Bank acceptances: May 28. 1,908 3,172 857 265 729 343 175 653 1,102 9,204 June 4 1,981 4,157 882 257 679 318 175 646 1,077 10,172 June 11 2,201 4,728 738 306 789 362 204 673 1,099 11,100 June 18 1,839 4,362 995 233 544 362 175 639 1,013 10,162 June 25 2,041 4,631 975 213 475 342 168 632 902 10,379 United States bonds: May 28 175 3,575 242 1,025 1,000 6,947 June 4 175 3,650 242 1,025 1,000 7,022 June 11 265 3,725 242 1,025 1,000 7,187 June 18 285 3,725 242 1,025 930 1,001 7,208 June 25 194 485 3,725 242 1,025 930 1,000 7,601 Municipal warrants: May 28 2,338 9,595 2,703 2,474 3,281 777 156 1,080 23,094 June 4 1,808 7,329 1,729 1,597 2,601 801 789 181 1,080 17,916 June 11 1,878 2,149 1,191 1,328 2,072 326 413 165 473 9,996 June 18 2,058 2,495 1,096 1,387 1,290 302 397 165 473 9,664 June 25 2,228 3,246 1,291 1,507 1,515 387 468 230 636 11,509 Due from other Federal reserve banks, net: May 28 2,383 1,014 1,158 103 2,062 1,484 12 128 866 9,210 June 4 674 2,480 l-~- 1,090 115 1,694 34 738 361 667 9,721 June 11 1,099 2,989 1,889 1,190 534 8,591 1,276 271 199 295 1,037 19,370 June 18 2,370 1,817 1,101 125 7,705 928 254 563 615 498 15,976 June 25 2,101 2,067 1,530 1,285 242 7,612 607 157 548 648 409 17,206 Federal reserve notes, net assets: May 28 372 3,178 I 34 267 2,300 42 1,397 7,765 June 4 571 2,507 87 2,298 44 1,365 7,350 June 11 361 1,507 I 91 296 2,294 47 235 1,373 6,204 June 18 353 3,304 71 136 2,308 57 168 1,356 7,753 June 25 357 4,466 ! 51 2,306 60 284 1,317 9,124 All other resources: | May 28 578 229 | 265 149 71 463 308 2,805 63 366 53 76 5,426 June 4 1,087 209 216 143 50 835 298 2,127 69 396 55 66 5,551 June 11 1,073 137 412 548 114 103 259 2,713 67 498 154 68 6,146 June 18 1,037 143 645 743 96 170 214 2,739 64 540 81 61 6,533 June 25 486 153 i 734 160 109 235 195 2,787 56 476 45 65 5,501 Total resources: May 28 23,123 141,286 26,441 23,039 16,129 10,984 51,541 16,751 11,277 12,346 12,894 16,211 360,247 June 4 21,007 142,924 | 25,723 22,957 16,006 10,930 49,915 17,654 11,403 12,614 12,610 16,377 357,531 June 11 22,358 152,621 26,652 22,973 16,291 10,812 52,503 17,085 11,505 12,976 12,935 17,062 371,281 June 18 22,636 153,395 i 27,202 23,098 16,233 10,680 54,435 16,442 11,422 13,116 13,028 16,473 370,329 June 25 24,100 163,118 ! 26,841 22,928 16, 410 10,514 54,604 16,478 11,425 13,727 13,869 16,337 381,456 ] Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

JULY 1, 1915. FEDERAL RESERVE BULLETIN. 171 Resources and liabilities of each of the Federal reserve banks and of the Federal reserve system at close of business on Fridays, May 28 to June 25—Continued. [In thousands of dollars.] LIABILITIES. Boston. Y N o e r w k. d P el h p i h la i - a. C la le n v d e . - m R o ic n h d - . la A n t t - a. Chicago. Lo S u t. is. M ap i o n l n is e . - K C a i n ty sa . s Dallas. F c S i r s a a c n n o - . sy T s f o o te t r a m l . 1 Capital paid in: May 28 $4,805 $9,962 $6,227 $5,977 $3,356 $2,410 $6 608 ' &>• 7K»$2,383 $2,791 $2,919 $3,932 $54,158 June 4 4,802 9,962 6,227 5,976 3,358 2,412 6,603 3,788 2,417 2,783 2,923 3,933 54,184 June 11 ... 4,802 9,962 6,228 5,976 3,362 2,414 6,605 2,788 2,418 2,783 2,924 3,933 54,195 June 18 4,802 9,962 6,226 5,976 3,364 2,414 6,606 2,789 2,419 2,783 2,926 3,934 54,201 June 25 4,802 9,962 6,225 5,976 3,364 2,414 6,606 2,790 2,421 2,780 2,926 3,934 54,200 Reserve deposits, net: May 28 18,018 127,474 19,829 17,062 8,106 5,662 44,933 13,963 8,894 9,128 6,702 12,279 292,050 Jim ft 4 15,751 127,330 19,496 16,981 7,808 5,258 43,312 14,866 8,986 9,472 6,577 12,444 288,281 June 11 17,052 133,472 20,424 16,997 8,016 5,463 45,898 14,297 9,087 9,631 6,187 13,129 299,653 June 18 . . 17,164 131,757 20,976 17,122 7,885 5,418 47 829 is fisa 9,003 9,881 6,134 12,539 299,361 June 25 18,588 141,844 20,616 16,952 7,957 5,253 47 998 '• 1S fi8S 9,004 10,475 6,571 12,403 311,349 Federal reserve notes, net liability: May 28 . .. 4,596 2,877 193 3,255 10,921 June 4 4,766 3,200 359 3,088 11,413 June 11 4,836 2,896 562 3.804 12,098 June 18 4,900 2,806 i 452 s 3,942 12,100 June 25 5,001 2,803 472 ! 4.341 12,617 Due to other Federal Reserve Banks, net: May 28 1,156 385 234 1,775 June 4 2,563 26 2,589 June 11 4,492 4,492 June 18 . 161 7,670 7,831 June 25 8,895 8,895 All other liabilities: May 28 300 2,694 71 35 18 3,118 June 4 454 3,069 74 34 22 3,653 June 11 504 4,695 77 39 20 5,335 June 18 509 4,006 84 42 26 4,667 June 25 710 2,417 88 44 31 3,290 Total liabilities: May 28 23,123 141,286 26,441 23,039 16,129 10,984 51,541 16,751 11,277 12,346 12,894 16,211 360,247 June 4 21,007 142,924 25,723 22,957 16,006 10,930 49,915 17,654 11,403 12,614 12,610 16,377 357,531 June 11 .. 22,358 152,621 26,652 22,973 16,291 10,812 52,503 17,085 11,505 12,976 12,935 17,062 371,281 June 18 22,636 153,395 27,202 23,098 16,233 10,680 54,435 16,442 11,422 13,116 13,028 16,473 370,329 June 25 24,100 163,118 26,841 22,928 16,410 10,514 54,604 16,478 11,425 13,727 13,869 16,337 381,456 CIRCULATION OF FEDERAL RESERVE NOTES. I Federal reserve notes issued to the banks: May 28 $2,320 $31,840 $1,640 $2,900 $7,200 $4,950 $4,380 $626 $2,660 $2,600 $4,000 $2,040 $67,156 June 4 3,320 32,440 2,240 3,100 7,400 4,950 4,380 2,860 3,100 4,500 2,040 70,956 June 11 3,320 35,100 2,420 3,300 7,500 4,950 4,380 626 2,860 3,100 5,000 2,040 74,596 June 18 3,320 38,100 2,420 3,300 7,650 5,150 4,380 626 3,000 3,600 5,800 2,040 79,386 June 25 3,320 40,500 2,400 3,700 7,750 5,150 4,380 3,300 3,600 6,195 2,040 82,961 Federal reserve notes in the hands of the banks: May 28 372 3.358 267 404 323 2,300 175 347 290 1,397 9,309 June 4 571 2,687 189 334 2,298 289 281 457 1,365 8,602 June 11 361 1,687 296 264 304 2,294 235 78 241 1,373 7,271 June 18 353 3,484 136 200 394 2,308 168 238 403 1,356 9,168 June 25 357 4,646 283 199 397 2,306 284 168 404 1,317 10,472 Federal reserve notes outstanding: May 28 1,948 28,482 1,606 2,633 6,796 4,627 2,080 584 2,485 2,253 3,710 643 57,847 June 4 2,749 29,753 2,153 2,911 7,066 4,950 2,082 582 2,571 2,819 4,043 675 62,354 June 11 2,959 33,413 2,329 3,004 7,236 4,646 2,086 579 2,625 3,022 4,759 667 67,325 June 18 2,967 34,616 2,349 3,164 7,450 4,756 2,072 569 2,832 3,362 5,397 684 70,218 June 25 '. 2,963 35,854 2,349 3,417 7,551 4,753 2,074 566 3,016 3,432 5,791 723 72,489 Gold and lawful money deposited with the agents: ' May 28 2,320 31,660 1,640 2,900 2,200 1,750 4,380 626 2,660 2,060 455 2,040 54,691 June 4 3,320 32,260 2,240 3,100 2,300 1,750 4,380 626 2,860 2,460 955 2,040 58,291 June 11 3,320 34,920 2,420 3,300 2,400 1,750 4,380 626 2,860 2,460 955 2,040 61,431 June 18 3,320 37,920 2,420 3,300 2,550 1,950 4,380 626 3,000 2,910 1,455 2,040 65,871 June 25 3,320 40,320 2,400 3,700 2,550 1,950 4,380 3,300 2,960 1,450 2,040 Net liability on account of Federal reserve notes May 28 4,596 2,877 193 3,255 10,921 June 4 4,766 3.200 359 3,088 11,413 June 11 2' 562 3,804 12,098 June 18 4,900 2,806 452 3,942 12,100 June 25 5,001 2,803 472 4 341 12,617 .Net assets on account of Federal reserve notes: May 28 372 3,178 267 2,300 175 1,397 7,765 June 4 571 2,507 189 2,298 289 1,365 7,350 June 11 361 1,507 296 2,294 235 1,373 6,204 June 18 353 3,304 136 2,308 168 1,356 7,753 June 25 357 4,466 2,306 284 1,317 9,124 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

INDEX. Page. Informal rulings of the board—Continued. Page, Acceptances 169 Timber as note security 126 Address by Hon. P. M. Warburg 132-135 Trust company branches 126 Address by Hon. C. S. Hamlin *.... 136-141 Authority to accept 126 Branch bank at New Orleans 123 Acceptances 126 Business conditions, general 157-163 Deposits as loans 126 Circulars and regulations 145-149 Money-order business 127 Commercial paper rediscounted 166-168 Collateral trust notes 127 Discount rates 124 Pig iron as security 127 Emergency currency outstanding 124 Purchase of United States bonds 127 Expenses of the Federal Reserve Board 118-119 Silver certificates for notes 127 Gold imports and exports 164,165 Indorsement of notes 127 Gold settlement fund 120,121 Law department 150-156 Summary of transactions, May and June 121 Pan American financial conference 128-131 Governors of Federal reserve banks, meeting of ... 122 Resources and liabilities of Federal reserve banks. 170,171 Informal rulings of the board 125-127 Short-term discount rate 124 Branches of national banks 125 Subscription price of Bulletin 115 Reducing capital stock 125 Transfer of member banks 142-144 Deposit of trustee funds 125 Trustee powers, applications for, approved 144 Trustee powers 125 Work of the Federal Reserve Board 117 o Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis