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Confidential 
 No. 207 
 
 REPORT 
 
 TO THE 
 
 Reserve Bank Organization 
 Committee 
 
 BY THE 
 
 Preliminary Committee on 
 Organization 
 
 H. Parker Willis, Chairman 
 Edmund D. Fisher Joseph A. Broderick 
 
 Andrew A. Benton Ralph Dawson 
 
 O. Howard Wolfe Stephen H. Farnham 
 

 
 
The Reserve Bank Organization 
 Committee, Washington, D. C. 
 
 New York, June 1. 
 
 Gentlemen: 
 
 The undersigned, after careful investigation, beg leave to submit 
 the following report upon the nature and treatment of the various 
 problems arising in connection with the organization of the new 
 banking system provided for under the Federal Reserve Act of 
 December 23, 1913, the same being in accordance with the instruc- 
 tions conveyed by you through the Comptroller of the Currency, 
 Hon. John Skelton Williams. 
 
 In preparing the report herewith transmitted, special assign- 
 ments for individual study and inquiry were from time to time made, 
 the effort being to secure the best work that could be done by 
 each member of the group engaged upon this investigation. Co- 
 operation between these individuals has, however, been obtained 
 throughout, and every portion of the work, when completed has 
 been submitted to and revised by each of those whose names are 
 hereto appended. At meetings held for that purpose, there has 
 been general discussion of the methods to be pursued and of the 
 conclusions properly to be reached in each of the several divisions 
 of the report. The document is, therefore, presented as the joint 
 opinion of those whose signatures are appended to it, and has the 
 approval of each and all of them. 
 
 In addition to the work thus done, some material has been 
 obtained from outside sources, under careful supervision and direc- 
 tion. The portions of the material thus derived are indicated in 
 the document itself, and their authorship is duly stated. 
 
 Special acknowledgment is made to Mr. Max May, of the Guar- 
 anty Trust Co. of New York City, for advice and suggestions 
 from the beginning of the work; as well as to Mr. Ralph Van Vech- 
 ten, of the Continental and Commercial National Bank of Chicago, 
 for recommendations on certain special topics; and to Messrs. 
 Harry E. Ward and C. C. Robinson of the Irving National Bank of 
 New York City for important work on the accounting sections of 
 this report. Thanks are likewise generally expressed to other 
 bankers and experts for courtesies and aid at various points in the 
 course of the inquiry. 
 
 Thus prepared and submitted, the recommendations of the 
 report are offered as embodying a general scheme of organization 
 for the new system which it is believed will result in carrying out 
 the spirit and purposes of the Federal Reserve Act. 
 
 SCOPE OF REPORT. 
 
 Before proceeding to detailed discussion, it is deemed well to 
 enumerate the various specific items of investigation suggested by 
 
 3 
 
a careful analytical survey of the Federal Reserve Act. This out- 
 line survey may be presented as follows: 
 
 (1) DISTRICT MAP. 
 
 (2) FORM OF DESIGNATION OF CITIES AND DISTRICTS. 
 
 (3) SUBSCRIPTION BLANKS. 
 
 (4) SHAREHOLDERS’ RECORDS (AMOUNT SUBSCRIBED 
 
 and AMOUNT PAID IN). 
 
 (5) RULES and REGULATIONS GOVERNING the TRANS- 
 
 FER of STOCK. 
 
 (6) BY-LAWS (FEDERAL RESERVE BOARD — FEDERAL 
 
 RESERVE BANK). 
 
 (7) BY-LAWS (BRANCHES). 
 
 ( 8 ) RULES and REGULATIONS for BRANCHES. 
 
 (0) CERTIFICATE SHOWING DISTRICT LIMITS. 
 
 (10) APPLICATION BLANK FOR MEMBER BANKS. 
 
 (11) CERTIFICATE OF ORGANIZATION. 
 
 ( 12 ) AUTHORIZATION OF COMPTROLLER OF CURRENCY 
 TO OPEN RESERVE BANK. 
 
 (13) CERTIFICATE OF ELECTION OF “ELECTOR.” 
 
 (14) LISTS OF ELECTORS. 
 
 ( 15 ) NOMINATING BALLOTS— RULES AND REGULATIONS. 
 
 (16) LISTS OF NOMINEES (WITH COLUMNS FOR 1. 2. 3. 
 
 4, 5, CHOICES). 
 
 (17) BOOKS FOR FEDERAL RESERVE AGENT. 
 
 (18) SCHEDULE FOR COMPENSATION — ALL CLASSES. 
 
 (19) CLASSIFIED LIST OF FEDERAL RESERVE BANK 
 
 DIRECTORS (WITH THEIR TERMS). 
 
 (20) CERTIFICATE OF COMPTROLLER OF CURRENCY 
 
 SHOWING REDUCTION OF CAPITAL. 
 
 (21) DIVIDEND RECORD (SHOWING SEGREGATION OF 
 
 EARNINGS AFTER DIVIDEND PAYMENTS) and 
 DISPOSITION of SURPLUS. 
 
 (22) ARTICLES OF ASSOCIATION. Organization Certificate. 
 
 (23) CERTIFICATE OF COMPTROLLER TO CONVERTED 
 
 BANKS. 
 
 (24) RULES and REGULATIONS re SUBSCRIPTIONS of 
 
 STATE INSTITUTIONS. 
 
 (25) BY-LAWS (governing conduct in acting upon applications 
 
 of State Banks, Banking Associations and Trust Com- 
 panies). 
 
 (26) OATH OF OFFICE — MEMBERS FEDERAL RESERVE 
 
 BOARD. 
 
 (27) STATEMENT OF LEVY FOR EXPENSES. 
 
 (28) GENERAL ANALYSIS OF ANNUAL OPERATIONS AS 
 
 BASIS FOR REPORTS. Dependent upon Plan for Sta- 
 tistical Department. 
 
 (29) PLAN OF ORGANIZATION FOR FEDERAL RESERVE 
 
 BOARD. 
 
 (30) PLAN FOR EXAMINATION OF FEDERAL RESERVE 
 
 BANKS. Regulations Regarding Statements and Re- 
 
 4 
 
ports. Weekly Statement of Condition of Federal Re- 
 serve Banks. Consolidated Statements. 
 
 (31) RULES and REGULATIONS re ISSUE AND RETIRE- 
 
 MENT OF FEDERAL RESERVE NOTES and DE- 
 LIVERY to and CUSTODY by FEDERAL RESERVE 
 AGENT. 
 
 (32) CONTROL OF BONDS OF FEDERAL RESERVE AGENTS. 
 
 (33) REGULATIONS FOR INTERNAL MANAGEMENT OF 
 
 BANK’S BUSINESS. 
 
 (34) REGULATIONS GOVERNING FEDERAL ADVISORY 
 
 COUNCIL. 
 
 (35) GENERAL BANKING PLAN including- Certificate of Or- 
 
 ganization, Minutes, By-laws, Stockholders’ Records, 
 Statements and Reports, General Ledger, Record of 
 Rates — in classes (s. d. Sec 14), Tellers, Credit De- 
 partment, Collection Department, Issue Depart- 
 ment. Loans and Discounts (Schedule of Maturities) 
 Investments — Data (Schedule of Maturities Support- 
 ing Business, (Kind), Bookkeeping, Audit, Open 
 
 Market Record, Statistics, Reserve Continuing 
 
 Record of Elements of — With Percentage, Vault Con- 
 trol, Foreign and Domestic Exchange, Circulation, 
 Record of Note Series and Collateral, Record of 
 Notes of Other Banks, Continuing Record of De- 
 posits with U. S. Treasury (16), Continuing Record 
 of U. S. Bond Accounts. 
 
 (36) REGULATIONS GOVERNING PURCHASES. 
 
 (37) FORM OF NOTE, Determination of Letter and Serial 
 
 NUMBER. 
 
 (38) REGULATIONS GOVERNING TRANSFER OF FUNDS 
 
 AND CHARGES. 
 
 (39) GENERAL CLEARING PLAN. 
 
 (40) APPLICATIONS and REGULATIONS GOVERNING ES- 
 
 TABLISHMENT OF FOREIGN BRANCHES. 
 
 Some of the foregoing items — for example, numbers 2, 9, 11, 13, 
 and others in the above list — will best be studied in the office of 
 the Comptroller of the Currency, because of their predominantly 
 legal or administrative nature. Those which are considered ger- 
 mane to the present inquiry have been dealt with in this report. 
 
 It has been deemed wise in preparing this report for transmis- 
 sion to divide it into two distinct parts as follows: 
 
 Part I. Dealing with the work of the reserve bank organiza- 
 tion committee and the process of organizing the new banking- 
 system up to the time that the Federal reserve bank directors are 
 named and the Federal Reserve Board appointed. 
 
 Part II. Dealing with the subsequent organization and opera- 
 tion of the new system, the relations between the Federal Reserve 
 Board and the several banks, and the inner workings of the banks 
 themselves. 
 
 5 
 
Part I. 
 
 The first part of the discussion thus outlined may itself be 
 divided into two portions as follows: 
 
 1. A discussion of the process of districting the country for the 
 establishment of reserve banks. 
 
 2. A discussion of the process of providing for the election of 
 directors of the several reserve banks, the payment of subscriptions 
 to stock, and the general conditions under which banks may be 
 admitted into the system. 
 
 I. — DISTRICTING THE COUNTRY. 
 
 We may first deal with the question of districting the country 
 for the establishment of the new banks. In this discussion careful 
 examination has been made of the hearings before the Reserve 
 Bank Organization Committee dui’ing its tour of the country and 
 of many of the briefs filed with it by the respective places that 
 were candidates for designation as reserve bank cities. 
 
 CLASSES OF EVIDENCE. 
 
 Available data relating to districting may be generally divided 
 into the following classes: 
 
 (a) That relating to the importance, capital, business, and 
 future prospects of the various places represented. 
 
 (b) That relating to the clearings and financial transactions 
 of the various places, and their relation to other cities with ref- 
 erence to banking accounts and reserves carried in other banks. 
 
 (c) That relating to the habits and customs of the surround- 
 ing communities in regard to applications for loans and in regard 
 to the distribution of their business between different cities under 
 the present banking system. 
 
 (d) That relating to railway facilities, times of communica- 
 tion, and delivery of mail. 
 
 (e) That relating to the capitalization of the banks of the sec- 
 tion, state and national, the amount of their deposits and of 
 their reserves. 
 
 CHARACTER AND VOLUME OF LOCAL BUSINESS. 
 
 Relatively little attention need be paid to the evidence with 
 regard to the character and volume of local business, or with ref- 
 erence to the rapid development of such trade and industry in the 
 past or its probable future. Under the existing banking sys- 
 tem competition and the general course of trade have mapped 
 out distinct channels within which funds are transferred, and 
 have determined the distribution of banking capital upon known 
 lines. There is nothing in the new act to alter this distribu- 
 tion certainly for the present, and there is no reason to believe 
 that the main features of business, its distribution, and its char- 
 acter will be materially altered in the near future. They will 
 continue about the same under the proposed system as they are 
 to-day. The chief difference that will be gradually developed 
 
 G 
 
will be found in the fact that those who have prime commercial 
 paper to dispose of will be able to market it in local reserve centres 
 instead of relying upon distant financial centres. But inasmuch as 
 the capital and reserves of the new banks are to be determined as a 
 percentage of existing bank capital, the reserve banks represent a 
 function, to speak mathematically, of existing banks. They can- 
 not do more for the given section in which they are situated 
 than their capital, contributed by existing banks, will allow. A 
 certain limitation may of course be placed upon this statement in 
 that some stock may be sold to the public at the discretion of 
 the Organization Committee. This, however, will be a limited, and 
 doubtless, exceptional, resource, and the consequence must be 
 that in order to enlarge the resources of a reserve bank it would 
 be necessary to develop those of existing member banks. This 
 will be done as the wealth of the various centers develops. There 
 is, therefore, no direct or immediate relationship between the 
 proposed reserve bank and the business concerns of a given dis- 
 trict which is not expressed in the capitalization of the banks 
 of that district. 
 
 QUESTION OF CLEARINGS. 
 
 In like manner, it may be said that the question of clearings 
 is not one that is vitally essential to the locating of the new 
 banks. Much of the testimony adduced has to do with the rela- 
 tive amount of clearings at given places. On the other hand, it 
 has been frequently pointed out by witnesses that large volumes 
 of trade are not expressed in clearings. The reason why the 
 clearings need not be primarily considered as throwing light upon 
 the suitability of a given point as the location of a reserve bank 
 is found in the facts that, (a) under the existing system of bank- 
 ing the clearings are affected by many extraneous features which 
 will disappear under the new system; (b) the precise amount 
 of the clearings varies as between different cities and will 
 always do so, according to the number and character of 
 the banks and the nature of their relations with one another 
 and with outside banks. Clearings are never a very good index 
 of business either as to volume, nature, or strain on the finan- 
 cial resources of the places where they are effected. There is 
 little need, therefore, to examine figures of clearings in seek- 
 ing to place the new reserve banks. In all probability, even 
 the most conscientious study of clearings would be found to 
 be useless, owing to the complete alteration which will be effect- 
 ed so soon as the new system has been successfully put into 
 operation and has had time to produce its results in changing 
 the direction of remittances and in altering modes of payment. 
 
 CAPITALIZATION. 
 
 Again, the bare facts as to the capitalization of the banks and 
 trust companies of a given city or region are of only secondary 
 importance in determining the location of reserve banks. The 
 law specifies that no reserve bank shall be created with a smaller 
 
 7 
 
capitalization than $4,000,000 and it is, therefore, necessary to 
 obtain in every district an aggregate of banking capital which 
 shall bear the proper relation to this minimum amount on the 6 
 per cent, basis indicated in the law. For reasons which will 
 be later stated, it is not believed that anything is gained by 
 attempting to take in an unduly large amount of banking capital 
 in any given district. Assuming these premises, — one based 
 on legislative provisions, the other upon general reasoning — the 
 question how great or how effective is the capitalization of exist- 
 ing banking facilities in any particular place is not fundamentally 
 important. The district reserve bank, if operated upon public- 
 spirited lines, will be managed in such a way as to serve in an 
 equitable manner the various needs of the district, and will be 
 managed by directors who presumably represent the whole dis- 
 trict, just as the reserve bank system will presumably be oper- 
 ated in the interests of the country as a whole and without 
 effort to serve the interests of one particular section or group 
 of persons. It may be said, therefore, that since the capitalization 
 of the whole district will be available in its due proportion for 
 the uses of the district in all of its varied parts, the develop- 
 ment of a portion of this capitalization at a given point has 
 no fundamental bearing upon the placing of the reserve bank at 
 that point. Still less is this true in view of the provisions for 
 the creation of bi'anch banks. 
 
 RAILWAY FACILITIES. 
 
 A very different point of view must be taken with respect 
 to the question of railway facilities. The Federal reserve bank of 
 a district must be located somewhere, and the assumption nat- 
 urally is that it will be located in the place which is most acces- 
 sible and from which it can best serve the community. Other 
 things being equal, a large city is favored because it is likely 
 to contain a correspondingly large proportion of the heavy bor- 
 rowers of a community and to bring them consequently close to 
 the reserve bank where their habits and methods can be easily 
 inspected. It remains true, moreover, that the larger places are 
 usually those where the railway facilities are the best. 
 
 The Federal reserve bank is furthermore, called upon to per- 
 form the service of dealing for its members, and in order to 
 effect this object successfully it must be within as quick and 
 easy reach of the member banks as practicable. This is funda- 
 mentally important in getting the clearing system into effective 
 operation, and it is believed that this clearing system will be 
 found to be one of the most significant features of the new law. 
 Moreover, easy communication for the purpose of prompt trans- 
 mission of funds, the shipment of currency in time of necessity 
 with as little delay as possible and the prompt receipt of deposits, 
 as well as the affording of immediate means of communication 
 with other Federal reserve banks, all dictate the selection of 
 places for the head offices of such banks that are best equipped 
 
 8 
 
with means of communication and are able most speedily to re- 
 ceive from and send to their member banks such funds, checks, 
 drafts and the like as may be required by the. course of business. 
 The testimony affords considerable valuable information on this 
 point. 
 
 HABITS OF BORROWING. 
 
 It will be worth while to devote attention to the data that 
 have been developed with respect to the borrowing- habits of the 
 community inasmuch as these habits undoubtedly will tend to 
 persist and it is not desirable to break them except where neces- 
 sary. For example, if it is shown that a large section of the 
 surrounding country is in the habit of dealing with point A and 
 of discounting its paper in the banks of A, that is a considera- 
 tion in favor of recognizing A as the center of the reserve 
 district which is to include A and the territory adjacent. It is 
 also an argument to be considered in that it indicates that A 
 is already a financial center for that territory with well de- 
 veloped lines of credit outstanding. At the same time, it should 
 be remembered that under the new act there is nothing what- 
 ever to prevent individuals from borrowing outside of their own 
 districts or to prevent member banks from rediscounting paper 
 with other banks in other districts or from selling or buying in 
 the open market. They will be able to continue their present 
 practices in that regard. Further, the existing banking system 
 has in some cases tended to centralize funds under an artificial 
 method, and so to build up balances in certain points in a way that 
 they would not naturally have developed. It is, therefore, not abso- 
 lutely essential, or always possible, in laying out the districts, 
 to pay heed to the existing practices on the part of given banks 
 in borrowing through or from the banks of a specified city. 
 In some cases, it may be necessary to place such borrowing 
 banks or individuals in a district which will center at a point 
 not heretofore regarded as the financial metropolis of the region. 
 It maj be generally said that the borrowing habits of the com- 
 munity should be regarded as fully as possible, in all cases where 
 such regard does not run counter to other more forcible or con- 
 trolling considerations. The testimony throws much valuable 
 light upon these borrowing habits, and is of material assistance 
 in determining the limits to be assigned certain districts. 
 
 QUESTION OF A LARGE BANK OR BANKS. 
 
 Inspection of the records and testimony filed at the various 
 hearings of the organization committee shows that in several 
 places local bankers advocated the establishment of a very large 
 bank. This was not in all cases because of the desire for an 
 extremely high capitalization, but was in not a few, the outgrowth 
 of a feeling that the city where the bank was to be located was 
 entitled to a certain territory which was regarded as naturally de- 
 pendent upon or ancillary to it. Thus pleas were made for a 
 bank with a very large capital or a large territory, or both, at 
 
 9 
 
New York City, Chicago and St. Louis. At other places requests 
 for large territories were filed, but in many such cases the re- 
 quests were due to the converse consideration, — the necessity of 
 including a sufficiently large territory to supply the banking 
 capital requisite upon the percentage basis prescribed by the act, 
 to furnish the necessary reserve bank capitalization. Some anal- 
 ysis may now properly be made of the two points of view thus 
 offered. 
 
 Those who demanded the organization of a large bank on the 
 ground that such a bank was necessary in order to supply the 
 necessities of the borrowing' community dependent upon such 
 bank were manifestly in error, inasmuch as they assumed that the 
 bank in question was to be primarily dependent upon its capital- 
 ization for the means of supporting its discounts. Such is far 
 from being the case. The act itself prescribes that the banks 
 shall be provided shortly after their organization, not only with 
 paid in capital, but also with very large sums in deposited re- 
 serves representing the reserve funds of member banks. These 
 both can and should be (as they were intended to be) available 
 for use as reserve bank loaning resources. In addition the gov- 
 ernment deposits to be made with the banks will furnish further 
 means of supporting credits. The capital will be simply an extra 
 or added strength to the banks. If it be contended that the bank of 
 any given district is not large enough to meet the needs of the 
 community the criticism really amounts to a statement that the 
 amount of the reserves required to be deposited is not sufficient. 
 This difficulty, if it existed, could be overcome by the banks which 
 are jointly stockholders in the reserve bank, by simply depositing 
 more of their funds with the reserve institution. If necessary, it 
 will have to be corrected by enforcing a requirement that a larger 
 percentage of reserves shall be deposited with the reserve banks. 
 Merely to extend the area included within the territory belong- 
 ing to a reserve bank would not help, because such extension 
 would simply enlarge the area without enlarging the proportion of 
 the capitalization of the bank to that of the member banks. In 
 other words, as fast as the area increased and the capitalization 
 with it, just so fast would the amount of demand or strain like- 
 ly to be brought to bear upon the reserve bank be increased or 
 extended. This means that no purpose whatever in the direction 
 of strengthening the reserve banks is attained by enlarging the 
 area over which they preside, assuming that a sufficient area 
 has been included to give them a reasonable degree of capitaliza- 
 tion at the start. 
 
 Secondly, the statement that a very large capitalization is nec- 
 essary in order to inspire respect either abroad or elsewhere ignores 
 not only the fact that the real strength of the banks lies in 
 their holdings of reserve funds as just set forth, but also ignores 
 the fact that the reserve system will undoubtedly be viewed as 
 a unit by foreign countries as well as by domestic interests 
 There is, therefore, no argument whatever on the side of those 
 
 10 
 
who demand that an exceptionally large banking capital shall 
 be assigned to some one or more of the new institutions. The 
 contentions put forward in this connection fail to recognize 
 the united character of the system and the fact that in case of 
 necessity the reserve board has power to require any one of the 
 reserve banks to come to the aid of any one or more of the 
 others. 
 
 AVERAGE CAPITALIZATION. 
 
 An estimate of the probable capitalization of the Federal banks 
 as a whole, assuming that only the national banks enter the 
 system at the start and that practically all of them do so, or 
 (what comes to the same thing), that enough state banks enter 
 to make up for any withdrawals of national banks, would give 
 a total capitalization of about $107,000,000. The Federal Re- 
 serve Act prescribes that the number of banks to be established 
 shall be not less than eight or more than twelve. This means 
 that the average capitalization of the reserve banks shall be not 
 more than one-eighth of $107,000,000, or $13,350,000, and not 
 less than one-twelfth of $107,000,000, or $9,000,000, in round num- 
 bers. There is nothing in the act to indicate a desire or in- 
 tent on the part of its framers that none of the banks should be 
 materially larger than the others, but on the contrary the act 
 has specifically left a large latitude to those engaged in laying 
 out the country into districts in order that they may exercise 
 their best judgment in apportioning the banking capital among 
 such districts. It is, however, obviously true that since the act 
 requires that no reserve bank shall have a smaller capital than 
 $4,000,000, and since the whole tenor of the law and of the 
 debate on it was against the creation of one overshadowing in- 
 stitution, the framers of the act did intend that there should be 
 no marked or extreme disparity between the capitalization of the 
 several banks. Inasmuch as the minimum capitalization and 
 the number of banks is fixed, it is evident that if eight institu- 
 tions were to be established on the basis already indicated, the 
 
 maximum size which could be given to any one of them and 
 
 yet comply with the law would be $79,000,000, while if twelve 
 institutions were to be established the maximum size thus assign- 
 able would be $63,000,000. To these limits the organizers of the 
 act could go without violating the letter of the law. Such a 
 variation in size of the banks would, however, be a manifest vio- 
 lation of its spirit. The same is true of the proposal to estab- 
 lish three or four very large banks made by the bankers at the 
 
 hearings. This latter plan in turn repeats the proposal which was 
 
 urged during the debates on the bill that there should be not 
 to exceed four reserve institutions. That plan was an alterna- 
 tive to the plan of a single central institution and was rejected 
 in the same way as the central plan. If the recommendations 
 of the bankers of New York, Chicago, and St. Louis were to be 
 accepted, the country would be practically divided up between 
 these centers except in so far as a fringe had to be left to comply 
 
 11 
 
with the requirements of the law. Worked out in practice and 
 harmonized with one another to some extent, the suggestions 
 of the bankers in these three cities would lead to the establish- 
 ment of eight banks of which three should be very large and 
 five small. If the five were kept down to the minimum capital- 
 ization of $4,000,000, there would be left $87,000,000 for division 
 between the three centers, or an average of $29,000,000 as the 
 capitalization basis for the reserve bank in each place. It is not 
 believed that this would be a compliance with the law or that 
 the bankers in those places submitted any evidence showing that 
 such a capitalization should be assigned. 
 
 Assuming this reasoning to be accepted, a first approximation 
 towards a plan for laying out the proposed districts can be ar- 
 rived at as follows: 
 
 The largest of the reserve banks to be located at the princi- 
 pal financial centers of the country should have a capitalization 
 whose minimum limits should be in the neighborhood of $9,000,000, 
 or less, and whose maximum limit should certainly not exceed 
 $28,000,000, and should preferably be very much smaller than that 
 amount, — as much smaller as the convenience and customary 
 course of business will permit. 
 
 FUNDAMENTAL PRINCIPLES. 
 
 The fundamental principles of a positive nature upon which 
 the process of districting should be carried out may now be laid 
 down. 
 
 (a) The act calls for not less than eight or more than twelve 
 districts: it leaves the choice of the number within these limits 
 entirely open and to be decided without prejudice. 
 
 (b) The plain intent of the framers of the act was to es- 
 tablish a number of different and independent institutions, each 
 sufficiently strong to care for itself without the necessity in normal 
 times of depending upon any other. 
 
 (c) The institutions to be created should, therefore, be reas- 
 onably similar to one another in size, without attempting to 
 bring about any artificial similarity, and should be located at 
 such points as will most nearly convenience the business of 
 the country. 
 
 (d) The creation of any one large bank should be avoided, 
 meaning by large bank, a bank so preponderating in importance 
 as to make it ipso facto the most conspicuous and by far the 
 strongest element in the system ; while at the same time it 
 should be sought to avoid the creation of two distinct classes 
 of banks, one consisting of large, powerful institutions, the other 
 consisting of smaller and weaker institutions likely to become 
 dependent upon the neighboring and stronger banks. 
 
 (e) While the law requires that a minimum capital of 
 $4,000,000 shall be present in each and every reserve district and 
 while this requirement must be observed, there is no harm in 
 approaching closely to it or even in going below this limit so far 
 
 12 
 
as the banks are concerned, making up the deficiency by private 
 or Government subscription, if it be true that within a reason, 
 ably near future the district will probably advance in wealth 
 and capital so as to make the establishment of such a bank 
 desirable. 
 
 (f) Special study should be given both in establishing the 
 districts and in establishing the point in each district where the 
 headquarters bank is to be situated, to the facilities and speed of 
 transportation both between such point and those at which 
 other headquarters banks are located, and between such head- 
 quarters point and the outlying portions of the district itself. 
 
 GENERAL PROBLEM OF DISTRICTING. 
 
 A general survey of the country for the purpose of districting 
 clearly shows that several distinct problems are offered in con- 
 nection with the division of the country under the Federal Re- 
 serve Act. These problems present distinct phases and vary 
 from region to region. While it will not be possible in making as- 
 signments to proceed in a consecutive way, geographically speak- 
 ing, in the division of the country, it will be well to let the work 
 proceed so far as practicable and convenient by grand divisions or 
 regions, recognizing the distinct character of the soil, industry, dis- 
 tribution of population, and transportation systems of the several 
 portions of the Continent. 
 
 A limitation to be imposed upon this general principle of pro- 
 cedure as well as a consideration which will aid in developing 
 the different districts is found in the fact that to a certain ex- 
 tent the sites of reserve banks must be regarded as practically 
 predetermined, as in the case of New York, Chicago, and St. Louis, 
 the present central reserve cities. Wherever that is true, for the 
 reasons already generally set forth in the foregoing analysis, it is 
 possible to assign certain territory as definitely belonging to the 
 banks to be placed in the cities aforesaid. Thereby certain definite 
 limitations necessarily to be observed in connection with the subse- 
 quent outlining of the districts are laid down. 
 
 DIRECTION OF BUSINESS. 
 
 In the division to be mapped out effort must be made to 
 recognize the fact that business at the present time has a north- 
 ern and easterly trend. In most cases the headquarters of given 
 districts will be so located as to recognize this fact and to give 
 the fullest possible scope to existing habits and methods, doing 
 as little violence as possible to prevailing customs and wherever 
 practicable adopting existing banking relationships as the basis 
 for the new organization, particularly in its clearing phases. 
 At the same time there should be no hesitation in making changes 
 wherever it is believed that the existing banking practice is purely 
 artificial and where, therefore, a change will increase convenience 
 instead of diminishing it. Wherever such a change becomes 
 necessary the effort should be to lay out the boundaries of the 
 district in such a manner that both from the transportation 
 
 13 
 
standpoint, as well as from the point of view of business and 
 manufacturing growth the new banking center will develop in 
 harmony with the general commercial interests of the district 
 where it is situated. 
 
 QUESTION OF RESERVE HOLDINGS. 
 
 Before effecting the districting as a finality it would be well 
 to ascertain with accuracy the reserve affiliations of each and every 
 bank in the system by obtaining from them the facts in the 
 case as already suggested in a memorandum filed with the Or- 
 ganization Committee on January 8, 1914. If each bank has 
 been asked to indicate its choice of a district or city with which 
 to be associated these data should be considered in conjunc- 
 tion with the figures for reserves. 
 
 It should be understood, however, that the data, whatever 
 they may be on this subject will not affect in any very general 
 manner the outlines of the districts. On the contrary, those 
 general outlines must be determined by broader considerations and 
 it may be true in many cases that there would be reasons for 
 assigning a bank to a given district notwithstanding that its 
 affiliations would place it elsewhere if nothing else were con- 
 sidered. The single fact that, as is well known, and as the re- 
 ports of the Comptroller show, a large number of banks have 
 their reserve agents in New York, Chicago or St. Louis rather 
 than in a reserve city near home is due to an artificial condition 
 which has existed heretofore and is not a circumstance to which 
 any particular weight should be assigned in making up the dis- 
 tricts under the new system. In a less degree and with very 
 much greater limitation, the same may be said of the facts as 
 to reserve holdings in the smaller reserve cities. 
 
 Something needs to be said concerning the general assignment 
 of banks to districts in different parts of the country. A survey will 
 indicate that there must be assigned to the northern and eastern 
 part of the country an apparently disproportionately large number 
 of districts. In the effort to alter this plan of districting in such a 
 way as to give to the “south” or to the “west” a larger number 
 of districts on the ground that there should be a certain sec- 
 tional equality of distribution, the difficulty of irregular distribu- 
 tion of population and capital will inevitably be encountered. 
 Only two remedies could be applied in connection therewith; (a) 
 the placing of the headquarters of given districts in that part 
 of the country which was supposed to have been slighted — in 
 those districts where the territory included is so great as to oc- 
 cupy parts of two general sections of the country, or (b) to read- 
 just the disti’icts themselves so as to divide up great regions in 
 a different way and make given parts of the country independent 
 or self controlling. Some have suggested that the districts on 
 the Atlantic Coast be elongated while compensating capital is 
 obtained by carrying the extreme southern states such as Miss- 
 issippi, Alabama and Georgia into a district which should be 
 
 14 
 
allowed to run high up the Mississippi River along- the eastern 
 bank of that stream, extending- over the southern part of what we 
 have called the Great Lakes district. While this plan might be 
 feasible, it is not believed that it would be desirable. The effect of 
 it would be to establish too great a north and south extent of 
 territory. The same objection would hold good of any district 
 embracing- the far southern states with the southern portion of 
 the middle west. Moreover the districts thus created would be 
 decidedly inferior in transportation as well as in quick clearing 
 capacity to those which have been tentatively suggested above. 
 It would seem that there is but one argument seriously to be 
 considered in favor of such a plan — namely the view that any 
 district established should, if possible, contain a variety of differ- 
 ent interests which will make seasonal demands for loans at dif- 
 ferent times. This is the argument for so-called “shoe string” 
 districts that has been put forward from time to time, or as 
 others have expressed it, it is a demand for the inclusion of a 
 lending and a borrowing area within each district. 
 
 QUESTION OF LENDING AND BORROWING AREAS. 
 
 As regards this argument, it should be noted that even if 
 it be allowed full scope the idea is one which cannot be fully 
 worked out throughout the whole process of districting. The New 
 York and Chicago districts for example will almost necessarily 
 be debarred from making use of it, while the same is true of 
 sundry of the other districts in greater or less degree. This 
 would not be a good argument against employing the plan so far 
 as practicable if it should be entitled to serious theoretical con- 
 siderations. The question must be considered, therefore, how far 
 such serious theoretical consideration may be granted to it. Under 
 existing conditions the idea is one which undoubtedly should have 
 large weight, inasmuch as to-day the banks of the country are 
 habitually compelled to shift currency back and forth, relying 
 upon one another for seasonal aid through the redistribution 
 of their fluid resources. If conditions were to be the same 
 under the new system as at present it would be necessary to 
 provide for this state of things. However, the very essence of 
 the new plan is intended to meet the condition which in the past 
 has caused chief trouble by eliminating this necessity of inter- 
 dependence between districts. The Federal Reserve Act will pre- 
 sumably afford a means of making each district self-supporting in 
 a credit way so that assuming the plan to work as it is expected 
 to work the need for mutual seasonal aid and shipments of 
 currency will be minimized. 
 
 CHOICE OF CHIEF CITIES. 
 
 In choosing the chief city of each district — that is to say the 
 city in which the headquarters bank is to be located — two main 
 considerations are to be borne in mind: 
 
 (a) Existing banking relationships and associations. 
 
 15 
 
(b) Geographical and transportation considerations, govern- 
 ing the relative ease of access of different parts of the district. 
 
 In some cases it will be found that these two sets of consider- 
 ations cannot be harmonized; in others that a city can be selected 
 that will satisfy both. 
 
 Wherever possible the preference should be given to a city 
 which has acquired a distinct leadership in the matter of business 
 and with which the banks within the district are in the habit of 
 dealing. Where the choice between two cities would otherwise 
 be difficult to make on account of practical equality in the ex- 
 tent and importance of their commercial relationships, the city 
 to be chosen should be that which has the advantage in ease of 
 communication. This is fundamentally desirable because of the 
 necessities of the clearing process and the advantage to be gained 
 from having all parts of the district within easy reach of head- 
 quarters. 
 
 LOCATION OF BRANCHES. 
 
 The problem of branches is likely to be decidedly serious from 
 the very beginning. It will be found upon a close examination 
 of the subject that the establishment of branches will be prac- 
 tically out of the question so far as any useful purpose is con- 
 cerned, unless a distinct territory is assigned to each branch. 
 This involves the question whether a district shall be broken up 
 among a number of branches with the headquarters bank simply 
 presiding over the series, or whether a district will be assigned 
 to the headquarters bank just as it is assigned to each branch. 
 In either case the problem of subdistricting each district is 
 raised. Some of the testimony already available, obtained during 
 the hearings before the reserve bank Organization Committee has a 
 valuable bearing upon this subject. At some points it would re- 
 quire to be eked out with other information. There is however, 
 no purpose to be served in attempting a very careful process of 
 subdistricting until the districts themselves have been organized 
 so that what is said in this discussion has been confined entirely to 
 the districts themselves without effort at the detailed study of the 
 subdistrict question. 
 
 One further point should be carefully noted in this connection. 
 There are two ways in which the branches may be established. 
 They may be created either (a) as mere local boards of directors 
 charged with the duty of passing upon paper and perhaps car- 
 rying on a clearing process for the subdistrict, but without any 
 stock of cash, without a banking house and without the power to 
 make loans directly, merely transmitting the approved paper to 
 the headquarters bank; or (b) as full-fledged branch banking in- 
 stitutions with a banking house and fixtures, a stock of coin, 
 and a full staff of employees. Care and judgment should 
 be exercised even in establishing branches on the first named 
 basis and they should not be created unless they are actually 
 needed for immediate purposes. Even in the latter event, there 
 
 16 
 
should be no undue haste in creating- them, but the headquarters 
 banks should be allowed to get a satisfactory start before the 
 complicating elements involved in branch organization are allowed 
 to enter into the problem. There will, however, be no harm in 
 announcing- at the time of the districting the probable names of 
 cities regarded as suitable sites for branch banks, leaving the 
 decision to be revised later if necessary, and permitting the 
 question of branch organization to remain in the background until 
 such time as the actual establishment of the branches is re- 
 solved upon, when the type of such organization to be adopted 
 may be indicated.* 
 
 SELECTION OF DIRECTORS. 
 
 The choice of directors for the new banks is provided for in 
 Section 4 of the Federal Reserve Act. This section contains much 
 matter relating to the qualifications of directors, methods of 
 removal, and other topics not germane to the present discussion. 
 These phases of the matter are therefore properly omitted from 
 the present treatment. The portion of Section 4 which is consid- 
 ered to be significant in the present connection is as follows: 
 
 At a regularly called meeting of the board of direc- 
 tors of each member bank in the district it shall elect 
 by ballot a district reserve elector and shall certify his 
 name to the chairman of the board of directors of the 
 Federal reserve bank of the district. The chairman 
 shall make lists of the district reserve electors thus 
 named by banks in each of the aforesaid three groups 
 and shall transmit one list to each elector in each 
 group. 
 
 Each member bank shall be permitted to nominate 
 to the chairman one candidate for director of class 
 A, and one candidate for director of class B. 
 
 The candidates so nominated shall be listed by the 
 chairman, indicating by whom nominated, and a copy 
 of said list shall, within fifteen days after its comple- 
 tion, be furnished by the chairman to each elector. 
 
 Every elector shall, within fifteen days after the 
 receipt of the said list, certify to the chairman his first, 
 second, and other choices of a director of class A and 
 class B, respectively, upon a preferential ballot, on a 
 form furnished by the chairman of the board of direc- 
 tors of the Federal reserve bank of the district. Each 
 
 *The foregoing section of this report, accompanied by a detailed 
 statistical and geographical analysis indicating the sites for Re- 
 serve Banks and the limits of the districts pertaining thereto, upon 
 a basis of eight, of nine, of ten, of eleven, and of twelve institu- 
 tions, was submitted to the Organization Committee early in March, 
 1914. The Committee having since that date established the dis- 
 tricts and indicated the headquarters of the banks, the detailed 
 analyses are here omitted. 
 
 17 
 
elector shall make a cross opposite the name of the 
 first, second, and other choices for a director of class A 
 and for a director of class B, but shall not vote more 
 than one choice for any one candidate. 
 
 Any candidate having a majority of all votes cast 
 in the column of first choice shall be declared elected. 
 
 If no candidate have a majority of all the votes in the 
 first column, then there shall be added together the 
 votes cast by the electors for such candidates in the 
 second column and the votes cast for the several candi- 
 dates in the first column. If any candidate then have a 
 majority of the electors voting, by adding together the 
 first and second choices, he shall be declared elected. 
 
 If no candidate have a majority of electors voting when 
 the first and second choices shall have been added, then 
 the votes cast in the third column for other choices 
 shall be added together in like manner, and the can- 
 didate then having the highest number of votes shall 
 be declared elected. An immediate report of election 
 shall be declared. 
 
 The prescriptions of this language unmistakably call for the se- 
 lection of two and only two directors, one a banker and one a 
 business man, in each of the three banking groups; ballots to be 
 cast upon a basis of preferential voting which shall result in the 
 designation of different individuals as first, second, and third choice 
 for each place and upon each ballot. This being considered so 
 clear as to be open to no debate it has been deemed best therefore 
 to present merely a form of ballot designed to comply with the 
 terms of the act in regard to the choice of directors. In order fully 
 to carry out the provisions of the law with respect to the election 
 of directors there have been drafted a series of forms for use in 
 balloting for such directors under the terms of the legislation. These 
 forms have been shaped with a view to fulfilling the requirements 
 of the act in general, and particularly of the sections already quoted 
 with respect to the methods of indicating choices of directors. The 
 forms suggested will be found in the accompanying collection of 
 draft forms herewith presented as an accompaniment to Appen- 
 dix I. 
 
 Upon the election of the directors, unless the work has been 
 undertaken prior to that time in accordance with the authority 
 bestowed by the act upon the Organization Committee to exercise 
 the functions of the chairman of the board of directors, the pay- 
 ment of the specified subscriptions to stock will be in order, such 
 payments to be made in accordance with the provisions of the act 
 contained in section whereby the dates for the transmission of each 
 instalment of the stock payments is provided for. A form of stock 
 subscription ledger for the recording of such payments has been 
 prepared. The chief points in connection with it are seen in the 
 necessity of providing for the specified percentages of payment, the 
 
 18 
 
change in the amount due from any bank as a result of changes in 
 its capital or surplus or both, and the possibility that two classes 
 of stock, the one issuable to member banks only, and in that event 
 non-transferable, the other issuable to individuals and assignable 
 and transferable, may be provided for either at the beginning or 
 at some time in the future. A separate stock subscription ledger 
 is provided for use in the case of individual subscriptions, if any, 
 while the ledger intended for the use of individual banks is ruled 
 to permit of additions to or deductions from stock subscriptions re- 
 sulting from changes in the capital of the several banks necessitating 
 corresponding' changes in the amount of the subscription to be 
 exacted of them. The forms presented herewith in the collection 
 accompanying Appendix I for use in the recording of stock subscrip- 
 tions are, beyond the few points already noted, self-explanatory. 
 
 There have also been prepared forms for use in receipting for 
 stock subscriptions. Two such forms are presented, the one in- 
 tended to be a continuous record which would be transmitted by 
 the bank making the subscription to the body receiving the same, 
 the amount thereof to be recorded upon the form and the latter 
 returned to the subscribing bank in the case of each instalment, 
 while the second form is scrip intended for use in place of the con- 
 tinuous record already referred to, should that method of receipting 
 be preferred. In case the scrip type receipt should be used, a sep- 
 arate and independent receipt would be transmitted for each instal- 
 ment. It is believed that the scrip receipt will probably be pre- 
 ferable to the continuous record, owing to its greater convenience. 
 
 19 
 
Part II. 
 
 In dealing- with the general question of the organization of the 
 reserve system after the necessary structure has been set up by 
 the appointment of the boards of directors of the Federal reserve 
 banks and by the appointment of the Federal Reserve Board itself 
 it is deemed best to recognize several distinct elements as follows: 
 
 1. The organization and management of a typical Federal re- 
 serve bank whose operations are supposed to be representative of 
 and practically uniform with those of every other. 
 
 2. The organization of the office of the Federal reserve agent 
 stationed at each reserve bank, and the duties of such agent. 
 
 3. The organization of the Federal Reserve Board. 
 
 4. The conduct of business of Federal reserve banks. 
 
 5. The relations between Federal reserve banks themselves and 
 between each Federal reserve bank and its member banks. 
 
 6. The relations between the Federal reserve system and out- 
 side banks. 
 
 7. The establishment of branches at home and abroad and the 
 relations between such branches and the “parent” banks to which 
 they are attached. 
 
 It will not be feasible, for reasons of convenience which -will 
 later appear, to discuss these topics strictly in the order in which 
 they are here presented, but each of the general discussions thus 
 indicated will be dealt with in the course of the report. 
 
 A beginning will be made by outlining the proposed type of 
 organization for a Federal reserve bank. The reasons for the 
 precise form of organization suggested will become apparent as the 
 treatment proceeds. 
 
 ORGANIZATION OF BANKS. 
 
 In dealing with the actual organization of the proposed banks 
 two leading questions are presented: 
 
 1. The systematic recording of their doings, including full pro- 
 vision for accounting and internal regulation. 
 
 2. The officering of the several institutions, and the general 
 relationship between their organization and that of the Federal 
 Reserve Board. 
 
 To some extent these two phases of the subject must be treated 
 together, but the principal features of each branch of the questioii 
 of organization can be independently disposed of. Attention will 
 first be given to the question of the routine conduct of business in 
 the institutions. 
 
 In organizing the Federal reserve bank in each of the districts 
 set apart by the Organization Committee, it will be necessary first 
 of all to determine upon the general type of organization to be 
 employed and to formulate a specific plan of procedure in accord- 
 ance therewith. The Federal Reserve act makes no effort to pre- 
 scribe the details of organization, but leaves them to be settled by 
 
 20 
 
the boards of directors, subject to the general requirements of the 
 methods, and restrictions definitely set forth in the national banking 
 act are to be adhered to. 
 
 ADMINISTRATION. 
 
 It is believed, however, that so far as practicable, the adoption 
 of a uniform system of organization which shall prevail throughout 
 the whole system of banks as nearly as conditions will permit, is 
 much to be preferred to a plan which would allow the banks to 
 adopt a variety of different methods of organization, according to 
 circumstances. The points which have been deemed, on the whole, 
 practically essential in connection with the organization are brought 
 out in the latter portions of this report in connection with the treat- 
 ment of branches, accounting, and other subjects, but at this point 
 it is considered desirable to sketch their main outlines for the sake 
 of clearness by way of introducing the subject. In general, the 
 following requirements must, it is thought, be complied with: 
 
 (a.) Each Federal reserve bank should have a distinct executive 
 head not identical with the Federal reserve agent, even in those 
 cases where the reserve agent has been selected in a manner en- 
 tirely satisfactory to the banking community, so that stockholders 
 would be quite willing to have the agent act as the executive head 
 of the bank. Of course this implies that in no case should the 
 president or executive head chosen by the stockholders be desig- 
 nated by the Government as reserve agent. The intent of the act 
 is distinctly opposed to any such fusion of functions, the agent 
 being intended to be a Government representative and spend his 
 time in furthering the interests of the public at large — a position 
 he could hardly preserve were he to become an active operating 
 officer, anxious to increase profits and advance given private 
 interests. 
 
 (b.) Each Federal reserve bank should be carefully subdivided 
 into departments, each such department representing a definite 
 allotment of business, the divisions being those which correspond 
 with the various types of business set forth by the Federal Re- 
 serve act. 
 
 (c.) Each Federal reserve bank should be so organized as to pro- 
 vide for a proper check upon the operations of the member banks 
 and for a suitable oversight on the part of the reserve agent. 
 
 (d.) Each Federal reserve bank should be subject to specified 
 internal regulations evolved as the result of bank experience, which 
 will conduce to the efficient and economical conduct of its affairs. 
 
 (e.) Suitable provision shall be made in each bank for the bond- 
 ing of employees and for an accurate control of their operations. 
 
 An organization chart is presented in Portfolio I for the graphic 
 presentation of this plan. 
 
 21 
 
For the purpose of presenting- a connected view of the plan 
 of organizing the banks, it has been deemed be^t to formulate a 
 tentative set of by-laws for a typical Federal reserve bank, such 
 by-laws to be varied or modified in detail according as special re- 
 quirements on the part of the different institutions might demand. 
 These by-laws will be first presented and will later be supplement- 
 ed by a detailed sketch of practicable accounting systems. 
 
 BY-LAWS 
 
 of 
 
 THE FEDERAL RESERVE BANK 
 of 
 
 PREAMBLE. 
 
 As provided in its Certificate of Organization, dated 
 
 the name of this bank shall be The Federal Reserve Bank of 
 
 and it shall do business in the City of State 
 
 of and serve the territory known as Federal Reserve 
 
 District It was duly authorized to commence 
 
 business by the Comptroller of the Currency, under date of 
 
 ARTICLE I. 
 
 Directors. 
 
 Section 1. Number and Quorum. — The number of directors 
 shall be nine. A majority of the directors shall constitute a 
 quorum. 
 
 Section 2. Classes. — The board of directors, as provided by law 
 divided into three classes — A, B, and C — shall, at its initial meeting, 
 designate one member of each class whose term of office shall ex- 
 pire one year after the first day of January nearest the date of 
 such initial meeting; in like manner, one whose term shall expire 
 in two years, and one in three years. Thereafter, the term of office 
 of each director shall be three years. 
 
 Section 3. Vacancies. — Vacancies shall be filled and successors 
 elected in the manner provided by law. 
 
 Section 4. Meetings. — There shall be a stated meeting of the 
 
 board every at o’clock A. M., or, if that day be a 
 
 holiday, on the first preceding day not a holiday. 
 
 The chairman of the board shall be empowered to call a special 
 meeting at any time, or upon the written request of any three 
 directors, or whenever requested so to do by the president. 
 
 Section 5. Powers. — The board of directors shall, subject to the 
 approval of the Federal Reserve Board, fix the compensation and 
 define the duties (other than those herein provided for) of officers, 
 clerks, and employees of the bank. It shall duly provide for the 
 expenses of the Department of Federal Reserve Agent and for the 
 pro rata amount of expenses of the Federal Reserve Board and 
 the Federal Advisory Council. 
 
 Section 6. Order of Business. — The following shall be the order 
 of business at each regular meeting of the board: 
 
1. Reading- or inspection of minutes of the last regular meet- 
 ing. 
 
 2. Report of the president, including- information concerning 
 banking and business conditions in the district. 
 
 3. Report of the secretary-treasurer, including- detailed sum- 
 mary of all business transacted since last regular meeting and 
 statement of present condition, the latter to include: 
 
 (a.) Statement of all loans, rediscounts, investments and 
 purchases; 
 
 (b. ) All official correspondence received from Federal 
 Reserve Board; 
 
 (c. ) Weekly statement of condition made to Federal Re- 
 serve Board; 
 
 (d.) Summary of condition of member banks; 
 
 (e. ) Minutes of meetings of boards of directors of 
 branches. 
 
 4. Committee reports. 
 
 5. Unfinished business. 
 
 6. Discount policy and formulation of report to Federal Re- 
 serve Board on reasons for same. 
 
 7. New business. 
 
 ARTICLE II. 
 
 Executive Committee. 
 
 Section 1. How Constituted. — There shall be an executive com- 
 mittee consisting of the president, the Federal reserve agent, and 
 one director of class A or B. Such director shall be elected by the 
 board to serve for a period not to exceed one month, and his suc- 
 cessors shall be chosen in rotation until each member of classes A 
 and B shall have served or shall have been given an opportunity to 
 serve. The board shall elect each month an alternate for service 
 on the executive committee, who shall be authorized to act in the 
 absence or disability of the member first chosen. 
 
 Section 3. Powers — Subject to the rules and regulations of the 
 meetings upon call of the ■ Chairman and shall cause to be kept 
 minutes of all such meetings held by it, which shall be read and 
 approved by members of the board at the next succeeding meeting 
 of the board. 
 
 Section 3. Powers. — Subject to the rules and regulations of the 
 board of directors and of the Federal Reserve Board, the executive 
 committee shall have the following powers: 
 
 1. To pass upon all commercial paper submitted for discount, 
 
 2. To initiate open market transactions. 
 
 3. To recommend to the board of directors, from time to 
 time, changes in the discount rates. 
 
 4. To buy and sell securities. 
 
 5. To apply and provide for the security of such Federal re- 
 serve notes as may be necessary for the general requirements of 
 the bank. 
 
 6. To employ clerks and other subordinates, to define their 
 duties, and to fix their compensation. 
 
 23 
 
ARTICLE III. 
 
 Officers. 
 
 Section 1. The officers to be chosen by the board of directors 
 shall be a president, a first and a second vice-president,* a sec- 
 retary-treasurer, and such other officers as the board may from 
 time to time determine. They shall hold office during the pleasure 
 of the board. Such officers shall, so far as may be practicable, at- 
 tend board meetings. 
 
 Section 2. Chairman. — The chairman of the board shall preside 
 at all meetings thereof. He shall, together with the officers of the 
 bank, have supervision of all credit records and data concerning 
 member banks and borrowers which may be compiled from reports 
 and examinations of such banks. All reports and statements made 
 to the Federal Reserve Board shall be submitted to the chairman 
 and shall be countersigned by him as Federal reserve agent. All 
 examinations of member banks made on behalf of the Federal 
 Reserve Board shall be conducted under his general direction as 
 such agent. 
 
 Section 3. Deputy Federal Reserve Agent. — In the absence or 
 disability of the chairman, as such, or as Federal reserve agent, 
 his powers shall be exercised and his duties performed by the 
 deputy Federal reserve agent. Subject to the rules and regulations 
 of the Federal Reserve Board and the direction of the Federal re- 
 serve agent, such deputy shall represent the bank in examinations 
 of member banks and shall perform such other duties as may be 
 assigned to him. In case of the absence or disability of both the 
 Federal reserve agent and his deputy, the third member of Class C 
 of the board of directors shall act as chairman and Federal reserve 
 agent pro tern. 
 
 Section 4. The President. — The president shall have general 
 charge of the bank and shall preside at all meetings of the execu- 
 tive committee, subject, however, to such rules and regulations as 
 may be incorporated herein or from time to time promulgated by 
 the board of directors. He shall have power to make any and all 
 transfers of securities of the bank which may be authorized to be 
 sold by the executive committee and shall, jointly with the secre- 
 tary-treasurer, sign all certificates of stock of the bank. 
 
 In all cases where the duties of subordinate officers and agents 
 of the bank are not specifically prescribed by the by-laws or the 
 board of directors, they shall be the duties specified by and instruc- 
 tions of the president. The president may, with or without the 
 advice of the executive committee, suspend or remove any em- 
 ployee of the bank, subject, however, to a hearing before said com- 
 mittee. 
 
 The secretary-treasurer shall have custody of the seal of the 
 bank, with power to affix the same to certificates of stock and 
 other instruments, as may from time to time be required. 
 
 *The number of vice-presidents will depend upon the size of 
 the bank and the character of its work. 
 
 24 
 
Section 5. The Vice-Presidents. — In case of the absence or dis- 
 ability of the president, his powers shall be exercised and his 
 duties discharged by the first vice-president, and, in the absence or 
 disability of the latter, by the second vice-president. In the event 
 of the absence or disability of all three, the executive committee 
 shall, by a majority vote of its members, appoint a director presi- 
 dent pro tern. 
 
 Section 6. The Secretary-Treasurer. — The secretary-treasurer* 
 shall carry out the instructions of the Board of Directors regarding' 
 the custody of all moneys received and paid out on account of 
 the bank. He shall, jointly with the president, have custody of 
 all investments of the bank. He shall keep the minutes of all 
 board meetings and of all committees of the board. 
 
 ARTICLE IV. 
 
 Counsel. 
 
 Section 1. The board of directors shall, subject to the approval 
 of the Federal Reserve Board and upon such terms as it may pre- 
 scribe, appoint a counsel who shall represent the bank in such 
 matters as may be assigned to him and shall approve all legal in- 
 struments. 
 
 ARTICLE V. 
 
 Auditor. 
 
 Section 1. The board shall appoint an auditor, who shall be 
 subject to its direction and to that of the Federal reserve agent 
 and shall make a weekly report direct to the board of directors of 
 the Federal reserve bank, giving a full statement of condition based 
 upon his audit. The auditor shall have charge of the internal 
 auditing of the bank, the reconciliation of accounts, the periodical 
 examination of branches, and, in general, the audit of all trans- 
 actions, expenses, receipts, and disbursements. 
 
 ARTICLE VI. 
 
 Bonds. 
 
 Subject to the rules and regulations of the Federal Reserve 
 Board, the board of directors shall provide all bonds necessary to 
 cover officers and clerks of the bank. 
 
 ARTICLE VII. 
 
 Branches. 
 
 All branches established by the board shall conduct business in 
 the manner prescribed for the main office and pursuant to such 
 by-laws, rules, regulations, and directions as may from time to 
 time be promulgated by the directors and officers of the bank. 
 
 ♦Whether one or two officers, will depend upon the size of 
 the bank and the character of its work. 
 
 25 
 
ARTICLE VIII. 
 
 Information. 
 
 Section 1. All persons employed by the bank shall keep invio- 
 late its business affairs and concerns, and shall not disclose or 
 divulge the same to any unauthorized person whomsoever. Any 
 employee who shall give information contrary to this by-law shall 
 be liable to immediate dismissal. 
 
 Section 2. The action or policy of the board and of the execu- 
 tive committee shall not be expressed by any individual member, 
 but by its duly constituted officers after formal action by the whole 
 board. 
 
 Section 3. For the information of member banks and the pub- 
 lic, there shall be maintained in the office of the secretary-treasurer 
 a bulletin board, upon which shall appear the current rates of 
 discount established by the directors and such other information 
 as they may deem it necessary to make public. 
 
 ARTICLE IX. 
 
 Certificates of Stock. 
 
 All certificates of stock shall be signed by the President and 
 Secretary-Treasurer, and bear the corporate seal. 
 
 ARTICLE X. 
 
 Transfers. 
 
 No transfer shall be permitted, except upon the surrender of the 
 outstanding certificate of stock or scrip, and no new certificate shall 
 be issued until the former certificate is cancelled; but the Board 
 of Directors may authorize the issue of a duplicate in place of a 
 lost certificate, taking a satisfactory bond of indemnity. It shall be 
 the duty of the Federal Reserve Agent to register the stock or scrip 
 of the bank. 
 
 ARTICLE XI. 
 
 Amendments. 
 
 These by-laws may be amended at any regular meeting of the 
 board by a majority vote of the entire board; provided, however, 
 that a copy of such amendment shall have been delivered to each 
 member at least ten days prior to such meeting. 
 
 INTERNAL REGULATIONS. 
 
 Besides the general by-laws as thus set forth, it is believed that 
 the proper conduct of the new banks will call for a code of rules 
 of internal regulations. 
 
 Probably one of the greatest initial difficulties in opening the 
 Federal Reserve Banks will be the securing of a competent staff. 
 The continued efficiency of even a thoroughly competent corps of 
 Bank employees depends largely upon the discipline in vogue in 
 the institution. Such discipline requires the application of rules 
 designed to promote morale and proper thoroughness. 
 
 These rules should be sufficiently wide in their latitude to insure 
 
 26 
 
the primary essentials of co-ordination. Their structure should be 
 more than a series of prohibitions, and should serve to give the 
 tendency toward that which is desired, even if not categorically 
 expressed. 
 
 They should at least be so arranged as: 
 
 1. To set forth the time at which employees of various grades 
 should report for duty; to stipulate when the windows shall be 
 closed for business; to designate a maximum lunch period; to 
 provide for temporary absence or leave of absence; to provide for 
 reports of tardiness, and to provide for overtime work. 
 
 2. To set forth when the vault shall be opened and closed and 
 upon what authority the vault may be kept open after the time 
 provided; to designate what records shall be kept by the Vault 
 Officer and what his duties shall be; to stipulate what parties in 
 conjunction shall hold combinations. 
 
 3. To require care to be taken of securities in the various de- 
 partments, to set forth how shipments of securities must be 
 handled; to provide for receipting and recording of securities re- 
 ceived and delivered; to set forth under what conditions and under 
 what authority valuables may be deposited and withdrawn from 
 the vault. 
 
 4. To set forth certain necessary regulations and restrictions 
 regarding apparel, neatness, and habits; to prescribe mutual cour- 
 tesy and politeness; to resti'ict smoking to certain hours. 
 
 5. To require neatness of desks, cabinets, and other working 
 furniture; to require care and neatness in records prescribing how 
 records shall be kept and closed. 
 
 6. To provide for initialing and signing of all necessary tickets 
 and vouchers, what class of entries certain authorities are em- 
 powered to sanction; to provide for signing of checks, receipts, and 
 other papers. 
 
 7. To describe the duties and powers of the auditor; to specify 
 to whom the auditor is responsible and to what extent his au- 
 thority obtains in the matter of accounting and the records; to 
 place final responsibility for all systems and changes on the 
 auditor. 
 
 8. To indicate how supplies shall be ordered and how audited; 
 to state upon whose authority expenditures may be incurred; to 
 prescribe when bills shall be paid, who shall receive and distribute 
 supplies; to require that when re-orders are necessary old forms 
 shall be submitted to auditor for possible change and correction. 
 
 9. To provide who shall code and decode cables and telegrams; 
 to designate an officer who shall hold test -words and keys; to 
 prescribe how copies and records shall be kept and telegraph bills 
 checked. 
 
 10. To prescribe who shall receive, assort, and distribute mail, 
 who shall be authorized to sign letters; to direct how correspon- 
 dence files shall be kept and how access thereto may be granted. 
 
 11. To provide for the assembling of all reports in the hands 
 of a designated functionary at a certain time. 
 
 27 
 
WORK OF TRANSFER AGENT. 
 
 It is further suggested that in case the Federal Reserve agent 
 shall be authorized to act as agent for the transfer of stock of the 
 bank to which he is accredited the following considerations be 
 observed b'y him, particularly in relation to stock, if any, that may 
 be held by individuals. It is understood that at the outset no such 
 stock will be held by individual stockholders; but a set of regula- 
 tions designed to cover not only present conditions, but those that 
 might arise under the terms of the law has been developed. 
 
 1. The salient point in transferring certificates of stock is to 
 ascertain who has authority to assign the certificate and how the 
 authority was granted; whether by special resolution, general 
 resolution, or by the By-Laws, in respect to a corporation; whether 
 by will, indenture, or Court order, in respect to Executors, Trustees, 
 Administrators, Guardians, Agents, and the like; or whether by 
 power of attorney. 
 
 2. In every case proof of papers submitted shall be first ascer- 
 tained to the satisfaction of the Transfer Agent. He shall require 
 that certificates issued in the name of a corporation or an asso- 
 ciation be endorsed by such officials authorized by a special or 
 general resolution, or the By-Laws, and a certified copy thereof 
 attested by the Secretary with the seal affixed, filed with the stock 
 certificate. A copy of the resolution shall be accompanied by a 
 notary’s certificate certifying that he had inspected the minutes and 
 that the resolution was a true copy thereof. 
 
 3. In issuing certificates to Trustees, the trust shall be fully 
 described by a reference to the will or indenture under which the 
 trust is created, and the name of beneficiary given, if possible. In 
 transfers from Trustees, all Trustees shall sign, and transfers must 
 be accompanied by a copy of instruments properly certified showing 
 the authority of the Trustees to sell or transfer. Trustees appointed 
 by a Court shall exhibit both certified copy of instrument and 
 certified copy of the Court appointment. Transfers by Adminis- 
 trators shall be accompanied by a copy of appointment certified by 
 the Probate Court. Transfers by Executors or Administrators, with 
 the will annexed, shall be accompanied by a copy of the will and 
 copy of the Court appointment, both certified by the Probate Court. 
 
 4. In issuing certificates to a minor, the Guardian’s name shall 
 also be given, as follows; “James Brown (minor) under Guardian- 
 ship of William Jones.” 
 
 Transfers from a minor shall be made only by a Guardian ap- 
 pointed by the Court, who shall exhibit a properly certified copy of 
 his appointment. 
 
 5. Trustees, Executors, Administrators, Guardians, or Agents 
 shall not transfer directly to themselves individually. 
 
 6. In transfers executed by an Attorney, the original power of 
 attorney, certified by a Notary, or a copy of same shall be left on 
 file. Authority to transfer stock shall appear in the instrument, 
 and evidence is required that the signature to the power of attorney 
 
 2S 
 
is genuine and that the power of attorney is in force at the time 
 of transfer. 
 
 7. In issuing' a certificate to a married woman, her Christian 
 name and not that of her husband with “Mrs.” prefixed shall be 
 used. In case a new certificate is desired by reason of change of 
 name by marriage of an unmarried woman, the old certificate shall 
 be signed as follows: “Mrs. Mary E. Brown (formerly B. Smith),” 
 the new certificate being issued in the name of “Mrs. Mary E. 
 Brown.” 
 
 8. Signatures on assigned certificates shall be guaranteed or 
 notarially acknowledged. 
 
 9. Transfers shall not be made directly from husband to wife or 
 from wife to husband. 
 
 10. Certificates issued in the name of an individual shall show 
 their Christian name as follows: John Smith, Charles A. Jones. 
 
 11. Certificates issued in the name of a bank, corporation, or 
 association shall show title and address as follows: 
 
 First National Bank, New York City. 
 
 First National Bank, Chicago, 111. 
 
 Farmers National Bank, St. Louis, Mo. 
 
 12. Certificates shall not be issued in the name of an estate of a 
 deceased person, but in the name of the representative of the said 
 estate. 
 
 13. Certificates in the name of a deceased person shall not be 
 transferred until the filing of papers as aforesaid and the filing with 
 the Transfer Agent of consent from the Comptroller of the State 
 in which deceased resided. 
 
 14. All transfers in the name of a deceased person shall be re- 
 ferred to Counsel of Transfer Agent, as each state has different 
 inheritance laws in respect to estates of decedents. 
 
 15. The signature of the assignment on the back of stock cer- 
 tificates shall correspond to the name as written on the face of 
 the certificate in every particular, without alteration. 
 
 16. All notarial acknowledgments shall have affixed a certificate 
 of certification by County Clerk or Court of notarial authority. 
 
 SYSTEM OF ACCOUNTING. 
 
 As already noted, the system of accounting to be employed by 
 the reserve banks is logically to be considered and dealt with under 
 the head of organization. Inasmuch, however, as the accounting 
 problems of the banks necessarily involve references to features 
 of business management, such as the clearing system of the banks, 
 the duties of Federal Reserve agents and others, it is deemed pref- 
 erable to postpone consideration of the accounting system of the 
 banks until all matters of organization involving modifications or 
 adjustments of accounting processes have been concluded. 
 
 FEDERAL RESERVE AGENTS. 
 
 The Federal reserve act provides for the appointment of a new 
 type of official, heretofore unknown to Federal law, to be designated 
 
 29 
 
as “Federal Reserve Agents.” With reference to these agents the 
 reserve act provides (section 4) as follows: 
 
 “Class C directors shall be appointed by the Federal re- 
 serve board. They shall have been for at least two years 
 residents of the districts for which they are appointed, one 
 of whom shall be designated by said board as chairman of 
 the board of directors of the Federal reserve bank and as 
 Federal reserve agent. He shall be a person of tested bank- 
 ing experience: and in addition to his duties as chairman 
 of the board of directors of the Federal reserve bank, he 
 shall be required to maintain under regulations to be estab- 
 lished under the Federal reserve board a local office of said 
 board on the premises of the Federal reserve bank. He shall 
 make regular reports to the Federal reserve board and shall 
 act as its official representative for the performance of the 
 functions conferred upon it by this act. He shall receive an 
 annual compensation to be fixed by the Federal reserve board 
 and paid monthly by the Federal reserve bank to which he is 
 designated.” 
 
 Elsewhere in the act it is provided that the reserve board shall: 
 “Make regulations for the safeguarding of all collateral, 
 bonds, Federal reserve notes, money, or property of any kind 
 deposited in the hands of such agents. . . .” 
 
 By Section 16 it is provided that: 
 
 “Any Federal reserve bank may make application to the 
 local Federal reserve agent for such amount of the Federal 
 reserve notes hereinbefore provided for as it may require. 
 Such application shall be accompanied with a tender to the 
 local Federal reserve agent of collateral in amount equal to 
 the sum in the Federal reserve notes thus applied for and 
 issued pursuant to such application. The collateral security 
 thus offered shall be notes and bills accepted for discount 
 under the provisions of section 13 of this act, and the Federal 
 reserve agent shall each day notify the Federal reserve board 
 of all issues and withdrawals of Federal reserve notes to 
 and by the Federal reserve bank to which he is accred- 
 ited. . . .” 
 
 The functions of Federal reserve agents as thus set forth are 
 broad inasmuch as the agent is made the local representative of 
 the Federal reserve board for the performance of the functions 
 entrusted to such board. The agent is therefore able to exercise 
 under the direction of the said 'board such powers as the board 
 may desire specifically to entrust to him. At the same time the 
 act is exceedingly specific in its directions with reference to the 
 records that are to be maintained by such agent. While experi- 
 ence will undoubtedly in the long run alter and develop any con- 
 ceptions of the functions of Federal reserve agent which may be 
 employed at the beginning, it is manifestly^ necessary to develop a 
 set of instructions for Federal reserve agents to be used by them 
 at the inauguration of the reserve banks and to continue in use 
 
 30 
 
until such time as experience may demonstrate the necessity of 
 some new method of describing' such functions or some extension 
 of them, while it is equally desirable and necessary to describe 
 with care the records which are to be maintained by such agents. 
 
 Attention will first toe paid to the gejieral duties of the agent 
 himself and to the scope of the functions to be performed by him. 
 
 The intent of the act never was that of placing the Federal 
 reserve agent in charge of the Federal reserve bank to which he 
 is accredited or of vesting him with practical banking functions in 
 the direct management of business relationships between the re- 
 serve bank and its member banks. Its purpose was to make him 
 a local supervisory factor representing the Federal reserve board 
 and ultimately the Government, that is to say the public, his 
 duties being fundamentally those of controlling the issue of the 
 notes applied for by the reserve banks and of inspecting and su- 
 pervising banking operations in the district for the purpose of 
 assuring himself, and of toeing able to assure the reserve board, 
 that the banks, both member and Federal reserve, were complying 
 with the letter and spirit of the law. 
 
 In pursuance of this conception of the duties of Federal reserve 
 agents, it will be necessary for the Federal Reserve Bank to be in 
 possession of detailed information concerning each member bank, 
 as to financial condition, character of management, competency 
 of officers and directors, care exercised in granting and checking 
 credits, custom in extending accommodation to directors and of- 
 ficers, or to corporations which they may own, control, or be 
 interested in, and relations with large borrowers. Safeguards 
 must be adopted to control the use of rediscounting power and to 
 check overexpansion. 
 
 In this connection, it will be desirable to have detailed records. 
 
 It will be necessary for the Federal Reserve Agent to be fa- 
 miliar with the affairs of the bank and the general business and 
 credit conditions in the district which the bank serves. For this 
 reason, it is both desirable and necessary that a plan be adopted 
 which will give to the Federal Reserve Agents, facilities for ob- 
 taining definite, reliable, accurate, and detailed information. 
 
 Application for the issue of Federal Reserve notes must be 
 made to the Reserve Agent and must be accompanied by a tender 
 of bills and notes as collateral security (Sec. 16, Par. 2). It is 
 therefore suggested: 
 
 1. That the Federal Reserve Agent exercise general supervi- 
 sion over credit records and data concerning member banks and 
 borrowers which may be compiled from reports and examinations 
 of member banks, and elsewhere. 
 
 2. That all statements or reports made to the Federal Reserve 
 Board, be prepared under the direction, or bear the countersigna- 
 ture of the Federal Reserve Agent. 
 
 3. That special examinations of member banks provided for in 
 the act should, when undertaken, be made under general direction 
 of the Federal Reserve Agent. 
 
 31 
 
We may now proceed to enumerate the chief features of a plan 
 for the management of the business of the Federal Reserve Agent. 
 
 GENERAL PLAN— STATEMENT AND REPORTS. 
 
 1. FEDERAL RESERVE BANKS: 
 
 There should be adopted a form of General Statement or Bal- 
 ance Sheet which will show on its face the true condition of each 
 bank and give under appropriate headings the assets and liabili- 
 ties in detail, as well as such supplemental information as will be 
 necessary to give to the Federal Reserve Board an idea of general 
 business and financial conditions in the district which the bank 
 serves. 
 
 2. WEEKLY REPORT: 
 
 At the close of business Friday of each week a statement, 
 showing the general condition of each Federal Reserve Bank, should 
 be forwarded by the agent to the Federal Reserve Board at Wash- 
 ington. Figures should be telegraphed so as to be received at 
 Washington by 9 A. M. Saturday morning. 
 
 3. FEDERAL RESERVE BOARD: 
 
 A statement showing condition of each Federal Reserve Bank 
 and a consolidated statement for all Federal Reserve Banks is to 
 be published once each week. (Section 11, Paragraph A.) It is 
 suggested that publication be made either on Saturday or Mon- 
 day. This will be more fully discussed in speaking of the board 
 itself. 
 
 4. MEMBER BANKS: 
 
 For the purpose of ascertaining the general condition of mem- 
 ber banks in each Federal Reserve District, it is suggested that a 
 weekly report, showing the average condition of each member 
 bank, be made to the head office of each Federal Reserve Bank, at 
 the close of business Friday of each week. The figures should be 
 compiled under the direction of the Federal Reserve Agent and 
 the summary forwarded by mail or telegraph to the Federal Re- 
 serve Board. If deemed advisable, a brief summary of condition 
 of member banks in each Federal Reserve District and a combined 
 statement of all member banks should be published not later than 
 Wednesday of following week, by the Federal Reserve Board. 
 
 5. RELATIONS WITH BOARD: 
 
 The Federal Reserve Agent must each day notify the Federal 
 Reserve Board of all issues and withdrawals of Federal Reserve 
 Notes to and by the Federal Reserve Bank to which he is accred- 
 ited. (Section 16, Paragraph 2.) It is suggested that the Federal 
 Reserve Agent be also required to forward to the Federal Reserve 
 Board at the close of business Friday of each week a detailed 
 statement giving: 
 
 (1,) Amount of gold and lawful money deposited with him by 
 the Federal Reserve Bank to which he is accredited for exchange 
 for outstanding Federal Reserve notes. (2) Bills of exchange, 
 notes and drafts held by him as collateral to Federal Reserve 
 
 32 
 
notes issued to the Federal Reserve Bank. (3) Record of the total 
 outstanding notes at the beginning of week, notes issued or re- 
 tired during the week, and liability of Federal Reserve Bank upon 
 outstanding notes on day of report. (4) A summary to be car- 
 ried forward from previous report, showing amount of Federal 
 Reserve Notes received from Comptroller, outstanding notes in cir- 
 culation, notes returned to the Comptroller for cancellation or de- 
 struction, and notes in hands of Federal Reserve Agent. (5) List 
 of collateral held by Federal Reserve Agent, showing the aggregate 
 liability of makers, drawers, endorsers, and acceptors, on bills of 
 exchange, notes, and drafts, received from Bank, as security for 
 Federal Reserve Notes issued. 
 
 Forms designed to serve for the preparation of these reports 
 and records have been carefully drafted and will be found in the 
 collections of forms accompanying this report. Two distinct sets 
 of forms for the purpose of carrying out the foregoing recom- 
 mendations have been drafted — one set accompanying the ac- 
 counting plan presented in Appendix I, and numbered as portfolio 
 III, the other included in that presented in Appendix II, and 
 numbered as portfolio II. 
 
 IDENTIFICATION OF NOTES. 
 
 In this connection it is also deemed best to make a recommend- 
 ation that will be of considerable importance in furthering the 
 convenience of the reserve banks in assorting their notes. 
 
 Section 16, Paragraph 3, of the Federal Reserve act provides 
 that: 
 
 “Notes . . . shall bear upon their faces a distinctive 
 letter and serial number which shall be assigned by the 
 Federal Reserve Board to each Federal reserve bank.” 
 
 In order that a uniform set of numbers may apply to the Fed- 
 eral reserve system throughout, it is recommended that the number 
 which shall appear on the Federal reserve notes as above pro- 
 vided, shall be the official number of the city where the issuing 
 Federal reserve bank is located, according' to the system of num- 
 bers now used by the banks of the country in numbering checks. 
 The consecutive order of these numbers is based upon population. 
 Letters should also be assigned to the banks to indicate their posi- 
 tion in the reserve system, the Arabic numerals being arbitrary 
 so far as that system itself is concerned. 
 
 Some of the Federal reserve districts and banks would, under 
 this system, be numbered as follows: 
 
 1 . 
 
 A 
 
 New York. 
 
 2. 
 
 B 
 
 Chicago. 
 
 3. 
 
 C 
 
 Philadelphia. 
 
 4. 
 
 D 
 
 St. Louis. 
 
 5. 
 
 E 
 
 Boston. 
 
 11. 
 
 F 
 
 San Francisco. 
 
 The use of letters in connection with these numbers makes pos- 
 
 33 
 
sible a continuity of designation, so that if additional reserve hanks 
 are organized it will not be necessary to change any previous num- 
 bers or letters. 
 
 The notes should be printed with the letters and numbers in the 
 upper right-hand corner and the lower left hand corner, and they 
 should be sufficiently distinct to enable tellers and clerks to assort 
 the notes readily by number when preparing them for return to 
 their originating banks. 
 
 EXAMINATIONS: 
 
 In connection with the sections of the Federal Reserve Act con- 
 cerning examinations, suggestion is made as to: 
 
 1. Examination of Federal Reserve Banks and Branches. 
 
 2. Examination of Records and Accounts of Federal Reserve 
 Agents. 
 
 3. Examination of affairs of Member banks, so as to inform the 
 Federal Reserve Bank as to the condition of Member banks and 
 lines of credit that are being extended. (Sec. 21, Paragraph 3.) 
 
 4. Establishment of a Credit Bureau in each district for col- 
 lecting and compiling information concerning Member banks, and 
 borrowers who are dealing with Member banks, or who are selling 
 paper in the open market. 
 
 FEDERAL RESERVE BANK: 
 
 Sec. 11, (Par. A) authorizes and empowers the Federal Re- 
 serve Board to examine at its discretion accounts, books, and af- 
 fairs of each Federal Reserve Bank. 
 
 Sec. 21, (Par. 5) provides that the Federal Reserve Board shall 
 at least once each year order an examination of each Federal 
 Bank, and upon joint application of ten Member Banks, the Federal 
 Reserve Board shall order a special examination and report of 
 condition of any Federal reserve bank. 
 
 The law provides for an examination of each Federal Reserve 
 Bank, at least once a year. Each bank should be examined twice 
 yearly. It would be well if possible to have all Reserve Banks ex- 
 amined by a carefully selected corps of bank specialists, who would 
 be instructed to make a thorough and detailed audit of the af- 
 fairs of each bank, making full report to Federal Reserve Board 
 and to the Board of Directors of each Federal Reserve Bank. 
 
 The examination should cover a thorough investigation of in- 
 vestments, rediscounts, collateral loans, and open market transac- 
 tions, particular attention to be paid to compliance with the pro- 
 visions of the Federal Reserve Act and to the rulings of the Fed- 
 eral Reserve Board. Relations ■with the foreign Agents, agencies, 
 banks, and branches of Federal Reserve Banks, should be inves- 
 tigated, and balances and accounts should be verified and recon- 
 ciled. Accounts of Member banks and balances due to or from 
 other Federal Reserve Banks should be reconciled, as should also 
 all monies on deposit to the credit of the United States Govern- 
 ment, or of public officials. The Foreign Department in each bank 
 
 34 
 
should be audited. Profit and Loss accounts should be carefully 
 analyzed. Thus, the examination should cover a complete audit of 
 the Bank and branches. The examiner should consult with the Fed- 
 eral Reserve Agent and the Board of Directors, upon the com- 
 pletion of the examination. 
 
 Report should also be made as to the competency of manage- 
 ment, condition of records, attention given by directors to the af- 
 fairs of the Bank under examination, and attention should be 
 called to any unsafe or unsound condition or tendency that might be 
 apparent in any department of the bank. 
 
 The use of a special corps of examiners for examinations of 
 Federal Reserve Banks would have many advantages. The work 
 will call for men combining the qualities of credit specialists, ap- 
 praisers, and bank accountants. The examiners will become more 
 valuable at each succeeding examination. 
 
 EXAMINATION OF RECORDS OF FEDERAL RESERVE AGENT 
 
 The records and accounts of the Federal Reserve Agent, in 
 each Federal Reserve district should be examined at least quarter- 
 ly, and a detailed report made to the Federal Reserve Board by 
 examiners in its employ. The examination should cover a verifi- 
 cation (a) of gold and lawful money held by Federal Reserve 
 Agent, deposited with him by the Federal Reserve Bank for ex- 
 change for outstanding Federal Reserve Notes; (b) of all bills 
 of exchange, notes, and drafts held as collateral security for Fed- 
 eral Reserve notes; (c) records of substitution and withdrawals 
 of collateral; (d) of Federal Reserve notes, received from Comp- 
 troller of Currency, delivered to Federal Reserve Banks and in 
 hands of Federal Reserve Agent; (e) of all other books and 
 records. 
 
 In each bank there should be an Auditor, who should be under 
 instructions and subject to the direction of the Federal Reserve 
 
 MEMBER BANK EXAMINATIONS. 
 
 Sec. 21 provides: “The Comptroller shall appoint examiners who 
 shall examine every Member Bank at least twice each year, pro- 
 vided, however, that the Federal Reserve Board may authorize ex- 
 aminations by the State authorities to be accepted in the case of 
 State Banks or Trust Companies, that are stockholders in any 
 Federal Reserve Bank. The examiner making the examination of 
 any National Bank, or of any other Member Bank . . . shall 
 
 make a full and detailed report of the condition of said bank to 
 the Comptroller of Currency.” 
 
 Sec. 21, Par. 3, provides that “In addition to the examination 
 made and conducted by the Comptroller of Currency, every Federal 
 Reserve Bank may, with the approval of the Federal Reserve Agent, 
 or the Federal Reserve Board, provide for special examination of 
 member banks within the district. . . . Such examinations shall 
 
 be so conducted as to inform the Federal reserve bank of the 
 condition of its member banks and of the lines of credit which are 
 being extended by them.” 
 
 35 
 
Under the plan suggested, each member bank will forward to 
 the head office of the Federal Reserve Bank in the district in 
 which the member bank is located, a weekly report, slewing its 
 average condition for the week. 
 
 This information will be recorded in a manner to show changes 
 in condition from week to week. For more detailed information, 
 however, the Federal Reserve Bank will be dependent upon data 
 obtained in connection with the examination of member banks. 
 
 Success in bank examinations depends to a large degree upon 
 the care exercised by the examiner in investigating the lines of 
 credit extended to borrowers by the bank under examination, upon 
 the facilities which the examiner has of obtaining reliable infor- 
 mation as to the character and financial responsibility of the of- 
 ficers, directors, and principal borrowers, and finally upon the 
 method used in collecting, compiling, and recording information 
 for use in subsequent examinations. 
 
 There should be adopted in each Federal Reserve district a 
 uniform plan of examination, which would provide for a thorough 
 and detailed examination of each member bank by a force of com- 
 petent, well-equipped examiners, authorized to take the necessary 
 time. A high standard of efficiency should be established which 
 would make it attractive and desirable for State banking institu- 
 tions to join the Federal Reserve System. Examinations of city 
 and country institutions should be made equally effective. 
 
 To prevent a multiplicity of examinations, the special exami- 
 nation by the Federal Reserve Bank might be made in connection 
 with the regular examinations made by National or State Bank 
 examiners. Certain information should be obtained for use of the 
 Federal Resei’ve Bank: (1) A record of all loans over a stated 
 amount. (2) The character of collateral accepted as security. 
 (3) A record of Bank Stock hypothecated at bank under examina- 
 tion. (4) The classification of loans, investments, and collateral. 
 Suggested form for use in this connection has been developed and 
 will be found in the portfolio of forms accompanying Appendix I. 
 
 LOCAL CREDIT BUREAU. 
 
 It is believed and recommended that the Federal Reserve Sys- 
 tem should be equipped with very carefully prepared credit bureau 
 records. Two plans for developing such records have been con- 
 sidered. Under one the records would be conducted and kept at the 
 several reserve banks; under the other they would be kept in a 
 single office under direction of the Reserve Board in Washington. 
 In either case frequent communication of results must occur be- 
 tween the several banks and the Board. A choice between the 
 two plans will depend somewhat upon the system of accounting 
 determined upon. In Appendix I is given a system of accounting 
 more adapted to the establishment of a local credit bureau in each 
 reserve bank, while in Appendix II records are so formulated as to 
 concentrate credit records in Washington as a by-product of the 
 accounting. The credit bureau principles in general will be the 
 same in either case. (See portfolios II and III.) 
 
 36 
 
Assuming for the purpose of the discussion that in each Federal 
 Reserve Bank a Credit Bureau in charge of the Agent is to be 
 established, its duty should be the collection and recording of data 
 concerning member banks, and the standing of individuals, firms, 
 and corporations, discounting at or borrowing of member banks, 
 or selling paper in the open market. 
 
 This Bureau should have card indexes showing: 
 
 1. Loan Record — compiled from examination reports, showing- 
 borrower’s loan liability at each bank, with a minimum limit of 
 $5,000 in City and $2,500 in Country banks. 
 
 2. Bank Stock Hypothecation Record; showing bank stock 
 hypothecated at member banks. 
 
 3. Inactive Collateral Record; showing Securities of small or 
 close corporations, or securities having a limited or inactive mar- 
 ket, whether securities be held as investments, or as collateral by 
 member banks. 
 
 4. Record of the business, firm, or corporation affiliations of 
 the directors and officers of every member bank in the district. 
 
 5. Current record of failures, bankruptcies, and large judg- 
 ments affecting borrowers of any member bank. 
 
 6. Record of character, standing, and financial responsibility 
 of all bankers and note brokers engaged in selling notes, drafts, 
 and bills of exchange in open market. 
 
 7. Record of standing and financial responsibility of individ- 
 uals, firms, and corporations selling notes, drafts, and bills of ex- 
 change in open market. 
 
 A plan for the exchange of information should be arranged 
 with the Credit Bureaus established in other Federal Reserve Dis- 
 tricts, and with the approval of the Comptroller of Currency, with 
 the Credit Bureaus established by State Banking authorities where 
 a proper system for safeguarding information has been adopted. 
 
 Credit Bureau data should be available to the Federal Reserve 
 Agent, the executive officers and directors of Federal Reserve 
 Banks, and the National Bank and Federal Reserve Bank Exam- 
 iners. 
 
 Suggested forms for these records are presented in the port- 
 folios accompanying the Appendices, especially in portfolio III. 
 
 The Credit Bureau will also have the benefit of service of mer- 
 cantile agencies and will no doubt subscribe to various financial 
 publications. 
 
 OTHER CREDIT RECORDS. 
 
 It is provided in the general plans of accounting offered here- 
 with that each Federal Reserve Bank shall keep detailed records 
 showing : 
 
 1. The aggregate liability of member banks on paper redis- 
 counted by the Federal Reserve Bank, as well as the liability of 
 member banks on bills, notes, and drafts purchased from or dis- 
 counted for others. 
 
 2. The aggregate liability of individuals, firms, corporations, 
 
 37 
 
banks, bankers, municipalities, etc., on bills, notes, and drafts, 
 rediscounted for member banks, or purchased in the open 
 market. 
 
 A similar record should be kept of the liability of concerns upon 
 foreign exchange bills and drafts bought and sold and of foreign 
 bills of exchange purchased for investment. 
 
 It will be seen that there is provided a means of ascertaining 
 definitely the aggregate liability of any one firm, individual, or 
 corporation, on bills, notes, or drafts held by the Reserve Bank. 
 Through the Credit Bureaus there will be facilities for ascertaining 
 the extent of paper held by member banks. If the principal of- 
 fice of a concern is located in another district, a comparison may 
 be made with the Credit Bureau in that district. 
 
 To ascertain the credit standing and financial responsibility of 
 concerns selling their bills of exchange, notes, and drafts in the 
 o^en market, arrangements may be made to obtain from the note 
 brokers copies of signed financial statements and copies of audi- 
 tors’ reports. Access to records of Credit Bureaus of other dis- 
 tricts, will enable the Federal Reserve bank to obtain definite in- 
 formation as to the extent of liability at banks where principal 
 borrowing accounts are maintained. However, as in the case of 
 the credit departments in banks and mercantile houses, all infor- 
 mation will have to be systematically recorded, statements care- 
 fully analyzed, and comparative statements made. 
 
 It will take some years to develop the Credit Bureau and 
 Department, but each Federal Reserve Bank will have access to 
 many sources of information which are not at present available. 
 Through their commanding positions, the Federal Reserve Board 
 and Banks will be able to exercise a close supervision over the 
 commercial paper market; to eliminate many of the abuses which 
 are now apparent, and probably suggest a means of standardizing 
 statements, audits, and reports of borrowing concerns. 
 
 The Credit Bureaus will aid examiners in their investigations 
 and tend to increase the efficiency of all bank examinations if the 
 proper degree of co-operation is established. The Bureau will have 
 after each examination definite information regarding the credits 
 and condition of the bank. The Federal Reserve Bank will be 
 vitally interested in all data concerning the standing of each mem- 
 ber bank, in order to determine the line of rediscount that may 
 be safely and wisely extended. To prevent inflation and an abuse 
 of the accepting power, there must be continuous vigilance. 
 
 The power to restrict or limit the rediscounting privilege will 
 be effective in forcing the elimination of lax methods and unsafe 
 practices; will prevent the gradual accumulation of questionable 
 assets, and will in effect require members to conduct business 
 along sound, businesslike lines. The Federal Reserve Examina- 
 tions of member banks and examinations by National Bank 
 Examiners will be a distinct advantage to members and Will 
 eventually prove a guarantee of solvency. 
 
 33 
 
If the main work of conducting- credit records be carried on 
 under the charge of the Agent at each of the Reserve Banks, as 
 thus suggested, it will still be desirable that there be a centraliza- 
 tion or combination of results under direction of the Board at 
 Washington through some one of its several divisions which shall 
 transmit the combined information to the other bureaus; while 
 if the information is directly compiled at Washington in the first 
 place a local receiving mechanism will also be needed in each bank. 
 
 STATISTICAL BUREAU. 
 
 An important part of the work of the Federal Reserve Board 
 will be found in the making of thorough and satisfactory analyses 
 of data relating to bank operations in different parts of the coun- 
 try. These analyses will be necessary both from a scientific, and 
 a practical banking, standpoint. They should include careful com- 
 pilations of figures designed to show the actual operations under 
 each section of the reserve act, changes in the outstanding cur- 
 rency circulation, fluctuations in the specie stock of the several 
 reserve banks and of the system as a whole, variations in the con- 
 ditions of domestic and foreign exchange, and a variety of other 
 items. While it is undoubtedly true that experience in the man- 
 agement of the system will materially modify any plan for the 
 collection of such statistics and for the making- of analyses of the 
 kinds already indicated, it will be desirable to start with a complete 
 and thorough basis for classifying the various data collected and 
 for presenting- the net results in an easily comprehensible form. 
 Indeed it will be only by this means that the subsequent develop- 
 ment of the statistical analyses along lines closely adapted to 
 the peculiarities of the system itself will be practicable. It has 
 therefore been deemed wise to present the outline for a statistical 
 bureau to be organized under the direction of the board at Wash- 
 ington. Such ah outline has been prepared under the direction of 
 the committee by Mr. Ludwig Bendix of New York City, and is 
 presented in Appendix III of this report. 
 
 BONDING OF AGENTS. 
 
 The Federal Reserve act provides in section 11, paragraph 1, 
 that: 
 
 “The Federal Reserve Board shall be authorized and empow- 
 ered . . . 
 
 “(i) To require bonds of Federal reserve agents to make regula- 
 tions for the safeguarding of all collateral bonds, Federal reserve 
 notes, money, or property of any kind deposited in the hands of such 
 agents, and said board shall perform the duties, functions, or ser- 
 vices specified in this act, and make all rules and regulations neces- 
 sary to enable said board effectively to perform the same.” 
 
 With reference to the first provision in this section, namely, that 
 authorizing- the Federal Reserve Board to “require bonds of Federal 
 reserve agents” (the Organization Committee being presumed to 
 exercise the same functions as the Federal Reserve Board under 
 section 2 of the act), it is suggested that three questions arise: 
 
 39 
 
1. The amount of the bonds to be given by Federal reserve 
 agents. 
 
 2. The nature and form of the bonds to be furnished by them. 
 
 3. The question whether such bonds shall be separate and 
 applicable only to the reserve agents or whether a “blanket bond” 
 covering all employees and officers of the Federal reserve bank and 
 including the reserve agent with others, should be permitted. 
 
 In view of the fact that the Federal reserve agent is distinctly 
 a Government officer, although paid by the bank to which he is 
 accredited, and in view of the fact that his responsibilities are to 
 the Federal Reserve Board primarily, rather than to the bank itself, 
 it is recommended that each and every Federal reserve agent be 
 called upon to give a separate bond for himself and his own staff, 
 and that he be not included in the blanket bond, if any, which may 
 be written for the protection of all other officers and employees of 
 the bank at large. His bond would thus cover merely his own lia- 
 bility and that of the subordinates under him in his own office. 
 
 The question of form of bond has formed the subject of careful 
 inquiry, and it is believed that the form employed by the American 
 Bankers’ Association, and recommended by them for general use, is 
 the best that can be employed under the circumstances. 
 
 With reference to the amount of the bond to be given by Federal 
 reserve agents, considerable difference of opinion has been encoun- 
 tered, and as a result, consultations have been had with the officers 
 of some of the principal bonding companies. As a result of the 
 investigation thus had and the advice furnished, it is recommended 
 that the bonds of Federal reserve agents shall not fall below a mini- 
 mum of $100,000, and that they shall vary according to the activity 
 and resources of the reserve bank to which each such agent is ac- 
 credited, probably not exceeding $250,000 in any case. 
 
 DOMESTIC BRANCHES. 
 
 The Federal Reserve Act contains the following provisions 
 (section 3) with reference to branch offices: 
 
 Section 3. Each Federal Reserve Bank shall establish 
 branch banks within the Federal Reserve district in which it 
 is located and may do so in the district of any Federal Re- 
 serve bank which may have been suspended. Such branches 
 shall be operated by a board of directors under rules and 
 regulations approved by the Federal Reserve Board. Direc- 
 tors of branch banks shall possess the same qualifications as 
 directors of the Federal reserve banks. Four of said direc- 
 tors shall be selected by the reserve bank and three by the 
 Federal Reserve Board, and they shall hold office during the 
 pleasure, respectively, of the parent bank and the Federal 
 Reserve Board. The reserve bank shall designate one of the 
 directors as manager. 
 
 It will be observed that this section is expressed in such 
 broad and general terms as to leave in the hands of the Federal 
 
Reserve Board and of the Organization Committee at the outset, 
 very large powers with respect to branches. It will be possible 
 practically to prescribe the conditions under which such branches 
 will operate, subject only to the general limitations as to direc- 
 tors laid down in the section as above quoted. 
 
 Two methods of dealing with these branches suggest them- 
 selves: 
 
 1. The establishment of a completely organized banking 
 house acting as a branch of the reserve bank of the district 
 in each place where a branch may have been determined upon. 
 
 2. The establishment of a local office only without bank- 
 ing machinery and equipped merely with a limited clerical 
 organization at the service of the board of directors appointed 
 as above provided for. 
 
 These types of organization may be considered in reverse 
 order. 
 
 If it be determined to organize simply a local office the 
 board of directors of the branch so-called would necessarily 
 amount to nothing more than a sub-committee whose functions 
 would be those of ascertaining the character of the paper 
 offered for rediscount by the banks of the community, certifying 
 to its desirability, or disapproving it as the case might be, and 
 then transmitting the paper for actual rediscount to the reserve 
 bank of the district. This plan would have the advantage of 
 avoiding the outlay necessitated by the organization of a com- 
 plete branch and would also eliminate all necessity for estab- 
 lishing a system of accounting in the branch which should fit 
 into the accounting system of the reserve bank of the district. 
 It would also eliminate all question of necessity for a readjust- 
 ment of the clearing system. On the other hand the question 
 may be raised whether so simple a type of organization would 
 satisfy the demands of the community in which the branch 
 was located and would supply a sufficient addition to the 
 mechanism of the reserve bank to warrant establishing it. Its 
 function would obviously be only that of a credit committee 
 passing upon particular paper. If this plan should be resorted 
 to, it is suggested that the only records required by the branch 
 would be those relating to offerings of paper. 
 
 On the other hand, if a full-fledged bank should be estab- 
 lished at each branch point, it is believed that the following 
 questions would have to be definitely considered in connection 
 with the matter: 
 
 1. Relation of branch accounting to accounting of district 
 reserve bank. 
 
 2. Relation of method of handling checks and transit items 
 to corresponding methods in district bank. 
 
 3. Area or territory to be assigned to branch as special or 
 peculiar to it, i. e., extent of sub-district within which such 
 branch would be located. 
 
 4. Internal organization of branch. 
 
 5. Capitalization, if any, to be assigned to the branch. 
 
 41 
 
Assuming that branches were to be created on this plan at 
 the outset, it is suggested that in every particular the regulations 
 recommended in this report with respect to the management 
 of a district reserve bank should be applied in the conduct 
 of the branch, in so far as practicable. At certain points, how- 
 ever, it will not be desirable to develop a full-fledged organi- 
 zation in the branch. The question then arises precisely how 
 far the organization should go and at what point reductions 
 or curtailments have to be made. 
 
 It is recommended that in the event of the establishment 
 of such branches they be assigned a proportionate capitalization 
 based upon the capitalization and surplus of the member banks 
 included within the territory assigned to the branch. This, 
 however, should be only a tentative matter and such assignment 
 of resources should be merely to bridge over the period during 
 which it is found from experience about what amount of paper 
 will on the average be presented by the banks in each branch 
 district. When sufficient experience has been had to determine 
 this point, the resources to be employed should be distributed 
 among the branches in proportion to the quantity of paper 
 presented on the average by the member bank in each such 
 branch district. It is recommended further that the parent 
 bank of the district shall in every case retain for itself a 
 substantial portion of the district as a territory from which 
 paper shall be directly presented for rediscount. This would 
 mean simply that the branch districts would be established 
 whenever there was a special need for them in a particular 
 part of a district which presented a clear-cut independent trad- 
 ing area whose territory was an economic unit and w T hose 
 member banks naturally stood in close relationship to one 
 another. The suggestion also amounts to a rejection of any 
 plan for subdividing a district completely into branch areas 
 while the district reserve bank itself exercised no distinct bank- 
 ing functions except those of oversight. It is believed that this 
 latter plan would not be desirable, but that in every district 
 there should be a strong independent reserve bank organiza- 
 tion performing actual banking functions and directly redis- 
 counting the paper of a considerable number of the member 
 banks included within such district. 
 
 Whenever a branch is established with a banking house 
 of its own, actual banking machinery and a board of directors, 
 as provided by the Federal Reserve Act, it is recommended 
 that it be required to install a system of accounting precisely 
 similar to that prescribed by regulation for the Federal reserve 
 banks themselves and that it be permitted to vary from the 
 system laid down for such reserve banks only at those points 
 where the maintenance of certain records is rendered unnec- 
 essary by reason of the fact that the branch does not perform 
 the functions to which such records relate. 
 
 42 
 
BY-LAWS. 
 
 The following suggested outline of by-laws will afford further 
 detailed data concerning the internal organization requiring to 
 be perfected in each branch: 
 
 BY-LAWS 
 
 of 
 
 FEDERAL RESERVE BANK OF 
 
 BRANCH 
 
 of 
 
 Federal Reserve Bank of 
 
 Established by it 191. .. 
 
 ARTICLE I. 
 
 Directors. 
 
 Section 1. Number and Quorum. — The number of directors 
 shall be seven. A majority of the directors shall constitute a 
 quorum. 
 
 Section 2. Meetings. — There shall be a stated meeting of 
 the board every Wednesday at .... o’clock A. M., or, if that 
 day be a holiday, on the first preceding day not a holiday. 
 
 The chairman of the board shall be empowered to call a 
 special meeting at any time, or upon the written request of 
 any two directors or whenever requested so to do by the 
 manager, or by the Federal Reserve Bank of the district. 
 
 Section 3. Powers. — The board of directors shall annually 
 submit for approval to the parent bank a schedule of com- 
 pensation and duties of officers, clerks, and employees of the 
 branch. 
 
 Section 4. Order of Business. — The following shall be the 
 order of business at each meeting of the board: 
 
 (1) Reading or inspection of minutes of the last 
 
 regular meeting. 
 
 (2) Report of the manager, including information 
 
 concerning banking and business conditions 
 in the district, as well as detailed summary 
 of all business transacted since last regular 
 meeting and statement of present condition, 
 the latter to include: 
 
 (a) Statement of all loans, rediscounts, invest- 
 
 ments and purchases: 
 
 (b) All official correspondence received from 
 
 the parent bank. 
 
 (3) Committee reports; 
 
 (4) Unfinished business; 
 
 (5) Approval of report and recommendations to 
 
 parent bank (duplicate to be sent to Federal 
 Reserve Board ) ; 
 
 (6) New business. 
 
 43 
 
ARTICLE II. 
 
 Discount Committee. 
 
 Section 1. How constituted. — There shall be a discount com- 
 mittee consisting- of the manager, the chairman of the board, 
 and one director of the class appointed by the parent bank. 
 Such director shall be elected by the board to serve for a 
 period not to exceed one month, and his successors shall be 
 chosen in rotation until each member of his class shall have 
 served or shall have been given an opportunity to serve. The 
 board shall elect each month an alternate for service on the 
 discount committee, who shall be authorized to act in the ab- 
 sence or disability of the member first chosen. 
 
 Section 2. Minutes. — The discount committee shall cause to 
 be kept minutes of all meetings held by it, which shall be read 
 and approved by members of the board at the next succeeding 
 meeting. A copy of such minutes shall be promptly sent to 
 the parent bank. 
 
 Section 3. Powers. — Subject to the rules and regulations of 
 the board of directors of the parent bank, the discount com- 
 mittee shall be vested with the following powers: 
 
 (1) To pass upon all commercial paper submitted 
 
 for discount. 
 
 ( 2 ) To suggest open market transactions to the 
 
 parent bank; 
 
 (3) To apply through the Federal Reserve Bank of 
 
 the district for such Federal reserve notes 
 as may be necessary for the general require- 
 ments of the branch. 
 
 ARTICLE III. 
 
 Officers. 
 
 Section 1. The officers to be chosen by the board of direc- 
 tors shall be a manager, who shall be one of their number, 
 a vice-manager* and such other officers as the board may 
 from time to time deem necessary. They shall hold office 
 during the pleasure of the board. 
 
 Section 2. Chairman. — The chairman of the board shall be 
 chosen by the Federal Reserve Board from the directors ap- 
 pointed by said Board. He shall preside at all meetings of 
 the board. He shall, together with the officers of the bank, 
 have supervision of all credit records and data concerning 
 member banks and borrowers which may be compiled from 
 reports and examinations of such banks. All reports and state- 
 ments made to the parent bank shall be prepared under the 
 general direction of the chairman and copies thereof shall be 
 sent directly to the Federal Reserve Board. 
 
 Section 3. Vice-Chairman. — In the absence or disability of 
 the chairman, his powers shall be exercised and his duties 
 
 *The number of vice-managers will depend upon the size 
 of the branch and the character of its work. 
 
 44 
 
performed by the vice-chairman, who shall be designated by 
 the chairman or, in default of such designation, by the manager, 
 from the directors appointed by the Federal Reserve Board. 
 
 Section 4. Manager. — The manager shall have general 
 
 charge of the branch and shall preside at all meetings of the 
 discount committee, subject, however, to such rules and regu- 
 lations as may be incorporated herein or from time to time 
 promulgated by the board of directors of the branch or of 
 the parent bank. 
 
 In all cases where the duties of subordinate officers and 
 agents of the branch are not specifically prescribed by the 
 by-laws or by the board of directors of the branch or the 
 parent bank, they shall be the duties specified by and instruc- 
 tions of the manager. The manager may, with or without the 
 advice of the board of the branch, suspend or remove any 
 employee of the branch, subject, however, to a hearing before 
 said board. 
 
 Section 5. The Vice-Manager. — In case of the absence or 
 disability of the manager, his powers shall be exercised and his 
 duties discharged by the vice-manager. In the absence or 
 disability of both, the board of directors shall, by a majority 
 vote of the directors present, appoint a director manager 
 pro tern. 
 
 The vice-manager shall have charge of all moneys received 
 and paid out on account of the branch and shall examine 
 and countersign all checks for the payment of money signed 
 by the manager. He shall, jointly with the manager, have 
 custody of all investments and collateral held by the branch. 
 He shall keep the minutes of all board meetings and of all 
 committees of the board. 
 
 In case of the absence or disability of the vice-manager, 
 or whenever occasion may require it, the manager shall ap- 
 point such director or employee of the branch as he may deem 
 proper, vice-manager pro tern. 
 
 ARTICLE IV. 
 
 Information. 
 
 Section 1. All persons employed by the branch shall keep 
 inviolate its business affairs and concerns, and shall not disclose 
 or divulge the same to any unauthorized person whomsoever. 
 Any employee who shall give information contrary to this 
 by-law shall be liable to immediate dismissal. 
 
 Section 2. The action or policy of the board shall not be 
 expressed by any individual member, but by its duly constituted 
 officers after formal action by the whole board and under rules 
 and regulations prescribed by the parent bank. 
 
 Section 3. For the information of member banks and the 
 public, there shall be maintained in the office of the manager 
 a bulletin board, upon which shall appear the current rates 
 of discount established by the parent bank and such other 
 information as it may deem necessary to publish. 
 
 45 
 
FOREIGN BRANCHES. 
 
 The power to establish foreign branches is broadly conveyed 
 in the Federal reserve act, which includes authority covering 
 not only the creation of such branches, but also the establish- 
 ment of agencies, the appointment of correspondents, etc. The 
 question, however, whether or not to create such branches 
 rests upon a somewhat different basis from that which relates 
 to the establishment of domestic branches. 
 
 With reference to operations in foreign countries it is to 
 be expected that as the reserve system develops these opera- 
 tions will become extensive and important. They should be 
 fully provided for by a plan which will assure absolute efficiency 
 in the handling of the functions of reserve banks abroad. That 
 at the start it may be desirable to await the definite organiza- 
 tion of the reserve institutions is quite probable, but before 
 many months the management of the business abroad must 
 be seriously taken in hand. Inasmuch as the approval of the 
 Federal Reserve Board is requisite to the establishment of 
 foreign branches, it is evident that the board will have full 
 authority in the matter. 
 
 The first point which, it is believed, calls for careful con- 
 sideration is the number of branches of reserve banks which 
 shall be independent of one another. Plainly the provisions 
 of the law are such that if the Reserve Board should approve 
 of such a course each and every one of the several reserve 
 banks might establish independent branches in foreign centers. 
 The conceivable result of such action would be the establish- 
 ment of a number of branches, one to each reserve bank, 
 equal to the number of reserve banks, in every important 
 foreign center. This, it is believed, would be unwise. From 
 the standpoint of the foreigner the reserve system should be 
 organized as a unit, while in controlling the flow of specie 
 to and from the United States it should act as a unit with 
 a single and uniform policy and without competition within 
 itself. These requirements could be fulfilled best, it is be- 
 lieved, by requiring the reserve banks to join in designating 
 a common agent or to join in creating a joint branch at each 
 foreign center where it is believed that such representation is 
 needful or desired. If it should appear that some of the reserve 
 banks do not care to have such representation abroad, their co- 
 operation could be waived, the whole matter being placed upon 
 a voluntary basis. But if they find that they want such repre- 
 sentation, then they should be required to co-operate in estab- 
 lishing and bearing the expenses of the branch existing at the 
 point where the representation is desired. This naturally 
 necessitates a plan of dividing the expenses of the branches 
 or agencies abroad between the Federal reserve banks. It 
 is recommended that the following plan shall be in substance 
 followed: 
 
 1. Whenever a Federal reserve bank desires to establish a 
 
 46 
 
branch or agency in a foreign country it shall make appli- 
 cation to the Federal Reserve Board for permission to do so 
 and in case such permission is granted it shall be allowed to 
 establish the branch or agency under conditions of organization 
 conforming to the principles laid down in the general pro- 
 visions that may be adopted with regard to branches. 
 
 2. If any other reserve bank should subsequently desire to 
 secure representation in the same place at which such branch 
 or agency may already exist it shall be required to select the 
 same agent, or if a branch has actually been established it 
 shall be permitted to join in the operation of the branch, bear- 
 ing a share of the expense dependent upon the percentage of 
 total operations undertaken for its account as compared with 
 the aggregate operations of the branch. 
 
 3. The personnel of the branch organization shall continue 
 as first established by the reserve bank which created the 
 branch, but as places fall vacant they shall be filled upon 
 the nomination of the reserve bank subsequently joining in 
 the operation of the branch in a proportion corresponding to 
 its payment of expenses. 
 
 4. Should other reserve banks desire to join in the opera- 
 tions of the branch they may do so upon a basis of division 
 of expenses based upon the principles already laid down above. 
 
 5. Should the Federal reserve banks subsequently desiring 
 representation (after the establishment of the branch by one 
 such bank) prefer to have the branch already existing act 
 as agent for them they may do so, and in that event the 
 reserve bank or banks actually co-operating in the conduct 
 of the branch shall charge for their services a sum to be deter- 
 mined at the end of each half year and dependent upon the 
 proportion borne by the operations of the bank or banks desig- 
 nating the branch as agent, to the total operations of such 
 branch. 
 
 6. Whenever a foreign branch is organized a specified sum 
 shall be assigned to it as a basis for its operations, such sum 
 to be determined in each and every case by consultation be- 
 tween the Reserve Board, or the Organization Committee, if 
 the task is undertaken while the system is in its initial stages. 
 Other reserve banks which subsequently participate in the 
 operation of the branch shall assign to it a sum of working 
 capital to be determined in the same way. 
 
 7. In the event that several reserve banks desire at the 
 outset to join in the establishment of a branch at a designated 
 foreign center, the total working capital to be set apart will 
 be determined as above indicated and shall be divided among 
 the several reserve banks in proportion to their capitalization. 
 
 8. The accounting records of each such foreign branch shall 
 be the same as those prescribed for domestic branches, except 
 that the reserve banks participating in the operation of the 
 branch shall be regarded as joint partners. 
 
 47 
 
RELATIONS BETWEEN BANKS. 
 
 In discussing the relations between members of the Federal 
 reserve system, attention must be devoted to three phases of the 
 question : 
 
 1. Relations between the Federal reserve banks themselves. 
 
 2. Relations between member banks in each district and mem- 
 ber banks in different districts. 
 
 3. Relations between member banks and their own Federal 
 reserve banks. 
 
 In surveying these distinct elements of the problem, it is 
 deemed best to consider first of all a matter which involves por- 
 tions of the question referred to under the first head above and 
 of that referred to under the third head. This is the clearing of 
 checks. It is believed that the most important problem involving 
 these relations between the banks in normal times will be that of 
 clearing the items drawn upon the reserve banks by their member 
 banks and those drawn upon the individual member banks by their 
 depositors. If this clearing process is satisfactorily and effectively 
 cari’ied out, it will profoundly modify the relationships now exist- 
 ing between banks and will have an important influence in re- 
 shaping the operations of present clearing houses, transforming 
 ultimately the functions of these clearing houses and changing the 
 degree of their significance from the standpoint both of their 
 members and of outside institutions. 
 
 CLEARING SYSTEM. 
 
 The provisions of the Federal Reserve Act with respect to the 
 introduction of a system of clearings are found in Section 16, where 
 it is provided that: 
 
 "Every Federal reserve bank shall receive on deposit at 
 par from member banks or from Federal reserve banks 
 checks and drafts drawn upon any of its depositors, and 
 when remitted by a Federal reserve bank, checks and drafts 
 drawn by any depositor in any other Federal reserve bank 
 or member bank upon funds to the credit of said depositor 
 in said reserve bank or member bank. Nothing herein con- 
 tained shall be construed as prohibiting a member bank from 
 charging its actual expense incurred in collecting and re- 
 mitting funds, or for exchange sold to its patrons. The Fed- 
 eral Reserve Bank shall, by rule, fix the charges to be col- 
 lected by the member banks from its patrons whose checks 
 are cleared through the Federal reserve bank and the charge 
 which may be imposed for the service of clearing or collec- 
 tion rendered by the Federal reserve bank. 
 
 "The Federal Reserve Board shall make and promulgate 
 from time to time regulations governing the transfer of 
 funds and charges therefor among Federal reserve banks 
 and their branches, and may at its discretion exercise the 
 functions of a clearing house for such Federal reserve banks, 
 or may designate a Federal reserve bank to exercise such 
 
 48 
 
functions, and may also require each such bank to exercise 
 the functions of a clearing house for its member banks.” 
 
 It is evident that this provision distinctly contemplates two 
 classes of work : 
 
 (a) A clearing- system providing- for the clearing- of items 
 among member banks which are stockholders and depositors in 
 any Federal reserve bank. 
 
 (b) A clearing system which shall provide for clearing the 
 transactions of Federal reserve banks among themselves. 
 
 It is strongly believed and recommended that a complete and 
 thorough clearing system shall be inaugurated by every Federal 
 reserve bank at the earliest possible moment consistent with suc- 
 cess. This system should further be continued and extended as 
 rapidly as is reasonably possible until it extends to all classes of 
 operations and provides for the clearing of items drawn on both 
 member and non-member banks. The facilities of the reserve 
 banks should be used both locally and for out-of-town checks in 
 the broadest possible sense and under conditions which will place 
 the member banks upon a satisfactory basis of competition with 
 non -members while giving- to the customers of member banks 
 the advantage of a system of par collection wherever possible 
 and of collection at cost wherever charge must be made. Undoubt- 
 edly experience will show some necessary changes both of method 
 and of rates of charge from the plan herewith recommended, 
 but it is believed that the basis of a satisfactory system is herewith 
 afforded and that no material alterations will be subsequently 
 necessary. Having in mind the fact that the banks cannot perform 
 their full functions in this respect at the very outset, it is, how- 
 ever, recommended that they start only with a partial system of 
 clearings, subsequently extending- this as they become able to do so. 
 
 An analysis of the law shows that it is the intent to readjust 
 the domestic exchange machinery of the present banking system 
 to conform with practices and regulations that the experience of 
 clearing houses have demonstrated to be the most efficient. There- 
 fore, in drawing up forms and regulations to govern the operations 
 of the Federal reserve banks, the policy should be to adopt so far 
 as possible clearing house principles as a model. Wherever, in the 
 plan to be proposed, it may seem at first glance that a proposed 
 method of procedure is not specifically authorized in the bill, the 
 warrant for such proposition is contained in the phrase “functions 
 of a clearing house,” and nothing herein suggested will be found 
 to do violence either to clearing house principles or practices. 
 
 It is one of the primary functions of banking and the purpose 
 of all clearing houses to make full use of the “clearing principle,” 
 which is the offsetting of debits with credits, to effect settlements 
 by book transfers, and to use such credit instruments as checks 
 and drafts, thus reducing to a minimum the handling of actual 
 currency. The primary object of the plan here presented is to use 
 the machinery of the Federal reserve system to make the enor- 
 mous domestic exchange business of the country clear itself, the 
 
 49 
 
balances of the entire nation being finally focussed and cleared 
 by a simple operation on the books of the Federal Reserve 
 Clearing House. 
 
 Each Federal reserve bank should be governed by uniform 
 regulations with respect to domestic exchange functions since 
 each such bank is a part of the whole system of clearing. 
 These regulations apply to forms, advices, accounting systems 
 and organization of departments and conform to the rules 
 applied by all well-conducted clearing house associations. They 
 will be grouped for convenience of treatment into three 
 divisions: 
 
 ( 1 ) The relations between the Federal reserve 
 
 banks and the member banks in the same city. 
 
 ( 2 ) The relations between the Federal reserve 
 
 banks and their members outside the city. 
 
 (3) The relations between the Federal reserve 
 
 banks themselves. 
 
 RELAl IONS BETWEEN THE FEDERAL RESERVE BANKS 
 AND THEIR MEMBERS IN THE SAME CITY. 
 
 The Federal Reserve Banks may if thought best co-operate with 
 the other banks of cities where they may be located, first, by 
 joining the local clearing house, and second, by providing a 
 means of settlement of clearing house balances through book 
 transfers. 
 
 Several points are open to discussion in connection with plans or 
 regulations governing the relations between the Federal reserve 
 banks and their members located in the same city. The logical 
 development of the Reserve Banks will ultimately result in 
 their assuming the functions of a clearing house, but in view 
 of the policy not to interfere unnecessarily with present prac- 
 tices and also on account of the fact that nearly all clearing 
 houses are composed partly of non-member banks, it is recom- 
 mended that the Federal reserve banks shall not accept local 
 member checks on deposit, provided such checks are payable 
 through the clearing house, until such time as it will be possible 
 for the bank to assume all the functions of the local clearing 
 house. 
 
 The Federal reserve banks will present checks on outside 
 member banks and outlying local member banks through the mails, 
 but it would be more economical and convenient to present city 
 member checks through the clearing house. A question here arises 
 as to whether the Federal reserve banks should be members "both 
 sides,” that is: receiving, as well as presenting, checks at the clear- 
 ing house. Were the existence of clearing houses where the Federal 
 reserve banks are located to be considered permanent, or were 
 all the members of the clearing house certain to be members 
 of the system, then it would seem wise to recommend that the 
 
 50 
 
reserve Banks should “out-clear” only, but, the facts being 
 otherwise, local members should be permitted either to deposit 
 drafts on the Federal reserve banks or to present them through 
 the Clearing House. As to the deposit of member checks by 
 local banks, it is recommended that a time limit be set by each 
 Federal reserve bank, say at 2 P. M., after which no items of less 
 than $1,000 of any kind would be accepted on deposit. This rule 
 will be found necessary to prevent the clogging of the internal 
 machinery of the banks, which would delay the outgoing mail. Ex- 
 perience in large city banks has demonstrated that it is much 
 easier to handle large volumes of checks if they come in early in 
 the day, because a given number of checks can be handled with 
 much less labor and chance of error if received within a fixed 
 time limit than the same number of items can be handled when 
 spread over a longer period. The bulk of all checks received 
 by business men come by morning mails and the individual 
 depositors in member banks can be gradually educated to make 
 their deposits early. 
 
 The settlement of balances resulting from clearing house 
 exchanges must be adjusted to conform with the fact that all 
 members of clearing houses will not be members of the Federal 
 Reserve System. Settlement may be effected by one of the fol- 
 lowing methods: 
 
 1. Debtor banks will give their drafts on the Federal 
 Reserve Banks to the manager of the clearing house, non-mem- 
 ber debtor banks paying to the manager funds acceptable for 
 deposit with the Reserve Banks. The manager of the clearing 
 house would then deposit the drafts with the Reserve Bank. 
 The Reserve Bank would credit such deposits to a “clearing 
 account” which would be subject to the manager’s check in 
 favor of creditor banks. The rule should be laid down that 
 drafts on the Federal Reserve Bank given to member creditor 
 banks should be deposited and not cleared through the next 
 exchange. 
 
 2. Assuming that all clearing house banks are members 
 of the system, the manager of the clearing house will present 
 to the Federal Reserve Agent a memorandum showing debtor 
 and creditor balances which may then be settled by a transfer 
 on the books of the Federal reserve bank. 
 
 If it should occur in any city that all the banks are mem- 
 bers both of the clearing house and of the Federal Reserve 
 System, and the clearing house be continued, it would be practicable 
 to have the Federal reserve bank “out clear” only. 
 
 The relationship, therefore, between the Federal reserve 
 banks and members in the same city may be said to be a local 
 problem which may be adjusted along the broad lines here 
 suggested without in any way interfering with the policy of 
 uniformity in the essential features of regulation affecting the 
 clearing functions of Reserve Banks. 
 
 51 
 
In general matters the regulations covering the accounts of 
 member banks will apply to city members as well as country 
 members. 
 
 THE RELATIONS BETWEEN THE FEDERAL RESERVE 
 
 BANKS AND THEIR MEMBERS OUTSIDE THE CITY. 
 
 The deposit section of the Federal Reserve Act provides that: 
 "Any Federal Reserve Bank may receive from any 
 of its member banks, and from the United States, 
 deposits of current funds in lawful money, na- 
 tional-bank notes, Federal reserve notes, or checks 
 and drafts upon solvent member banks, payable 
 upon presentation . . .” 
 
 Under this provision the following elements of the deposit 
 process will be as follows: 
 
 1. Lawful money, national bank notes and Federal reserve 
 notes are to be deposited as such deposits are now made in 
 banks — that is, using a regular deposit slip bearing the name and 
 number of the member bank and the items to be separated as to 
 kind of money deposited. No checks are to be enclosed with deposits 
 of money. 
 
 2. In receiving checks on deposit, the Federal reserve banks 
 assume a service for their members which unless it is properly 
 controlled and regulated will result in a serious burden and 
 will tax the resources of the reserve banks to the utmost. Care 
 must be taken that the work be reduced to a minimum and 
 that the member banks relieve the reserve banks as far as is 
 practicable. 
 
 3. A uniform letter of remittance or deposit should be used 
 throughout. Member banks will divide the items deposited into 
 those payable by the Federal Reserve Banks and those payable 
 by other banks in the city where the reserve bank is located. These 
 items may be placed on one sheet or letter in separate totals. A dif- 
 ferent sheet or letter must be used for each state within the region 
 or district, and as the number of members increases such states 
 may be redivided in accordance with the regulations of each 
 reserve bank. 
 
 4. Items payable in other Federal reserve districts will be 
 separated into two totals, "inside” and "outside,” and the outside 
 items will be grouped as to states, although a single total will 
 be accepted and such "outside” items may be placed on a single 
 remittance sheet. 
 
 5. With each deposit of checks from member banks there is to 
 be enclosed a summary sheet giving the total of each separate 
 sheet or division with a grand total or footing. 
 
 6. Opposite each item in the entire deposit, the member bank 
 should designate the place payable, preferably by number. Special 
 instructions such as “no protest,” "wire non-payment,” etc., 
 should be covered by an official tag or slip which is to be securely 
 fastened to the item and no confirmation of such instructions 
 
 52 
 
shall be required to be written on the letter. A distinctive mark 
 or symbol should also be stamped upon each such check. 
 
 7. Each item deposited shall be endorsed by the member bank 
 with a rubber stamp which shall bear the name of the Federal 
 reserve bank through which the items are cleared, the date 
 received by the Federal reserve bank, and the name and num- 
 ber of the member bank. This stamp, when used by the mem- 
 ber bank, shall be considered to guarantee all previous en- 
 dorsements and shall read as follows: 
 
 Cleared through 
 
 The Federal Reserve Bank of N. Y. 
 
 August 1, 1914 
 First National Bank 
 50-36 Syracuse, N. Y. 50-36 
 
 8. All items deposited by member banks with Federal reserve 
 banks should become “reserve” only after they have been col- 
 lected, that is, placed in the possession of the paying bank, and 
 thus chargeable to the account of the drawer. They may be 
 charged by member banks into the general ledger item "Due from 
 
 Federal Reserve Bank of ” the day they are mailed, but 
 
 a memorandum account should be carried by the member bank in 
 which this item is to be divided into “transit account” and "reserve 
 account.” Each member bank shall be furnished a time sched- 
 ule and in connection therewith shall operate a book which 
 may be designated the “Reserve Maturity Tickler.” In accord- 
 ance with the time schedule, the member banks will post the 
 detail amounts according to the divisions mentioned under the 
 dates when such checks may be credited to “transit a/c” and 
 charged to “reserve a/c.” These dates in every case will be 
 based on the receipt of the items at the place of payment. 
 
 An alternative plan differing in theory as applied to reserves 
 but more practical and simple in operation, may be considered 
 as follows: The Federal reserve banks will charge member checks 
 
 against the balance of such members upon the day forwarded. 
 This would reduce the amount of bookkeeping necessary and 
 would simplify the time schedule by more than one-half. On the 
 other hand, member banks would be apt to object to having their 
 reserves thus depleted without their knowledge. This objection 
 could be met by a concession which would further reduce the 
 accounting, that is, by allowing member banks to use all checks 
 on members of the same district as reserve the day forwarded 
 to the Federal reserve bank, as is now permitted in making re- 
 mittances to reserve agents. 
 
 It is desirable that drafts on Federal Reserve banks should be 
 acceptable without question in all districts. It may be suggested, 
 therefore, that such drafts be deposited in a separate total together 
 with drafts payable by the Reserve bank where deposited to be 
 counted as reserve by the member bank at once, or if the al- 
 ternative plan outlined in the preceding paragraph is adopted. 
 
 53 
 
r 
 
 drafts on all Federal reserve banks could be included in the totals 
 of checks on other members of the same district. 
 
 The Federal reserve bank will credit the account of the 
 member banks on day of receipt of the items, such account to 
 be subject to draft. The reserve bank in turn will use a time 
 schedule corresponding to the one used by member banks and 
 similarly the reserve bank will charge transit account, crediting 
 such account and charging other reserve banks as hereafter 
 provided. If any member bank should draw below its col- 
 lected funds, such draft should be subject to a charge based 
 upon, but higher than, the current discount rate of interest. 
 
 In Section 19 the Act provides that member banks may check 
 against their reserve balances with Reserve banks “subject to such 
 penalties as may be prescribed by the Federal Reserve Board,’’ 
 but it would be better banking to induce them to restore their 
 reserves through re-discounts. 
 
 The Federal reserve banks will receive items on deposit 
 until 2 P. M. each day. After 2 P. M. and until 3 P. M. items 
 of $1,000, and over only, and after 3 P. M. until 3:30 P. M. 
 items over $10,000 only, after which all items received will be 
 held over until the following day and the member bank so 
 notified. 
 
 The time of day and amounts here specified need not be uniform 
 for each Reserve bank, but should be regulated by each such 
 bank in accordance with local customs and geographical position 
 with respect to transportation and mail facilities. 
 
 At the close of the day’s business all checks on member 
 banks will be forwarded to the member banks, the letter bear- 
 ing opposite each amount the endorsement record of the de- 
 positing bank. These remittances will be charged by the 
 reserve banks in “transit account.” On the following day, or the 
 day of receipt by the member banks, the accounts of the mem- 
 ber banks will be charged and “transit account” will be credited. 
 
 Attached to each letter from the reserve bank will be a per- 
 forated slip bearing the total of the enclosure, to be used as an 
 acknowledgment of receipt. The slip will read: “We credit 
 
 you $ 
 
 checks on this bank received to-day 
 
 (Signed) 
 
 Cashier.” 
 
 If items are unpaid they are to be returned direct by the 
 member upon whom drawn to the member making the deposit 
 with the Federal reserve bank first receiving them, and upon 
 receipt of advice the Federal reserve bank will credit the mem- 
 ber bank the amounts of such checks returned direct and charge 
 the accounts of members to whom the items have been returned. 
 If such unpaid items have been received by the reserve banks 
 from other reserve banks they will be returned direct in the same 
 way and adjustment made between the reserve banks as here- 
 after provided. Unpaid items which have been deposited by the 
 
 54 
 
U. S. Government or any of its agents will, however, be returned 
 in every case to the reserve banks by the member banks. 
 
 Member banks should be encouraged to make use of the 
 Federal reserve banks to effect settlement with one another 
 through book transfers. The reserve banks should perform 
 such service as between its own members at par since it avoids 
 the use of drafts and also does not reduce the loanable funds 
 ol’ the reserve bank. Transfer of funds by members for the 
 credit of members of other districts may also be easily arranged 
 and the charges therefor will be discussed under a separate heading 
 in this report. 
 
 Reserve banks will also send to member banks for collection 
 notes, acceptances and such paper as is usually classified as 
 “time items,” representing the matured loans and discounts of the 
 Federal reserve banks, such items, if unpaid, to be returned by 
 member banks to the Federal reserve bank owner, with proper 
 advices. 
 
 At the close of each day's business the Federal reserve banks 
 will mail a statement of the day's transactions to each member 
 bank other than which no acknowledgment of receipt of items, 
 etc., will be required. At regular intervals the balance shown 
 by such statement as of a certain day will be reconciled by 
 the member bank and a report made to the reserve bank. 
 
 RELATIONS BETWEEN THE FEDERAL RESERVE BANKS. 
 
 “. . . . or solely for exchange purposes, (any Fed- 
 eral reserve bank) may receive from other Federal 
 reserve banks deposits of current funds in lawful 
 money, national-bank notes, or checks and drafts 
 upon solvent member or other Federal reserve 
 banks, payable upon presentation." 
 
 “Every Federal reserve bank shall receive on de- 
 posit at par from member banks or from Federal 
 reserve banks checks and drafts drawn upon any 
 of its depositors, and when remitted by a Federal 
 reserve bank, checks and drafts drawn by any de- 
 positor in any other Federal reserve bank or mem- 
 , ber bank upon funds to the credit of said depositor 
 in said reserve bank or member bank." 
 
 As between the Reserve Banks, there will be five different 
 kinds of transactions. (1), the exchange of checks for col- 
 lection payable in their respective districts, and also the ex- 
 change of checks and drafts on one another. (2), the transfer 
 of funds deposited by the member of one Bank to the credit of 
 a member of another Bank. (3), the deposit of Federal Re- 
 serve notes for redemption or credit as provided in the Act. 
 
 “Whenever Federal reserve notes issued through 
 one Federal reserve bank shall be received by an- 
 other Federal reserve bank they shall be promptly 
 returned for credit or redemption to the Federal 
 55 
 
reserve bank through which they were originally 
 issued.” 
 
 (4), the deposit of other funds, such as national bank notes, 
 or lawful money which the Federal reserve banks are permitted 
 to deposit with one another for exchange purposes. Such shipments 
 should be subject to the request of the Federal reserve bank receiv- 
 ing the deposit. (5), the collection of notes, drafts and acceptances 
 for rediscount, as provided in Section 13, which may be payable 
 in a district other than where rediscounted. 
 
 Checks remitted by one Federal reserve bank to another 
 should be divided as to inside and outside items, the outside 
 items being further divided as to states, or such other division as 
 has been provided for the member banks depositing with Federal 
 reserve banks. They need not be endorsed by the Federal reserve 
 bank remitting or by the reserve bank receiving them. 
 
 Each Federal reserve bank will carry a single account with 
 every other reserve bank. Using the time schedule mentioned 
 previously, charges and credits of check remittances will be 
 mado simultaneously. 
 
 Remittances of Federal reserve notes will not be charged 
 in transit account, but will be carried in the General ledger 
 item “Notes of other Federal reserve banks” until the date of 
 receipt by the bank to whom sent. Remittances of lawful 
 money, national bank notes, etc., to be sent only upon request, 
 will be charged to the reserve bank to whom sent on the date 
 of shipment and will be carried as an asset of such bank 
 among its other cash items. 
 
 Time items will be forwarded a sufficient time before ma- 
 turity and will be charged and credited on date due. 
 
 Transfers for member banks, if made by mail, should be 
 charged and credited on day of receipt of notice. If made by 
 wire the entries should be made on day of such advice. No such 
 transfers should be made by wire or mail after 3 P. M., and in 
 the event of differences of time between banks, the time used by 
 the bank that is the farthest east should govern. 
 
 The original figures of every transaction of whatever nature 
 between Federal reserve banks should be considered to be correct, 
 and the original entries should not be changed by either the bank 
 charging or the bank crediting. Allowances for errors, returned 
 items, etc., and all changes in the account between any two banks 
 should be adjusted by mail. The accounts between any two 
 Federal reserve banks will thus automatically reconcile, provided 
 there has been no delay in the mails. To provide against such a 
 contingency, it is proposed that if any reserve bank fails to re- 
 ceive the regular daily letter from any other reserve bank by 
 2 P. M., a telegraphic advice be sent to the forwarding bank, 
 which would then defer the usual charge until the following day. 
 
 56 
 
FEDERAL, RESERVE CLEARING HOUSE. 
 
 To settle the balances between reserve banks, growing out of 
 these various transactions, a clearing house is suggested, as pro- 
 vided in the act, in the clause which specifies that: ‘‘The Federal Re- 
 serve Board . . . may at its discretion exercise the functions of a 
 clearing house for such Federal reserve banks, or may designate 
 a Federal reserve bank to exercise such functions. . . .” 
 
 If one of the Federal reserve banks should be chosen as a 
 clearing house, for convenience of location it might be the 
 Chicago bank; but this function of clearing would be better 
 assumed by the Federal Reserve Board. For many reasons it 
 would be well to establish the clearing house at the national capital. 
 Since each reserve bank will carry a single account with every 
 other reserve bank, subject to simultaneous debit and credit, the 
 bulk of the interchange of business will clear itself. Balances 
 will arise partly on account of the seasonal changes which will 
 alter the debit and credit relationship between the districts, and 
 partly on account of the fact that membership in the system will 
 not be proportionately equal as between national and State banks 
 in different regions. 
 
 The plan herewith proposed is based upon the requirement that 
 each Federal reserve bank deposit with the Federal Reserve Board 
 clearing- house all of its gold beyond that which will be sufficient 
 to take care of local needs. This gold deposit, carried on the books 
 of each reserve bank in a separate item as a part of its reserve 
 funds, can be used in either of two ways or in a combination of 
 them to effect settlement which will be explained later. Settle- 
 ment need not be made between reserve banks oftener than weekly, 
 since to require daily settlement might prevent the operation of 
 the natural clearing effected by the interchange of ordinary busi- 
 ness transactions. Therefore, at the close of business on each 
 Thursday, each reserve bank should wire the clearing house the 
 amount of the balance and should state whether debit or credit 
 relations exist between it and other reserve banks. Allowing one 
 day, Friday, for adjustment of any differences in the advices 
 received, the clearing would be effected on Saturday. How this 
 shall be done depends upon a consideration of the following possi- 
 bilities: 
 
 The gold deposited with the clearing- house may be credited upon 
 a simple set of books to each bank so depositing. Clearing would 
 then be effected by a charge and credit on the books, and advice 
 would be made to the reserve banks. This is the simple plan, but 
 it has one apparent disadvantage in that the banks would have 
 no tangible evidence of the ownership of the gold other than a 
 book credit. Consideration might, therefore, be given a plan of 
 issuing certificates in large denominations against the proposed 
 gold deposits as clearing house currency certificates are now issued. 
 Upon the direction of the Federal Clearing House, the debtor 
 reserve banks would mail these certificates to the creditor banks 
 to pay balances. These two plans might be combined so that, al- 
 
 57 
 
though the clearing of balances would be effected by book trans- 
 fers of gold at the Federal Clearing house, the debtor banks could 
 anticipate this settlement by mailing certificates to creditor banks 
 prior to the day of settlement. Both these plans, however, seem 
 less effective and more cumbersome than the first plan. Very 
 little (if any) gold would ever need to be transferred between the 
 reserve banks, and such operations would be limited to transac- 
 tions between the banks and the clearing house. The banks, in 
 turn, would be able to loan or borrow, buy or sell gold in dealing 
 with each other, and the transactions would be arranged through 
 book transfers at Washington. 
 
 It is recommended that the official who may act for the Federal 
 Reserve Board as supervisor of the clearing functions of the 
 system act also as the manager of the Federal Reserve Clearing 
 House, and bear the same relation to the reserve banks that the 
 manager of any clearing house does to the members of a city 
 clearing house. In addition to the supervision and control over 
 the entfre machinery of domestic exchange, he should provide 
 for its development along lines hereafter suggested. 
 
 CHARGES FOR COLLECTION. 
 
 The Federal Reserve Act provides in Section 16 that: 
 
 The Federal Reserve Board shall, by rule, fix the 
 the charges to be collected by the member banks from 
 its patrons whose checks are cleared through the Fed- 
 eral reserve bank and the charge which may be im- 
 posed for the service of clearing or collection rendered 
 by the Federal reserve bank. 
 
 The Federal Reserve Board shall make and promul- 
 gate from time to time regulations governing the trans- 
 fer of funds and charges therefor among Federal re- 
 serve banks and their branches. . . . 
 
 It must be borne in mind that the banking power of the United 
 States will divide more sharply than it has ever done before into 
 two groups — members and non-members. It is the intent of the 
 Act itself to bring non-members into the system. But so long as 
 there is any considerable body of non-member banks, the two 
 groups will of necessity be in competition with one another, pro- 
 ducing two parallel clearing systems. The organization of the 
 domestic exchange machinery of the new system thus takes on 
 a double aspect. On the one hand, Federal reserve banks and 
 their members must be prepared to meet a competition on the 
 part of non-members. But on the other hand the domestic ex- 
 change business of the Federal reserve system must be so arranged 
 as to offer constant inducements to non-members to enter the 
 System. At the same time, members must find it more prof- 
 itable to use the Federal reserve system than to make col- 
 lections as at present. The situation is more complex when it is 
 taken into consideration that member banks are in a position to 
 
 58 
 
deal on favorable terms either with the Federal reserve banks 
 and their members or with non-members. 
 
 All charges contemplated in the act should be based on actual 
 costs, and it should not be the policy of the Federal Reserve Board, 
 nor of the reserve banks, to assess these charges against member 
 banks upon a basis that would yield a profit. All costs should be 
 placed against members for whom service is rendered as here- 
 after provided. The costs would include overhead charges, clerical 
 hire, including that of department management, stationery, postage 
 and equipment depreciation. In addition, all similar expense inci- 
 dental to the maintenance and operation of the Federal Clearing 
 House will be assessed against the reserve banks, which charge 
 will, in turn, be added by each reserve bank as a part of its 
 clearing - expense. 
 
 It should be the duty of the compilation department of each re- 
 serve bank to keep an accurate monthly record of the costs herein 
 mentioned incidental to the clearing of all checks. A record of the 
 amount and number of checks and drafts charged against the ac- 
 count of each member should be kept by each reserve bank, 
 and an additional record of the amount of the items pay- 
 able in other districts deposited for credit and clearing by mem- 
 ber banks. The total monthly cost should then be divided 
 between these two amounts in proper proportion, the number 
 of items making up the amount payable outside the district 
 being estimated upon the basis of the figures of the number of 
 checks divided into the total amount charged against members’ 
 balances. The cost of handling checks charged against members’ 
 balances should then be charged monthly to the accounts of such 
 members, and should be based one-half per hundred of items 
 and one-half per thousand dollars. The cost of handling 
 checks on other districts should be similarly pro-rated and charged 
 against members depositing such checks. 
 
 Each reserve bank should be required to send a monthly state- 
 ment to the Federal Reserve Clearing House, showing total 
 amount that has been charged against it by all other reserve 
 banks during the previous month. The clearing house would then 
 assess the costs of operation upon reserve banks in proportion to 
 such amounts. Each reserve bank should calculate the proportion 
 of this clearing house cost chargeable to check and transfer-for- 
 members debits, and this cost should then be apportioned and 
 charged to members per thousand dollars of checks charged to 
 their accounts or transfers made for them. Similarly the propor- 
 tion of the cost of shipping gold to the clearing house chargeable 
 to check and member transfer debits should be added by each 
 reserve bank to the clearing house cost which is to be charged to 
 members. Except for the charge for telegraphing when such 
 transfers are requested, there should be no further charge against 
 members for the transfer of funds. Accounts of the United States 
 Government or any of its disbursing agents should be subject to 
 the same basis and method of clearing charges as applied to 
 member banks. 
 
 59 
 
In addition to the charges above provided, a scale of fines 
 should be arranged applicable to members making errors in their 
 deposits. The purpose of such fines is to place the cost of locating 
 errors against the member making the error, and the income, if 
 any, derived from this source should be deducted from the total 
 
 operating cost. The scale should cover the following: 
 
 Error in listing or addition $1.00 
 
 Error in recapitulation sheet 1.00 
 
 Items missorted, including items not receivable, 
 
 each .50 
 
 Checks listed but not enclosed, or enclosed but 
 
 not listed, each 2.00 
 
 Items not endorsed, each .50 
 
 CHARGES BY MEMBER BANKS. 
 
 The policy of limiting charges by member banks against their 
 patrons to actual expenses incurred is clearly indicated in the bill. 
 Therefore the rate which the Federal Reserve Board is to fix for 
 the member banks to charge for their patron’s checks which are 
 cleared through the reserve banks, should be based cn the costs 
 as outlined and hereinbefore provided. Checks payable outside the 
 district may be made subject to a charge by the member banks 
 against the endorsers. 
 
 Checks drawn by depositors and charged against the member 
 banks’ accounts by the reserve banks may be made subject to a 
 charge against the makers of the checks. In each case the Federal 
 Reserve Board should base the rate on charges made by the reserve 
 banks, both for district and other items, and an additional amount 
 to cover a similar cost entailed by the member bank as to over- 
 head charges, stationery, etc. This rate, which may be made 
 dependent on the amount of the checks only, shall be considered 
 to be the maximum rate which the member bank may be permitted 
 to charge under the act, but it is recommended that the words 
 in Section 16, page 19, line 46, “to be collected,” be, by rule, con- 
 strued to mean “may be collected.” Otherwise depositors in mem- 
 ber banks would withdraw their deposits and place them with non- 
 members not required to make such charges. 
 
 Charges should be made by the reserve banks against member 
 banks as near as possible to the first of each month covering the 
 costs of the preceding month. The charges that are to be made 
 by member banks against their patrons should be based, as pro- 
 vided, on the original costs; but they should be at rates fixed 
 annually to cover such charges with sufficient margin only to 
 allow for slight monthly variations. Every member bank should 
 be permitted to make its own charges against depositors who draw 
 against uncollected funds, or against non-depositors for cashing 
 or collecting checks and drafts. Charges provided in the act 
 should not be construed to cover notes, sight drafts, coupons, or 
 other paper commonly known as “collections," but should cover 
 checks and bank drafts only. 
 
 60 
 
OTHER RULES AND REGULATIONS. 
 
 One provision in the Federal Reserve Act specifies that: 
 
 The Federal reserve bank . . . shall have power — 
 
 Third: To make contracts. 
 
 Sixth. To prescribe by its board of directors, by- 
 laws not inconsistent with law, regulating the manner 
 in which its general business may be conducted, and 
 the privileges granted to it by law may be exercised 
 and enjoyed. 
 
 Seventh. To exercise by its board of directors, or 
 duly authorized officers or agents, all powers specifically 
 granted by the provisions of this act and such inci- 
 dental powers as shall be necessary to carry on the 
 business of banking within the limitations prescribed 
 by this act. 
 
 In accordance with these powers, it is recommended that as soon 
 as the recommendations herein contained, or similar recommenda- 
 tions, have been officially adopted by the Federal Reserve Board, each 
 Federal reserve bank shall send to each member bank a printed 
 agreement which each member shall sign by its president and 
 cashier. This agreement (subject to change in the details of the 
 clearing plan finally adopted) should be somewhat as follows: 
 
 In order that the provisions of the Federal Reserve 
 Act affecting the deposit of funds by member banks, 
 the collection and clearing of checks and drafts, and the 
 fixing of charges therefor may be efficiently and eco- 
 
 nomically administered, the National Bank, 
 
 member of the reserve bank of herewith 
 
 agrees to be bound by the following rules: 
 
 1. All items shall be deposited on such forms and 
 in such manner as shall be prescribed by the Federal 
 reserve bank, and failure to do so, or any errors made 
 in such deposits shall subject the member bank to a 
 reasonable fine. 
 
 2. Members agree not to deposit with the Federal 
 reserve bank checks on other member banks within 
 twenty-five miles of such member bank, except where 
 specifically permitted by the reserve bank, or except 
 that this rule shall not be construed to apply to mem- 
 bers which are within twenty-five miles of the reserve 
 bank. Members situated in the same city with the 
 reserve bank shall not deposit checks and drafts on 
 other member banks in that city, unless such members 
 are not members of the clearing house. (This rule is 
 inserted as a result of the belief that it will be found 
 expedient to give to the reserve bank the power to 
 refuse to accept such items as would better be col- 
 lected through local clearing houses or branch banks.) 
 
 3. It is agreed that the Federal reserve bank may 
 
 61 
 
send all items direct to the member bank on which they 
 are drawn. 
 
 , 4. Items received after the time fixed for the receipt 
 
 of such items shall be held over until the following day, 
 and notice sent to the member bank. 
 
 5. The accounts of members will be charged, upon 
 notice, with items lost in the mails or otherwise, and 
 upon request members shall secure duplicates. 
 
 6. Items accompanied by special instructions, such 
 as "no protest,” “wire non-payment,” etc., shall have 
 firmly affixed a slip bearing such instructions, and in 
 addition each item shall be plainly stamped with a 
 mark indicating such instructions. Other than this, 
 no confirmation of instructions shall be required on 
 the letter. 
 
 7. The member bank undersigned hereby agrees 
 that the clearing endorsement stamp used by it on all 
 checks deposited with the reserve bank guarantees all 
 prior endorsements. 
 
 8. Items unpaid are to be returned direct to the 
 member bank which originally deposited such items 
 with any Federal reserve bank, and proper notice is 
 to be sent to the reserve bank from which such items 
 were received. 
 
 9. The member bank undersigned agrees that all 
 checks and drafts payable at such bank shall be 
 charged against the balance standing to its credit 
 with the reserve bank on the day of receipt of such 
 items by the member bank. 
 
 10. The reserve bank shall charge interest at . . . 
 
 % above the current discount rates for all drafts or deb- 
 its against member banks’ balances when such balances 
 are below the net amount of collected funds standing 
 to the credit of such members. 
 
 11. A daily statement of charges and credits will 
 be sufficient advice and acknowledgment of all transac- 
 tions. 
 
 GENERAL, SUGGESTIONS. 
 
 The plans and forms prepared for the clearing functions of 
 the Federal reserve system have been so shaped that no change in 
 principle will be necessary after branch reserve banks are estab- 
 lished. It has been thought wise not to arrange clearing plans for 
 branch banks at this time, since such banks will not be in operation 
 for some time following the organization of the reserve banks, and 
 a short experience with the system will demonstrate to what extent 
 branch banks will undertake the clearing and collection of checks. 
 It is probable that they will receive checks on deposit from mem- 
 bers in the same city only, and will receive checks on members 
 from other reserve banks only when such members are farther 
 distant than one night’s mail from the Federal reserve bank of 
 
 G2 
 
the district. Again, there may be branches established which may 
 clear a limited territory not easily accessible to or from the reserve 
 bank. Such clearing, however, should be strictly local, and these 
 branch banks should not receive items on deposit payable in other 
 districts, nor should other Federal reserve banks send them items 
 except (perhaps) those payable in the city where the branch bank 
 is located. 
 
 Whatever may be the business transactions to be developed 
 between a Federal reserve bank and branch banks of another dis- 
 trict, the clearing relations between the reserve banks will not be 
 altered, since all such transactions will be credited or debited on 
 the books of the main banks, proper advices forwarded, and adjust- 
 ment made between the reserve bank and its branch affected. 
 
 If that plan be deemed expedient the work of clearing may be 
 developed gradually. At first the Federal reserve banks might 
 limit the items received for collection to those payable in the 
 larger cities in the district, extending the service until the entire 
 district is covered. Drafts on all Federal reserve banks should be 
 accepted from the first, but no items payable in other districts 
 should be accepted until the machinery is working smoothly, and 
 this service should then be extended in the same manner that is 
 suggested for each individual district. Member banks on which 
 checks might be accepted at the beginning should be permitted to 
 deposit items payable in other districts. This would enable them 
 to meet the checks drawn against them, and would make it 
 possible to develop the exchange relations between the Federal 
 reserve banks at the outset. 
 
 On account of geographical and railroad limitations situations 
 will arise in every district where it will not be feasible for 
 member banks to send checks on other member banks to the Fed- 
 eral reserve banks. Each such case will need to be adjusted 
 according to conditions, either through branch banks or by re- 
 ciprocal relations established between the member banks, settle- 
 ment being arranged by a system of transfers. There are sections, 
 as for example the state of Mississippi, where the non-member 
 banks will so far outnumber the member banks that a hardship 
 will be imposed upon members unless they find relief through 
 the assistance of the Federal reserve bank of the district, which 
 might establish local offices at many centres and accept and collect 
 checks on non-member banks. 
 
 A list of member State banks and trust companies should be 
 sent to each member bank, and a monthly supplement showing 
 additions furnished. A list of non-member national banks may 
 also for a time be required. A large map should be furnished all 
 members at cost, showing the district limits, mail time between 
 Federal reserve banks, variation in time used, expressage and 
 telegraphic rates, and such other information as may be found 
 expedient. 
 
 It is recommended that a standard form of draft be required 
 for use by each member bank in drawing on its reserve bank, and 
 
 63 
 
if each reserve bank should adopt a different color of paper upon 
 which the drafts are to be printed, it would promote convenience 
 in assorting these items and would tend to prevent misrouting. 
 It would also serve as an example to the banks and make it easier 
 later to provide a color system applying to all checks. 
 
 Arrangements could be made with the Bureau of Engraving 
 and Printing to prepare the drafts on the Federal reserve banks 
 for members at cost. Uniformity would thus be assured. 
 
 A large item of expense and a great source of annoyance and 
 delay to all large banks is the daily weighing and stamping of 
 letters containing checks and drafts sent out each night. This 
 work will be greatly increased in the reserve hanks, and will 
 constitute quite an item of expense as to labor. The Post Office 
 Department should be consulted and arrangements made whereby 
 the Federal reserve banks would be authorized to send out letters 
 containing checks and other remittances at first-class rates, the 
 payment to be made by bulk weight. This would also be a con- 
 venience to the Post Office Department, since it would not be 
 necessary to test the letters as to the correct amount of postage 
 used, and some economy would be effected in the preparation and 
 sale of postage stamps. 
 
 CHECKS ON NON-MEMBER BANKS. 
 
 There is nothing in the act that prohibits the acceptance by 
 Federal reserve banks from members of deposits of checks payable 
 by non-member institutions. By accepting such items to a lim- 
 ited extent clearings could be equalized at times between the 
 reserve banks, thus avoiding the transfer of gold to the clearing 
 house. Also, exorbitant exchange rates on the part of non- 
 members could be checked wherever there is a member bank in 
 the same town, by having such member collect checks on the 
 non-member bank or banks for other members through the Federal 
 reserve banks. 
 
 AN ALTERNATIVE PLAN. 
 
 Many suggestions have been presented with reference to the 
 matter of handling the clearings of the Federal Reserve Banks. 
 It has been found that probably the greatest difference of opinion 
 concerns the manner of dealing with the Transit problem. In view 
 of the fact that the precise scope of the Banks’ operations has not 
 been determined, it is therefore considered worth while to offer for 
 consideration an alternative plan for the clearance of transit items, 
 differing from the one set forth above. The main feature to be 
 considered in this connection will be found to relate to the time 
 at which the items are to be credited to Reserves by the several 
 Banks. 
 
 In support of this alternative plan it is argued that if the pur- 
 pose is to shape the operations of the Federal Reserve Banks so 
 that the growth of the Member Banks will reflect itself in the Fed- 
 eral Reserve Banks, it would appear advisable to afford special ad- 
 vantages to the Member Banks which would encourage their main- 
 
 64 
 
taming' larger balances than required by law with the reserve 
 banks. 
 
 Any plan which would assist in placing Member Banks in a 
 more favorable position than non-Member Banks, in the clearance 
 of transit items at par, and at the same time extend the privilege 
 to the Member Banks of an immediate settlement for such items, 
 should receive careful consideration, inasmuch as it would without 
 question stimulate more widespread interest in the Federal Reserve 
 System and make its membership more attractive. 
 
 The essential point of the plan is: 
 
 Clearance at par, with immediate credit in the Reserve Accounts 
 of Member Banks for such items as they may forward for collec- 
 tion to the Federal Reserve Bank of their district and which are 
 drawn upon 
 
 (a) Member Banks of their own district; 
 
 (b) Federal Reserve Banks of other districts; 
 
 (c) Member Banks of other districts. 
 
 In order that this may be effected, an immediate settlement for 
 such items would be obtained by the Federal Reserve Banks in the 
 following manner; 
 
 MEMBER BANKS OF THEIR OWN DISTRICT. 
 
 Items drawn upon Member Banks located within the district in 
 which the Federal Reserve Bank is situated, will be charged 
 against their accounts upon the day of forwarding. 
 
 FEDERAL RESERVE BANKS AND MEMBER BANKS OF 
 OTHER DISTRICTS. 
 
 1. A certain portion of the gold reserve of the Federal Re- 
 serve Banks would be concentrated at Washington, preferably 
 with the Secretary of the Treasury, as Chairman of the Board, who 
 would maintain a ledger record of the balance of gold reserve be- 
 longing to each Bank. 
 
 2. The Federal Reserve Agents would authenticate, each day, 
 the transit operations of the Federal Reserve Banks, and forward 
 a descriptive statement to the Secretary of the Treasury, which 
 would enable him to record the debits and credits in the gold re- 
 serve of the different Federal Reserve Banks. This would place the 
 Secretary of the Treasury in a position to assemble the entries of 
 all the Federal Reserve Agents, with the result that the Federal 
 Reserve Board would maintain the gold reserves in twelve ac- 
 counts, so that the transfers of gold would be by book entries and 
 shipments would be reduced to a minimum. 
 
 3. Each Federal Reserve Bank would carry an account upon 
 its books known as “Transit Account,’’ the account being upon a 
 daily liquidating basis, as the balance resulting from the transac- 
 tions would mean either a credit or a debit to the Reserve Account 
 of “Gold Reserve with Secretary of the Treasury.” The credits to 
 Transit Account would consist of remittance letters received from 
 other Federal Reserve Banks, while the debits would be the total of 
 the cash letters in process of being forwarded for collection to 
 
 65 
 
other Federal Reserve Banks. The result of this would be, say in 
 the event that the Federal Reserve Bank of Chicago received re- 
 mittance letters for collection greater in amount than the total of 
 the cash letters forwarded by it, that the credit balance in the ac- 
 count would be liquidated by passing its equivalent to the credit of 
 “Gold Reserve with Secretary of the Treasury,” thereby reducing 
 the gold reserve to cover the transit transactions of the day. 
 
 From this brief outline, it will be noted that an immediate set- 
 tlement has been obtained for the transit items and that “Out- 
 standing Time” has been eliminated by the expedient of book en- 
 tries in the gold reserve, such entries having been authenticated by 
 the Federal Reserve Agent. 
 
 Further details of the plan would be: 
 
 (a) The ledger record of the Secretary af the Treasury would 
 be so designed that a carbon copy would constitute a daily state- 
 ment to the Federal Reserve Banks of the debits and credits enter- 
 ing their balances of gold reserve. This would also enable the 
 Federal Reserve Banks to check such entries, and likewise place 
 them in close touch with the condition of the account. 
 
 (b) The credit and debit entries which would appear upon the 
 daily statement of the Federal Reserve Agent to the Secretary of 
 the Treasury, would be obtained by means of a form prepared in 
 quadruplicate for use of the Bookkeeping Department of the Fed- 
 eral Reserve Banks. 
 
 (c) Federal Reserve Notes would be listed upon a separate 
 letter and included in the total of the outgoing remittances. 
 
 (d) Unpaid cash items would be charged to the Transit De- 
 partment, where they would be listed upon a separate letter and 
 included in the total of the outgoing remittances for the day. 
 
 (e) Cash letters from Federal Reserve Banks or Member 
 Banks would be credited only when received in time for use the 
 same day. 
 
 (f) Checks received by Member Banks, which are payable 
 within a certain radius to be determined by the Federal Reserve 
 Board, would not be forwarded for credit to the Federal Reserve 
 Bank of their district. 
 
 (g) The usual Reciprocal accounts, subject to check, would be 
 maintained by the different Federal Reserve Banks, for the pur- 
 pose of collection of drafts, notes, coupons, and etc. 
 
 (h) Telegraphic transfers up to a certain amount may be 
 made through the Reciprocal accounts, while for larger amounts 
 it would be advisable to use the existing sub-treasuries or the me- 
 dium of book transfers in the gold reserve at Washington. 
 
 (i) Errors in listing, etc., would be adjusted by means of claim 
 tickets to be drawn and approved by the Auditor and signed by an 
 officer of the Bank. 
 
 (j) To defray the expense of labor, stationery, postage, depre- 
 ciation of equipment, etc., it would appear advisable to assess the 
 Member Banks upon the basis of the volume of business handled 
 as compared with the expense involved. 
 
 66 
 
(k) In view of the special advantages afforded Member Banks 
 under the proposed plan, and to confine such advantages to Banks 
 in the Federal Reserve System, Member Banks should be pro- 
 hibited from depositing' transit items which in turn have been de- 
 posited with them by non-Member Banks. 
 
 The endorsement stamp of the Member Banks would be: 
 
 Pay to the Order of 
 
 Federal Reserve Bank, Chicago, Illinois, 
 
 May 28, 1914, 
 
 Endorsements Guaranteed 
 (Name of Member Bank) 
 
 while the endorsement stamps of the Federal Reserve Banks would 
 
 hp ■ 
 
 Pay to the Order of 
 Any Member Bank District No. 2 
 May 28, 1914, 
 
 Endorsements Guaranteed 
 Federal Reserve Bank 
 New York, N. Y. 
 
 Pay to the Order of 
 Any Federal Reserve Bank 
 May 28, 1914, 
 
 Endorsements Guaranteed 
 Federal Reserve Bank 
 New York, N. Y. 
 
 The accounting forms necessary to facilitate the prompt and ef- 
 ficient handling of this alternative plan will be found in Port- 
 folio of forms No II, accompanying Appendix II, with which this 
 plan is correlated. 
 
 QUESTION OF TIME IN COLLECTION. 
 
 The usual method employed at the present time in the collec- 
 tion of transit items, contains as a most important factor the mat- 
 ter of “Outstanding Time,” inasmuch as the Banks are obliged to 
 await the receipt of returns covering the settlement of such items 
 as may have been forwarded to correspondents for collection. Theo- 
 retically speaking, this burden should be borne by the depositors 
 of the Banks, as it would not be sound banking to permit the with- 
 drawal of funds in the course of collection, but from a pi’actical 
 standpoint it would be difficult to educate depositors not to check 
 against outstanding items and must so regulate their books that 
 they may know at all times what their checking balance really is. 
 
 Under the first plan discussed above, namely, that of with- 
 holding outstanding transit items from reserve balances of Mem- 
 ber Banks until such time as the checks are theoretically collected, 
 the problem of outstanding time is admitted, but only partially 
 solved by the decision that in order to lessen the burden upon the 
 Member Banks the outstanding time be cut in two; that is, the 
 checks will be permitted to enter the reserve balances of the Mem- 
 ber Banks upon the theoretical day of collection. 
 
 67 
 
The first plan proposes as an offset to the deduction of 
 transit items from the reserve balances, to defer charging items 
 drawn upon Member Banks until such time as they have been re- 
 ceived, thereby establishing a basis of equality. 
 
 For the purpose of carrying out the project, each Member 
 Bank, in addition to the Federal Reserve Banks, must as already 
 explained, be equipped with time schedules indicative of the days 
 necessary for the collection of checks, and upon the days of ma- 
 turity, when the items are supposed to be paid, entries would be 
 made upon both the books of the Member Banks and the Federal 
 Reserve Banks, a plan which would enable the collected items to 
 serve as reserve for the Member Banks; while in like manner the 
 checks which are forwarded by the Federal Reserve Banks to the 
 Member Banks, in accordance with the pre-arranged schedule, 
 would be charged against the balances of the Member Banks upon 
 the day they are supposed to have been received. 
 
 The Committee has been at pains to secure criticisms upon the 
 transit problem and finds that the idea of withholding credit until 
 items are collected is thought by many to have the following dis- 
 advantages ; 
 
 1. It places a discount upon such inland exchange as may re- 
 quire the Federal Reserve Banks one day or more to collect. 
 
 2. It similarly places a comparative premium upon such 
 exchange as may be drawn upon Member Banks located within 
 the cities in which the Federal Reserve Banks are situated. 
 
 3. It might tend to discourage Member Banks from using the 
 facilities of the Federal Reserve Banks, with the result that they 
 might either withdraw from the System or maintain the exact 
 amount of reserve required by the Act. 
 
 4. It might render the Transit System of the Federal Reserve 
 Banks more complex and to result in confusion, if not skilfully 
 conducted. 
 
 5. It might entail additional labor. 
 
 6. It might mean the maintenance of subsidiary records, both 
 in the Federal Reserve Banks and in the Member Banks. 
 
 7. It might be difficult of proof. 
 
 8. The most carefully planned Time Schedule would be only 
 approximate. 
 
 9. The return of unpaid items from one Member Bank di- 
 rect to another, when the items were originally forwarded by the 
 Federal Reserve Bank for credit, might result in error. 
 
 VIEWS OF A TRANSIT EXPERT. 
 
 By way of further elucidating the main points at issue in this 
 matter the committee, without expressing final opinion, thinks best 
 to include in this report the following letter from an eminent clear- 
 ing and transit expert to whom this subject was referred with a re- 
 quest for an opinion. 
 
 “In compliance with your request I have gone over the plan sub- 
 mitted to me regarding the method of handling items through the 
 Federal reserve banks, and beg to submit the following suggestions: 
 
 68 
 
(1) REGARDING THE RELATIONS BETWEEN THE 
 FEDERAL RESERVE BANKS AND THEIR MEMBERS 
 
 IN THE SAME CITY. 
 
 “As Federal reserve banks will not handle items on non-member 
 banks, or receive any items from non-member banks, there does not 
 appear to be any necessity for a Federal reserve bank joining the 
 clearing house in the city in which it is located. Items which the 
 Federal reserve bank will have on member banks in its own city 
 can be charged to their accounts with the Federal reserve bank and 
 a time allowance made the member bank for the redemption of un- 
 paid items. 
 
 “Items on member banks which fall into the hands of non-member 
 banks can be collected through the clearing house as at present. 
 The only service which would be rendered by the Federal reserve 
 bank through the clearing house would be the facility of member 
 banks settling their balances with each other by checks on the Fed- 
 eral reserve bank. 
 
 “Checks on the Federal reserve bank which may fall into the 
 hands of non-member banks can be deposited in the member banks 
 and it is probable that non -member banks in the Federal reserve 
 cities will carry accounts with member banks. They will either 
 have to do this to get the items cleared or will have to become 
 members of the Federal reserve system themselves. 
 
 “If the Federal reserve banks should allow clearings between non- 
 member banks and themselves, this would remove a strong reason 
 for non-member banks becoming members. 
 
 “Checks on member banks which are not members of the clear- 
 ing house in the Federal reserve cities, should be received on de- 
 posit by Federal reserve banks. This would provide a place of 
 redemption for items on outlying member banks, many of which 
 are located several miles from the downtown district and whose 
 items have to be collected either by mail or messenger, and would 
 also provide a place of payment for the downtown member banks 
 which are not members of the clearing house. This would be a 
 great accommodation to the member banks, as considerable dif- 
 ficulty is experienced in handling the items of outlying banks. 
 
 “When Clearing House balances are settled through the Fed- 
 eral reserve bank, payment should be made by checks on the 
 Federal reserve bank rather than by memorandum showing 
 debtor and creditor balances, as then no dispute would arise 
 in making settlement. 
 
 (2) RELATIONS BETWEEN THE FEDERAL RESERVE 
 BANKS AND THEIR MEMBERS OUTSIDE OF THE FEDERAL 
 
 RESERVE CITIES. 
 
 “In assorting the items for deposit in the Federal reserve banks 
 there does not seem to be any necessity to sort the items according 
 to the states, as state lines have not been used in outlining the 
 districts. 
 
 “With reference to ‘No protest’ and ‘Wire non-payment’ in- 
 structions, besides having the items so marked, these instructions 
 should also be written on the letter accompanying the items, as 
 
 69 
 
otherwise the receiving- bank would claim the instructions were 
 not given and the sending- bank would not have the item to prove 
 they had been given. 
 
 “With regard to the clearing- system to be used in each Federal 
 reserve bank, if we are going to have a clearing system, why not 
 make it complete instead of going only half way? All items re- 
 ceived by a Federal reserve bank drawn on members in its own 
 district should be credited when deposited to the reserve account 
 of the depositing member bank and charged at the same time to 
 the reserve account of the member banks upon which the checks 
 are drawn, thus doing away with a lot of unnecessary work for 
 the member banks, as well as the Federal reserve banks, in figur- 
 ing the time taken for the items to reach their destination. 
 
 “The system for clearing these items should be as simple as pos- 
 sible, with a minimum amount of clerical work, otherwise the 
 member banks will clear their items through outside banks and 
 will not put them in the Federal reserve bank. The items going 
 through the Federal reserve bank on points in its own district will 
 not change the deposits of the Federal reserve bank. They will 
 only increase the balances of member banks on one side and de- 
 crease them on the other. 
 
 “The reserve balances of member banks will increase in the Fed- 
 eral reserve bank just as much as they will decrease, and it is 
 quite likely in the course of business that the reserve banks will 
 carry more than the required amount of reserve with the Federal 
 reserve banks, and, instead of having to continually make up their 
 reserve, there will be just as much necessity for reducing the ac- 
 cumulations in the reserve account. 
 
 “Items on member banks outside of the depositing member 
 oank’s district should not count as reserve, as the reserve bank 
 will have no account to reimburse itself from when the items are 
 deposited. A separate account should be carried for each member 
 bank which deposits items on member banks outside of its own 
 district, as these items will be paid by a method described under 
 the heading, ‘Relations Between Federal Reserve Banks Them- 
 selves’ and the transit account of the member bank will be charg- 
 ed and the reserve account credited. 
 
 “The transit accounts should be used only for items -which are 
 deposited on member banks outside of the district and on other 
 Federal Reserve Banks. 
 
 “Member banks should not draw checks on the transit account, 
 but should draw all checks on the reserve account. This would 
 do away with any necessity for figuring a discount rate of interest 
 if the transit accounts should be drawn below the amount of col- 
 lected funds. 
 
 “As the member bank itself is the only one which knows the 
 amount its reserve should be, the Federal reserve banks cannot as- 
 certain whether a bank is drawing below its reserve or not, except 
 when reports are received from the national bank examiner. It is 
 up to the member banks to control their own reserves and to the 
 bank examiner to see that they live up to the law in this respect. 
 
 70 
 
•u relations between the federal reserve banks 
 
 THEMSELVES. 
 
 “Items sent from the one Federal reserve bank to another should 
 bear the endorsements of Federal reserve banks which handle, so 
 that it may be known from the check how it has been routed. This 
 is particularly necessary if items are missent. 
 
 “With regard to clearing items between the Federal reserve 
 banks, a system is suggested under which no Federal reserve bank 
 will have to open an account with another. Instead each Federal 
 reserve bank will carry an account with the Federal reserve bank 
 to be selected as the central clearing bank. 
 
 “The Federal Reserve Bank of Chicago is well situated to act as 
 the clearing bank on account of its central location and the ex- 
 cellent transportation facilities between all the Federal reserve 
 cities. 
 
 “The suggested plan of carrying a portion of the gold reserve of 
 the Federal reserve banks in Washington would require the ship- 
 ment of an enormous amount of gold from all the Federal reserve 
 cities, which, besides being a great expense, as some of the gold 
 would have to come from as far away as San Francisco, would 
 also take away the gold from the west where it is needed for cir- 
 culation. On the Pacific Coast probably less than 10 per cent, of 
 the circulation is in paper money. 
 
 “Lender the present United States Sub-Treasury system gold is 
 divided among nine cities from New York to San Francisco, and it 
 would seem advisable to leave it where it is, so that when it has to 
 be shipped to member banks it will not have to go far and the ex- 
 press rate will be reduced to a minimum. 
 
 “It is also desirable to hold the expense of the Federal reserve 
 bank down as far as possible, in view of the fact that there are 
 twelve banks, each with a separate organization which will create 
 a large overhead expense. 
 
 “The Federal reserve bank which will act as the clearing bank 
 will have little or no expense attached to this part of its business 
 and it would only make an unnecessary additional expense by de- 
 positing the reserves in Washington. 
 
 “Under the attached plan proposed reserve banks could make up 
 the deficiencies in their balances carried with the clearing reserve 
 bank by purchasing' exchange, and gold shipments would be less 
 necessary under this plan than they would be if the plan is adopted 
 of carrying the reserves in Washington. 
 
 “Under the plan of clearing through a Federal reserve bank each 
 Federal reserve bank would know how it stood at the end of each 
 day’s business, as the items would be cleared and settled for every 
 day. The cost of buying exchange to increase balances with the 
 clearing Federal reserve bank could be assessed on the member 
 banks which deposited the items in each Federal reserve bank and 
 could be added by the Federal reserve bank to the cost of handling 
 the checks for the member banks, and in turn charged to the 
 drawers of the checks by the member banks, provided they saw fit 
 to charge the drawers. 
 
 71 
 
“It is, however, likely that a member bank would absorb this 
 cost itself, except where the drawers do not carry satisfactory ac- 
 counts. 
 
 “With regard to the incidental rules, regulations, etc., it does 
 not seem desirable to fix a limit of twenty-five miles from each 
 member bank, thus denying the member bank the privileges of 
 the Federal reserve bank for the collection of items on banks lo- 
 cated within twenty-five miles of the member bank. Inasmuch 
 as the items can be charged up to the account of the bank upon 
 which they are drawn when they are deposited, checks will reach 
 the Federal reserve bank for presentation in nearly all cases just 
 as quickly as they would reach the bank upon which drawn if 
 sent direct by the member bank. 
 
 “Members situated in the Federal reserve cities should be per- 
 mitted to deposit items on other member banks in the same city 
 provided the depositing bank or the member bank upon which the 
 checks are drawn is not a member of the local clearing house. 
 
 “Referring to items bearing ‘No protest' and ‘Wire non-pay- 
 ment’ instructions, the instructions should appear on the letters 
 accompanying the items. 
 
 “Provisions regarding charging interest when balances are be- 
 low the net amount of collected funds, should be omitted, as pre- 
 viously explained. 
 
 “It would be very unsatisfactory to the member banks if the 
 Federal reserve banks when they first start business receive items 
 on only certain banks in the larger cities in the districts. These 
 banks would be compelled to ship currency or buy exchange to 
 settle for the items charged to their account by the Federal re- 
 serve bank, as they would not in turn be able to deposit 
 items which they would have on all the other member banks in 
 the district. Instead of picking out a number of the larger cities 
 to start with, the Federal reserve banks could take a certain num- 
 ber of counties in each state and gradually increase the number 
 until the whole district was covered. In this way there would be 
 very little burden upon member banks, as the items would be 
 cleared in certain zones in which the members would have items 
 drawn on each other. 
 
 “With regard to checks on non-member banks, I can find noth- 
 ing in the Act which permits the acceptance by Federal reserve 
 banks of items for deposit drawn on non-member banks. If the 
 Act can be construed to permit Federal reserve banks to receive 
 such items, I do not think it would be good policy, as there would 
 be a much greater chance for non-member banks becoming mem- 
 bers if the checks were not handled by the Federal reserve banks 
 than if these facilities were extended. 
 
 “Checks on non-member banks will circulate at a discount and it 
 is quite probable that non-member banks will arrange for a place 
 of redemption for their checks through the clearing houses in the 
 Federal reserve cities in the effort to make their checks circulate 
 on a par with the items on member banks of the Federal reserve 
 system.” 
 
 72 
 
BUSINESS OF FEDERAL RESERVE BANKS. 
 
 The business operations of the Federal reserve banks will be 
 fundamentally of two distinct kinds: 
 
 1. Rediscounting- for member banks. 
 
 2. Purchasing specified kinds of paper in the open market 
 under the conditions provided by the act itself. 
 
 From another point of view the business operations may be 
 divided as follows: 
 
 1. Domestic transactions. 
 
 2. Foreign exchange transactions. 
 
 The subject may first be considered under the latter division 
 and then inquiry may be made as to how the business should be 
 viewed from the point of view of the division or classification 
 first suggested. 
 
 DOMESTIC BUSINESS. 
 
 The domestic business of the reserve banks will, as stated, 
 consist primarily in the rediscounting of paper for member 
 banks and in the purchase of paper in the open market. In 
 either case the question is raised how the act must be regarded 
 as applying to the nature of the paper dealt in. As will be seen 
 from a survey of its provisions, the framers of the measure at- 
 tempted to throw about the rediscount and open market trans- 
 actions a series of very careful and detailed restrictions intend- 
 ed to assure the liquidity and unquestionable commercial char- 
 acter of the obligations which were thus taken over by the 
 reserve banks. 
 
 COMMERCIAL PAPER. 
 
 It is recognized that the question what should be accepted 
 as commercial paper eligible for rediscount under the act is 
 one of great difficulty, as well as one which must inevitably 
 affect in a very profound way the operations of the reserve banks 
 from the beginning. 
 
 “Upon the endorsement of any of its member banks, 
 any Federal Reserve Bank may discount notes, drafts and 
 bills of exchange arising out of actual transactions; that is, 
 notes, drafts and bills of exchange issued or drawn for agri- 
 cultural, industrial, or commercial purposes, or the proceeds 
 of which have been used or are to be used for such purposes, 
 the Federal Reserve Boai'd to have the right to determine or 
 define the character of the paper thus eligible for discount 
 within the meaning of this act.” 
 
 Later, (in section 14) Federal Reserve Banks are given 
 power to 
 
 “Purchase and sell in the open market at home or abroad 
 either from or to domestic or foreign banks, firms, corpora- 
 tions or individuals, cable transfers and bankers’ acceptances 
 and bills of exchange of the kinds and maturities by this act 
 made eligible for rediscount, with or without the endorse- 
 ment of a member bank.” 
 
 73 
 
There are other provisions in the act which limit or modify 
 these fundamental clauses but consideration of them may be 
 deferred for the present. 
 
 According as the “character of the paper thus eligible for dis- 
 count” is defined, the scope of the business to be granted to 
 the banks and to be undertaken by them will be greater or 
 less and the volume of their operations, and consequently the 
 extent of their aid to the community will be greater or less. 
 Various questions of a specific nature, therefore, arise at once 
 of which the following may be mentioned: 
 
 1. What is commercial paper in the sense in which the 
 term is used to-day? 
 
 2. Is this popular definition correct, and should it be ac- 
 cepted by the Reserve Board? 
 
 3. If not correct can an immediate change in definition 
 safely be made? 
 
 4. Is there any need for different treatment of the paper 
 made available for rediscount with the endorsement of a mem- 
 ber bank, and that to be purchased in the open market? 
 
 5. What is a commercial, agricultural or industrial trans- 
 action? 
 
 6. To what classes of paper does it normally give rise, and 
 how can a banker assure himself that a given piece of paper 
 had arisen from such a transaction? 
 
 7. What distinction if any should be drawn between paper 
 that grows out of such a transaction, and paper whose proceeds 
 are to be used in such a transaction? 
 
 By answering these questions the basis will have been pro- 
 vided for a thorough analysis of the provisions of the Federal 
 reserve act in regard to the use of commercial paper as a basis 
 for rediscount. 
 
 The language used in the section of the Federal reserve act 
 with reference to commercial paper is modelled upon language 
 used in many proposals of legislation which preceded the reserve 
 act and whose purpose was that of sufficiently limiting the 
 types of paper presented for rediscount so as to avoid the use 
 of bank funds in two general classes of transactions. The lan- 
 guage was intended to be negative rather than positive and 
 the two types of transactions which were regarded with disfavor 
 were the following: 
 
 (a) Those growing out of speculative transactions or in- 
 volving the use of funds for promotion of speculation. 
 
 (b) Those involving the regular, steady, provision of capital 
 for investment purposes with the idea of supplying to different 
 enterprises an additional element of business support quite 
 different from the mere use of banking as an aid to the financ- 
 ing of current transactions. 
 
 Of course in addition to these negative limitations it was 
 intended by the language employed to prevent the banks from 
 
 74 
 
rediscounting paper that necessitated a too remote maturity and 
 naturally to avoid the rediscounting of paper whose soundness 
 was not altogether assured. 
 
 At the present time commercial paper as employed by credit 
 institutions and banks generally includes the following types: 
 
 (a) Ordinary notes signed by an individual, firm or corpo- 
 ration and promising to pay a specified amount either on de- 
 mand or at a stated time. 
 
 (b) Drafts secured by documents (bills of lading, etc.) 
 which are discounted by banks and which bear two commer- 
 cial names. 
 
 (c) Ordinary notes signed by individuals, firms or corpo- 
 rations either on demand or on time and protected by stock, 
 bonds or other collateral with a collateral loan agreement. 
 
 (d) Ordinary notes of the kind already specified protected 
 by a chattel mortgage on crops and the like. 
 
 Investigation shows that of these types of what is ordinarily 
 called commercial paper today the ordinary single-name paper 
 constitutes a substantial proportion. Opinions differ as to the 
 relative amount of this paper as compared with other classes, 
 but there is general agreement as to its importance. Some large 
 concerns estimate that fully 90% of their business is transacted 
 on the basis of such single-name paper. The commercial trans- 
 actions growing out of or represented by such paper are in 
 general as shown in the following hypothetical case: 
 
 A purchases goods for his fall trade amounting to, say, 
 $1,000,000 from the X. Y. Z. Co. of New York City. These are 
 bought on open account with, say, ninety days’ credit. A gives 
 no paper in exchange for them, the seller having simply his 
 general knowledge of A’s credit to protect him. The X. Y. Z. Co., 
 however, offers A a discount for cash within a specified time 
 (say, thirty days), and an additional discount for immediate cash 
 (say within ten days). In order to get this cash, A applies to his 
 bank, making a full statement of his transactions and is granted 
 a loan for which he gives ordinary promissory notes. With the 
 funds thus obtained he pays off the X. Y. Z. Co., getting the 
 advantage of the discount, then settles with the bank as the 
 goods are taken up by consumers and paid for. The transaction 
 is distinctly a “commercial” one and the paper growing out of it 
 is commercial paper in the ordinary sense. In Europe, however, 
 the X. Y. Z. corporation would have insisted upon being paid 
 by a note signed by A and would then have sold this paper or 
 discounted it. Or A might have induced his bank to accept 
 drafts from the X. Y. Z. Co. (properly protecting the institu- 
 tion) in which case the paper would have been an acceptance 
 bearing the name of the bank and the X. Y. Z. Co. It is de- 
 sirable to stimulate the growth of true commercial paper of the 
 latter class as rapidly as possible for several reasons. The clos- 
 ing up of the transaction by the giving of the paper is in itself 
 a good thing, leading to conservatism and caution in the busi- 
 
 75 
 
ness. The tendency of this method is also to distribute loans 
 much more widely, thereby creating a much better and more even 
 division of business among banks. The paper thus created can be 
 sold and traded in, and thereby a wider market with much greater 
 competition and consequently lower rates of interest, can be 
 secured. Furthermore such paper bears on its face, ordinarily, 
 the certification that it grows out of a real “commercial trans- 
 action.” The effort should undoubtedly be to work steadily 
 toward a situation which would encourage the development of 
 this kind of paper and would eliminate or reduce as rapidly as 
 possible the present method of trading on the basis of one-name 
 paper. 
 
 SINGLE NAME PAPER PROVIDED FOR. 
 
 The conclusion that seems to be necessarily reached in con- 
 nection with this subject, however, is that the Federal Reserve 
 Act distinctly contemplates and provides for the use not only of 
 two-name but also of single name commercial paper. This is 
 seen in the fact that the act in the sections already referred to 
 provides for the rediscounting not only of paper whose proceeds 
 have been used in the particular classes of transactions referred 
 to but also of that whose proceeds are “to be used” in that 
 connection. At one time during the progress of the bill through 
 Congress, the provision was even broadened by the insertion of 
 words including for rediscount such paper as might give rise to 
 funds which “may be used” for the purposes referred to in the 
 act. It is believed, therefore, that Congress clearly and un- 
 equivocally intended to recognize under the provisions of the 
 law both classes of paper. This, however, was upon the dis- 
 tinct understanding that such paper, whether it bore one or more 
 names, was not to be admitted to rediscount unless it evidently 
 arose from the classes of transactions referred to or was so 
 clearly for the purpose of providing funds for such transaction 
 as to admit of no doubt. 
 
 In the second place, however, it is believed that paper carry- 
 ing two names bears on the face of it the evidence of a strictly 
 commercial origin which single-name paper never can, without 
 collateral evidence, supply. There is, therefore, a prima facie 
 case in favor of two-name paper which does not exist in that of 
 single-name, and the question is suggested how single-name 
 paper, when admitted to rediscount as it evidently must be under 
 the terms of the law, shall be prevented from being used as a 
 means to obtain current capital or to furnish the basis for specu- 
 lative operations. Various methods have been currently sug- 
 gested, among them the plan of requiring each piece of paper 
 thus presented for rediscount to be accompanied by a certificate 
 on the part of its maker, or of the endorsing bank, or both, 
 that it has originated in connection with a transaction of the 
 permitted kind. Another method that has been put forward is 
 to require such a general certificate on the part of each borrower, 
 insisting that such certificate be made once and for all, or per- 
 
 76 
 
haps at periodical intervals. Still another suggested plan is 
 that of employing a form of note which shall incorporate into 
 its own text a statement that it represents funds whose use is 
 desired for a transaction of the permitted class. Of these 
 various suggestions, the latter is perhaps the best and there 
 may be no harm in putting it into effect, but neither it nor 
 any of its predecessors would be likely to meet the require- 
 ments of the case completely. It is believed that this end can 
 be accomplished only by some process that will give absolute 
 assurance of the use of the funds advanced by the reserve 
 banks in the way contemplated by the law. Clearly, how- 
 ever, the absolute assurance that the particular sum of money 
 advanced by the banks on rediscounted paper has been used in 
 the way prescribed cannot be obtained in practice, nor is there 
 any use in obtaining it, if there be certainty that an equal sum 
 drawn from the liquid resources of the concern receiving the 
 advance is so applied. The purpose of the Federal Reserve 
 Act is thus fundamentally satisfied if evidence be given that 
 the advances made are made for a commercial purpose as 
 shown by the fact that the person or concern in whose favor 
 they are made is engaged in actual business of the kind re- 
 ferred to and is in a liquid condition. This fact can be ascer- 
 tained only by a direct audit of the affairs of the concern, 
 repeated as frequently as circumstances may require, in order 
 to renew the assurance of liquidity which is regarded as the 
 fundamental and essential test of the good faith of the con- 
 cern in making application for funds, not to furnish capital 
 for new enterprises or to take the place of capital that has 
 been sunk, but to carry through short period transactions. 
 
 A suggestion to which very considerable attention has 
 been granted in responsible quarters is that of establishing 
 through action on the part of the Reserve Board a so-called 
 “differential rate’’ on commercial paper of the classes referred 
 to, the rate required to be charged by Federal reserve banks 
 for the rediscount of single name paper, being fixed at, say, 
 14 of \% or perhaps at %% higher than that to be charged 
 for two name paper, the paper of the two classes being sup- 
 posed to be of equal safety, and the difference in rate being 
 designed merely to discriminate in favor of two-name paper. 
 This would probably be as effective a means as any for ac- 
 celerating the movement of the business community towards 
 the substitution of double-name for single-name paper. Pre- 
 cisely how great the discrimination in rate would have to be, 
 and precisely how far it would need to be varied between the 
 several Federal reserve districts is a question that cannot posi- 
 tively be answered pending the definite organization of the 
 districts and the creation of the banks as working units in 
 each of them. The idea is merely suggested here as indicating 
 a feasible and desirable mode of bringing about the end in view, 
 assuming of course that the application of the method is care- 
 
 77 
 
ful so that no injustice may be done through the charging of 
 the higher rate to the paper which is less favorably regarded. 
 
 Still another plan is that of restricting the total amount 
 of single name paper admitted to rediscount to a given per- 
 centage of the gross rediscounts of the reserve bank in ques- 
 tion. This plan has been carefully considered and is believed 
 to be desirable. The estimates that have been made by au- 
 thoritative persons concerning the proper amount of single 
 name paper in relation to two-name vary considerably, some 
 taking the ground that not to exceed 25% of the total redis- 
 counts should consist of single-name and others that not less 
 than 50% might safely be allowed to consist of that kind of 
 paper. It is believed that no definite percentage of this kind, 
 applicable to the whole country could be fairly established. 
 Inquiry has shown quite conclusively that in some parts of the 
 country there is much more two-name paper than elsewhere, 
 business habits having developed somewhat differently in 
 different communities. The restriction of the relative propor- 
 tions of two-name and single-name paper, through rules to 
 be issued by the Federal reserve board and to be applied by 
 the boards of directors of the several Federal reserve banks 
 can be scientifically developed when it is seen through the 
 early experience of the banks in about what proportions the 
 two classes of paper are presented for rediscount. It may 
 easily appear that the proportions in which the paper is offered 
 to the Federal reserve banks will vary quite materially from 
 those in which it has heretofore been offered to individual or 
 member banks. No definite relationship can be laid down with 
 certainty in advance. It can only be stated that wherever pos- 
 sible, the proportion of single-name paper allowed to figure 
 in the rediscounts of a Federal reserve bank should be confined 
 to the lowest basis consistent with the welfare and convenience 
 of the business community. 
 
 A proposal worthy of mention in this same connection but 
 requiring care in its consideration is that note brokers who 
 sell single-name paper to banks of the Federal reserve system 
 shall be required personally to endorse the paper they thus 
 dispose of. In support of this proposition it is urged that the 
 custom prevailed in Europe and has been found effective there. 
 This is only partially true, conditions being quite different 
 abroad from what they are here, but it is probably the case that 
 everything possible should be done to stimulate a greater degree 
 of responsibility on the part of note brokers. At present there 
 are many individuals and concerns in the note-broking business 
 whose financial responsibility may be a matter of some doubt 
 and whose principal effort is to dispose of as much paper as they 
 can, thereby securing for themselves the largest possible 
 amount of commissions. On the other hand, it seems hardly 
 desirable to take a step that would tend to produce a condi- 
 tion of monopoly or semi-monopoly in the note business. To 
 
 78 
 
require endorsements of the kind referred to would undoubt- 
 edly tend to drive the smaller concerns out of business and 
 would likewise tend to promote the formation of very large 
 corporations organized for the purpose of lending their signa- 
 tures to commercial paper, thus making it available for use 
 by reserve banks. In this same group of suggestions, is the 
 recommendation that the note broker whose paper is pur- 
 chased by the reserve banks through member banks shall be 
 required to be regularly examined and audited by a satisfactory 
 accountant. There is no objection to this requirement pro- 
 vided that it be properly applied and that the audit or exami- 
 nation be made under conditions that will not be unreason- 
 ably onerous or of a nature to entail unnecessary or excessive 
 expense upon the broker. 
 
 GENERAL, SUMMARY. 
 
 Summarizing these suggestions, therefore, we may first enu- 
 merate the recommendations which it is believed are at all 
 events not feasible at the present time. 
 
 1. Exclusion of single-name paper whose proceeds are “to 
 be used” for commercial purposes. 
 
 2. Narrow definition of the words “agricultural, commercial 
 or industrial purposes” or transactions. 
 
 The purposes which should undoubtedly be sought and the 
 recommendations corresponding thereto are as follows: 
 
 1. Exclusion of all paper of every kind from rediscount 
 unless those responsible for it are able to make good the con- 
 tention that its proceeds are intended for facilitating or carry- 
 ing out a genuine current business transaction of a kind that 
 shall be self-liquidating within the period set by the language 
 of the act. 
 
 2. Requirement of all possible classes of information on 
 the part of bankers, notebrokers and others bearing upon the 
 origin of the paper offered for rediscount and the purposes to 
 which its proceeds are to be applied. 
 
 The detailed methods that have been suggested for the at- 
 tainment of these objects and which it is believed will prove 
 more or less useful are as follows: 
 
 1. Regular audit of firms or corporations placing single- 
 name paper on the market in order to assure their absolute 
 liquidity and solvency and the liquidity of its assets. 
 
 2. Regular audit of note brokers in order to insure abso- 
 lute knowledge of broker’s responsibility. 
 
 3. Endorsement by note broker of all paper passing through 
 his hands and ultimately presented for rediscount. 
 
 4. Restriction of single-name paper to specified percent- 
 age, say, 25 to 50%, of total paper rediscounted by a reserve 
 bank. 
 
 5. Establishment of differential rate of rediscount for sin- 
 gle-name and two-name paper in order to favor the latter type 
 of security. 
 
 79 
 
6. Use of specified form of note or certificate intended to 
 indicate type of transaction giving- rise to paper. 
 
 The following points at least are, however, deemed essential 
 in determining the practice to be followed by reserve banks: 
 
 1. Commercial paper must be broadly defined as includ- 
 ing two-name paper given in lieu of cash for goods sold and 
 bearing the name of maker and endorser, if discounted, and 
 single-name paper which is largely discounted or sold to pro- 
 vide cash in anticipation of future purchases and sales. Where 
 the price of the commodity involved has been fixed, two-name 
 paper, so far as the seller is concerned, represents a closed 
 transaction, whereas in the use of single-name paper, repre- 
 senting as it does principally money borrowed for future trans- 
 actions, the price remains to be fixed by seasonal demand and 
 trade limitations. 
 
 2. From an economic standpoint, two-name paper may 
 be regarded as having no inherent quality that will develop in- 
 flation, while single-name paper involving, as previously stated, 
 future transactions, may (though not necessarily) promote spec- 
 ulation and thus develop price inflation. Member banks, there- 
 fore, should carefully analyze the business on which single- 
 name paper is to be predicated, differentiating sharply, for pur- 
 poses of rediscount, between that which is to be used to finance 
 accounts receivable or strictly seasonal requirements, and that 
 which is to finance a floating debt or be used for the extension 
 of business that cannot be readily liquidated. 
 
 3. Single-name paper, secured or unsecured, must bear the 
 name of a solvent party whose responsibility is secured by the 
 filing of a satisfactory statement made within one year prior to 
 the date of the discount, or by the filing of a certified copy of 
 such a statement by a responsible person who is m possession 
 of the original. 
 
 4. Such paper must bear the endorsement of a member bank 
 and be accompanied by a statement attached to its schedule of 
 application for rediscounts, signed by an officer of said bank, 
 to the effect that to said officer’s best knowledge and belief the 
 proceeds of the notes discounted have been or are to be used 
 for commercial, industrial or agricultural purposes of a current 
 nature. Such schedule of application must be classified (on a 
 standard form), giving the kinds of business supported by 
 individual items. 
 
 5. Such paper must have a maturity at the time of discount 
 
 of not more than ninety days, except in the case of notes, drafts 
 and bills drawn or issued for agricultural purposes or based on 
 live stock, which may have a maturity of not exceeding six 
 months. The total amount of such six months’ paper to be 
 taken by any one Federal Reserve Bank, however, shall not 
 exceed per cent, of the capital of said bank. 
 
 6. Any Federal Reserve Bank may discount acceptances 
 (bank or other than consignee) based upon the importation or 
 
 80 
 
exportation of goods and which have at the time of discount 
 a maturity of not more than three months and are endorsed by 
 at least one member bank. The amount of acceptances so 
 discounted shall at no time exceed one-half the paid up capital 
 and surplus of the bank for which the rediscounts are made. 
 
 7. Two-name paper must bear the names of two solvent 
 parties, the maker and the endorser. The responsibility of one 
 being reasonably assured by customary credit statements, or 
 the opinion of an officer or director of a member bank formally 
 stated and filed. 
 
 8. Such paper must bear the endorsement of the member 
 bank and be submitted on a schedule separate and apart from that 
 used for single-name paper, but similarly classified as to the kinds 
 of business involved. 
 
 9. Such paper must have a maturity at the time of discount 
 of not more than ninety days, except as provided by the act for 
 six months’ paper based upon agricultural products or live stock. 
 
 10. It is recommended as a general practise that at least one 
 party involved in the discount of two-name paper be required to 
 file a statement with the member bank. 
 
 FUNCTION OF OPEN MARKET OPERATIONS. 
 
 At this point some attention may be given to the question 
 of open market operations. Section 14 of the Federal Reserve 
 Act grants the Federal Reserve Bank power to deal in gold 
 coin and bullion to buy and sell bonds and notes of a public 
 character, to purchase and sell bills of exchange with or with- 
 out its endorsement and to establish such agencies as it may 
 deem best for the purpose of dealing in bills of this kind. It calls 
 for the formation of certain rules and regulations by the Federal 
 Reserve Board, involving — 
 
 (a) Open-market purchases of commercial paper and ex- 
 
 change ; 
 
 (b) Government bonds and short-time Government, State, 
 
 municipal, and other bonds, notes, and bills. 
 
 With reference to these classes of business the following points 
 are noted: 
 
 (a) The scope of open-market operations, so far as the ques- 
 tion of individual and corporate credit is concerned, must rest large- 
 ly with the purchasing bank, subject to suggestions based upon 
 analyses by the credit department of the Federal Reserve Board. 
 It will be necessary, however, for the Federal Reserve Board from 
 time to time to make regulations involving— 
 
 1. The amount of any particular paper permitted to be held 
 
 by any one bank and the aggregate amount of such 
 paper to be held by all the Federal Reserve banks; 
 
 2. The total amount of all open -market purchases held by all 
 
 Federal Reserve banks. 
 
 81 
 
The necessity for such regulations is apparent. The open-market 
 section of the bill was primarily provided to give the Federal 
 Reserve Board the necessary economic control of the domestic 
 money market and to preserve a proper equilibrium in inter- 
 national relations. Specific rules formulated in advance on this 
 general subject are, of course, impracticable. The rules when es- 
 tablished will, moreover, have to be varied somewhat from time 
 to time. 
 
 (b) The Federal Reserve Board should from time to time for- 
 mulate rules and regulations covering purchases and sales involved 
 in subdivision (b) of Article 14, limiting the volume of securities 
 which it would be appropriate for any one Federal Reserve bank 
 to purchase, and also in contemplation of the aggregate volume 
 held by all such Federal Reserve banks. The intent of the act is 
 to have such securities purchased, with the exception of Govern- 
 ment bonds, somewhat approximate the fluid quality of commercial 
 paper. It will therefore be inadvisable for banks to purchase any 
 revenue bills or bonds that are issued in the aggregate in excess 
 of the amount of revenues received by the respective States, dis- 
 tricts, or municipalities beyond the amount which experience shows 
 was received on the annual average of the last preceding two years. 
 No bills or bonds should be purchased which are not issued in 
 anticipation of specific levies or revenues. Federal Reserve banks 
 should file with the Federal Reserve Board comprehensive state- 
 ments involving the experience of all districts and municipalities in 
 relation to taxes and revenues received, and amounts borrowed for 
 the last preceding two years, when purchases are contemplated. 
 
 Banks desirous of purchasing irrigation, drainage, and reclama- 
 tion district obligations maturing within six months shall, prior to 
 making such purchases, file with the Federal Reserve Board a 
 statement of revenues, expenditures, and borrowings of such dis- 
 tricts for the last preceding three years. In all cases both as to 
 State, municipal, or irrigation, drainage or reclamation short-time 
 instruments, where any question is involved not herein covered, 
 specific action will be taken by the Federal Reserve Board based 
 upon the facts presented. 
 
 The open market provisions of the act are of very large 
 importance in two ways: 
 
 (a) In permitting Federal reserve banks to place their 
 resources at the disposal of constituent or member banks even 
 when such constituent or member banks do not apply for re- 
 discounts, inasmuch as the law allows the reserve banks to buy 
 the paper directly in the open market and thereby to insure 
 the placing of its funds in active use should occasion demand. 
 
 (b) In permitting a reserve bank in one district which has 
 surplus funds to relieve the strain upon reserve banks in other 
 districts by buying such surplus of paper as may have c-ome 
 upon the market in those districts, thereby preventing banks 
 in these places from being compelled to refuse to grant redis- 
 counts in cases where the supply of paper is in excess of the 
 
capacity of the banks to take care of at the seasons of the year 
 when an exceptional degree of strain has made itself felt. 
 
 Much has been said of the effect of the open market trans- 
 action in enabling the reserve bank to get funds out into active 
 use at times when they would otherwise be out of use. 
 There are some limitations upon this idea that have prob- 
 ably not been sufficiently considered. Under ordinary cir- 
 cumstances, the reserve banks will not compete with their own 
 members and while they may be expected to compete with 
 certain individual banks even among their own stockholders 
 under special or peculiar circumstances they will naturally do 
 so only when such action is rather urgently demanded. A quite 
 different condition of affairs will exist with reference to the open 
 market transactions, relating to paper put out in other dis- 
 tricts. In so far as this represents a field of activity which is not 
 occupied, or occupied only in a limited degree by individual 
 banks, the reserve banks may be expected to become active 
 buyers of paper originating in such other districts. 
 
 FOREIGN EXCHANGE OPERATIONS. 
 
 The second principal element in the business of the Federal 
 reserve banks will be that of dealing in foreign exchange and 
 of transmitting funds abroad. Precisely what relation this 
 business will bear to the general business of the reserve banks 
 themselves, cannot be predicted, and will undoubtedly vary 
 considerably from bank to bank, according to the particular 
 type of business developed in each of the several institutions. 
 At some of the banks the foreign exchange service may at 
 times be of preponderating importance while at others it is 
 entirely possible that the work may be sporadic or incidental. 
 In the case of some of the banks, it may be found desirable to 
 conduct the exchange operations entirely through the medium 
 of other reserve banks. 
 
 Nevertheless the conduct of the exchange operations for 
 the system as a whole will be of primary importance and will 
 amount to a general control of the foreign financial and mone- 
 tary relationships of the United States. 
 
 The provision of the Federal Reserve Act relating to foreign 
 exchange operations is found in section 14 where it is provided 
 that the banks shall have authority: 
 
 “To open and maintain banking accounts in foreign coun- 
 tries appoint correspondents, and establish agencies in such 
 countries wheresoever it may deem best for the purpose of 
 purchasing, selling, and collecting bills of exchange, and to 
 buy and sell, with or without its endorsement, through such 
 correspondents or agencies, bills of exchange arising out of 
 actual commercial transactions which have not more than 
 ninety days to run and which bear the signature of two or 
 more responsible parties.” 
 
 83 
 
The banks are also authorized: 
 
 ‘‘To buy and sell at home or abroad bonds and notes of 
 the United States and bills, notes, revenue bonds and war- 
 rants with a maturity from the date of purchase of not 
 exceeding six months, issued in anticipation of the collection 
 of taxes or in anticipation of the receipt of assured revenue.” 
 
 In section 13, it is provided that: 
 
 “The rediscount by any Federal Reserve Bank or any bills 
 receivable and of domestic and foreign bills of exchange, and 
 of acceptances authorized by this act, shall be subject to 
 such restrictions, limitations, and regulations as may be im- 
 posed by the Federal Reserve Board.” 
 
 It is thus seen that the Federal Reserve Act makes express 
 provision not only for dealing in foreign exchange and securities, 
 but also for the mechanism necessary for such exchange trans- 
 actions and finally for the regulation and control both of the 
 foreign agencies and of the transactions themselves by the 
 Federal Reserve Board through its regulations. 
 
 It is therefore necessary to indicate first of all the condi- 
 tions under which the reserve banks should operate abroad and 
 their relations to the member banks engaged in similar busi- 
 ness as well as to one another. 
 
 It is recommended that above all in dealing in foreign ex- 
 change the Federal Reserve Banks should act together as a 
 unit. While this is not necessary, and while the reserve banks 
 could undoubtedly do a successful foreign exchange business 
 independently of one another, each establishing its own agencies 
 as it saw fit, it is believed that better results would be obtained 
 if the reserve banks at least had general knowledge of one 
 another’s transactions and were required to act together so far 
 as conditions would permit. It is, therefore, recommended that 
 the policy to be prescribed with reference to foreign exchange 
 by the Federal Reserve Board shall be uniform and that there 
 shall be as little opportunity as possible for the development of 
 conflicting or unnecessarily duplicating orders and policies. 
 Moreover, it is believed that the establishment of agencies by 
 each and every one of the banks would be an unnecessary ex- 
 pense. It is, therefore, suggested that in selecting agents or in 
 establishing offices abroad, the reserve banks shall be required 
 to act jointly. Joint offices for all the reserve banks will ulti- 
 mately need to be established in each of the principal financial 
 centers in foreign countries and pending the time that such 
 joint office is established, it is recommended that consent be 
 given only to the establishment of agencies which shall jointly 
 act for all of the Federal Reserve Banks. The details of this 
 proposal will be fully considered in connection with the ques- 
 tion of establishing branches in general. 
 
 84 
 
GENERAL SCOPE OF FOREIGN OPERATIONS. 
 
 It is possible that the Foreign operations of the Federal 
 Reserve Bank will not be large at first. The ordinary clearance 
 operations of commerce are handled eagerly and adequately by 
 banks already engaged in foreign exchange. Except in cases of 
 stress all exchange is easily absorbed at the current price. It will 
 be necessary, however, for the Reserve Bank to stand ready to 
 negotiate all bills of exchange that may come to it from mem- 
 ber banks in outlying communities or from other Reserve Banks. 
 Rather should the position of the Reserve Bank in this field 
 be that of an overflow reservoir, recouping its balances from 
 the credits created abroad by other Banks engaged in such 
 business and making such advances from time to time as may 
 be necessary to facilitate absorption of exchange or protect 
 gold reserves, that is to say, not interfering with member banks 
 but operating rather from a broad economic standpoint. The 
 Reserve Bank can act as the medium through which the 
 necessities of the Post Office for Foreign Exchange to meet the 
 requirements of the Foreign Money Order Division may be 
 liquidated and otherwise as foreign Fiscal Agent of the Gov- 
 ernment, but must give due consideration to the development of 
 offsetting business. It may be needless for many of the Reserve 
 Banks to enter the foreign field, much depending upon their co- 
 operation through a common agency. It is a matter of grave doubt 
 as to whether it will be necessary for more than one to do so at 
 the start as even under present conditions the Foreign Exchange 
 market for all banks engaged in Foreign Exchange wheresoever 
 located is in New York City. However this may be, the rela- 
 tions of the Federal Reserve Banks and either member or non- 
 member banks in the Foreign Exchange field should be sym- 
 pathetic. The Federal Reserve Bank should have perfected all 
 the machinery to make it a dominant leader to marshal the col- 
 lective forces of the exchanges in times of stress. 
 
 FOREIGN REPRESENTATIVES. 
 
 Arrangements will necessarily be made as soon as feasible to 
 secure banking connections in all of the principal banking centres 
 of the world. It will be unnecessary to establish actual branches 
 in all those places where there are already good banking facili- 
 ties unless the Federal Reserve Board should deem it wise to do 
 so after a general survey of the whole field. The existing facili- 
 ties afforded by foreign banks or even by branches of American 
 banks will afford all that would be supplied by an independent 
 branch. Whether it will be deemed best in spite of this fact to 
 create actual branches with independent banking houses and 
 assigned capital in all places where good banking facilities already 
 exist is a matter of policy as to which no definite statement can 
 here be made. The general question of branches and the crea- 
 tion of such branches abroad will be given special attention at a 
 later point to which attention is accordingly directed. It will at all 
 
 85 
 
events be found that in not a few places the appointment of repre- 
 sentatives will probably be necessary, owing to the fact that ade- 
 quate banking facilities for the promotion of American commerce 
 are not available there. 
 
 CONDUCT OF BUSINESS. 
 
 It is recommended that the services of a foreign exchange 
 expert of known ability who is at the same time familiar with 
 banking in its broadest sense shall be secured. This expert should 
 probably be given the rank of an officer corresponding to that of 
 a vice president in an ordinary bank. Under his direction and 
 through the medium of a deputy acting as his assistant, the 
 foreign operations of the bank should be carried on. This foreign 
 exchange expert will find it desirable at the outset to secure with- 
 out delay connections, whether through the creation of branches 
 or not as may later be decided, with the principal European centres 
 particularly including London, Paris, Berlin, Hamburg, Frankfort, 
 Antwerp, Amsterdam, Rome, Naples, Vienna, St. Petersburg and 
 Zurich. Exchange should be acquired by him with prudence and 
 judgment as to money market conditions at all points, the major 
 portion of resulting balances being of course held in London. His 
 funds thus obtained should be employed in the purchase of short- 
 term paper and bills of exchange as specified under the law ac- 
 cording as business requirements demand. The rule to be ob- 
 served, however, should be that of having the holdings of ex- 
 change in the most liquid form. Dealings in exchange should be 
 carried on both at home and abroad, but it would probably be in- 
 advisable to enter the field as an aggressive operator. The policy 
 to be constantly observed is, unquestionably, that of providing a 
 secondary reserve for the reserve bank. Precisely how much 
 should be regularly invested in exchange with this object in view, 
 cannot be laid down in any definite manner, and, as will be later 
 indicated, could at most be limited to a given percentage of the 
 operations of the reserve bank, although even that is not in this 
 discussion definitely fixed. The funds invested in exchange will 
 of course return an income, but the principal object should be 
 as already stated, that of providing the secondary reserve re- 
 ferred to. It is probable that ultimately a considerable quantity 
 of ordinary exchange operations will be undertaken by the re- 
 serve banks engaged in this branch of business, but no steps 
 should be taken to force such a growth, it being permitted rather 
 to gain a natural development incident to the regular progress 
 of the institution carrying on the operations. 
 
 For the purpose of making clear the details of policy which 
 must be observed in carrying on the foreign exchange business 
 of the reserve banks upon the basis already described a complete 
 set of regulations designed to govern the management of the 
 foreign exchange department of the reserve bank has been worked 
 out as an element in this discussion. 
 
 They are as follows: 
 
 86 
 
I. 
 
 Manager. 
 
 (a) There shall be in charge of the Foreign Exchange De- 
 partment of each Federal Reserve Bank, if such a department be 
 developed, an official to be known as the “Manager of the For- 
 eign Exchange Department,” selected by the Board of Directors, 
 who shall receive an annual remuneration to be decided by the 
 Board. 
 
 (b) This official shall have been actively engaged and be ex- 
 perienced in Foreign Exchange operations. 
 
 (c) Upon appointment, the official mentioned shall furnish 
 
 bond of good and sufficient surety in amount of $ 
 
 (d) The duties of the manager of the exchange department 
 shall be to control the funds of the Reserve Bank carried in 
 Foreign Exchange. He shall have entire charge of the buying and 
 selling of all checks, drafts, demand or time, cable transfers, Bills 
 of Exchange, gold coin, bullion, and any other instruments, se- 
 curities, properties and commodities that the Reserve Bank is 
 authorized to buy or sell under the Law subject to the Regula- 
 tions hereinafter provided. 
 
 (e) The manager shall have the power to employ, through 
 the channels provided in the Regulations, such assistants as he 
 may deem necessary to carry on the business of his Depart- 
 ment. He shall make such recommendations as he may deem 
 advisable for the expansion or improvement of the Bank’s For- 
 eign Exchange operations to the President. 
 
 (f) He or his assistants shall through the usual clerical chan- 
 nels submit daily to the President a report of his operations, 
 showing purchases and sales of exchange, prices at which such 
 purchases and sales were made and the disposition of the Reserve 
 Bank’s foreign balances. It shall be his duty or that of his des- 
 ignated assistants to authorize all transactions, approving all 
 purchases, sales and other operations, subject to the rules and 
 regulations of the Board of Directors. There shall also be 
 submitted to the Board of Directors and to the Federal Reserve 
 Board a monthly report and such other reports as the Federal Re- 
 serve Board may deem advisable or necessary. 
 
 (g) He shall have general supervision under the direction of 
 the President of the exchange operations of all of the bank’s 
 foreign agencies and branches. The Board of Directors shall ar- 
 range for systematic reports from all Foreign Agents and Mana- 
 gers of Foreign Branches. 
 
 (h) There shall also be selected by the Board of Directors an 
 Assistant Manager, who shall act as general assistant. Before 
 receiving appointment he shall comply with the requirements of 
 paragraphs B and C He shall receive a compensation to be de- 
 cided by the Board. 
 
 87 
 
II. 
 
 Funds to Be Invested In Foreign Exchange. 
 
 (a) Unless at the express direction of the Board of Directors 
 or the Federal Reserve Board, there shall at no time be invested 
 in Foreign Exchange an amount exceeding .... percentum of the 
 Reserve Bank’s demand liabilities after deducting from the total 
 of such demand liabilities the total of gold and lawful money on 
 hand or in transit to the Bank, such sum invested, however, not 
 to include the working capital of any branch that may be es- 
 tablished in accordance with the law. Any Federal Reserve Bank 
 not regularly engaged in Foreign Exchange operations may at the 
 discretion of its Board of Directors, invest in Foreign Exchange 
 or transact any and all Foreign business eligible under the law 
 and clear such transactions with foreign countries through the 
 medium of the Foreign Department of any other Reserve Bank 
 that may be actively engaged in Foreign operations, and such 
 other Federal Reserve Bank shall separately record any and all 
 Foreign transactions it may perform for any Reserve Bank inde- 
 pendent of its own operations, and shall render a separate and 
 distinct accounting therefor, and may receive a compensation 
 from such other Federal Reserve Bank for so acting, such com- 
 pensation to be fixed by the Federal Reserve Board on the basis 
 of the pex'iodical turnover. 
 
 (b) When gold coin, or bullion is purchased in foreign coun- 
 tries, out of the amount invested by a Reserve Bank in foreign 
 exchange, for the purpose of importation into the United States, 
 such amount shall immediately be deducted from the total car- 
 ried as Foreign Exchange, and shall be regarded as part of the 
 gold reserve of the Bank. 
 
 (c) When importations of Gold are desired, at the discretion 
 of the Board of Directors or at the direction of the Federal 
 Reserve Board, Banks or Bankers may be employed to import Gold 
 for the account of a Federal Reserve Bank. In such cases the 
 gold coin or bullion must be consigned to the Federal Reserve Bank 
 making the advance and shall be regarded as part of the Gold 
 Reserve of the Federal Reserve Bank, when in transit. 
 
 (d) No clean Bill of Exchange drawn on parties other than 
 Banks or Bankers shall be negotiated by a Federal Reserve Bank 
 without the endorsement of a member Bank. 
 
 (e) Clean Bills of Exchange drawn on Banks or Bankers at 
 longer time than sight, (such maturities, however, not to exceed 
 ninety days sight) may be negotiated by a Federal Reserve Bank 
 upon the guarantee of acceptance of a member Bank. 
 
 (f) Documentary Bills of Exchange drawn on parties other 
 than Banks or Bankers at longer time than sight, provided, how- 
 ever, at not longer than ninety days sight, and where the docu- 
 ments are deliverable upon acceptance may be purchased by a 
 Federal Reserve Bank only with the endorsement of a member 
 Bank. 
 
 (g) All documentary Bills of Exchange drawn on Banks or 
 
 88 
 
Bankers of whatsoever tenor in accordance with Section 13 of 
 the Federal Reserve Act may he negotiated by the Federal Re- 
 serve Bank with the guarantee of acceptance of a member Bank. 
 
 (h) Cable transfers, checks, drafts, and bills of exchange 
 drawn by responsible Banks or Bankers, at the discretion of the 
 Manager, may be purchased by the Federal Reserve Bank, sub- 
 ject to regulations of the Board of Directors. 
 
 (i) The liability, direct or contingent, unless secured, of any 
 Bank or Banker member or non-member shall at no time exceed 
 . . . percentum of the capital, surplus and undivided profits of 
 such Bank or Banker where the amount of capital, surplus and 
 undivided profits is published by requirement of law. Where 
 such capital, surplus and undivided profits is not so determinable, 
 to not exceed an amount to be fixed as a line by the Board of 
 Directors subject to review by the Federal Reserve Board. 
 
 (j) The outstanding liability of any foreign individual, firm, 
 corporation, Bank or Banker, by reason of acceptance on unma- 
 tured Bills of Exchange held or re-discounted by the Reserve 
 Bank shall at no time exceed . . . percentum of the capital, sur- 
 plus and undivided profits of such Bank or corporation, and where 
 the capital, surplus or undivided profits are not so determin- 
 able, to not exceed an amount to be fixed by the Board of Di- 
 rectors, subject to review by the Federal Reserve Board. 
 
 (k) The liability of any individual, firm or corporation as 
 drawer or endorser of any check, draft, bill of exchange, or other 
 instrument negotiated by a Federal Reserve Bank in its foreign 
 operations shall not exceed a line to be fixed by the Board of Direc- 
 tors, subject to review by the Federal Reserve Board, and a record 
 shall be kept of the total liabilities of each individual, firm, or 
 corporation. 
 
 (l) A Federal Reserve Bank shall not purchase and have 
 outstanding at any time in unmatured drafts drawn on Foreign 
 points, where the documents underlying such drafts are to be 
 surrendered against payment only, an amount in excess of 
 . . . percentum of the total amount available for use in For- 
 eign Exchange operations by such Federal Reserve Bank. 
 
 (m) A Federal Reserve Bank shall purchase Foreign gold 
 coins of fineness fixed under the laws of the country where such 
 coins were minted at the mint price of $20.6718+ per fine ounce 
 whenever such coins are presented to it, and such coins when- 
 soever and howsoever acquired shall constitute a part of the 
 Gold Reserve of the Bank ; providing, however, that at no time 
 does such amount of Foreign Gold coins exceed in amount . . . 
 percentum of the amount of Gold the Bank is obliged to main- 
 tain by law. 
 
 (n) Whenever a Federal Reserve Bank purchases cable trans- 
 fers from member or nonmember Banks or Bankers, or any other 
 parties whatsoever, payment for the equivalent shall not be made 
 until the Reserve Bank is advised by telegraph of the receipt of 
 such payment by its Foreign Agent or Branch unless otherwise 
 guaranteed. 
 
 89 
 
(o) Whenever the Federal Reserve Bank sells cable transfers, 
 it shall be in receipt of payment before it may direct such 
 transfer. 
 
 (p) On all purchases or sales of Bills of Exchange and other 
 instruments except cable transfers by a Reserve Bank, payment 
 shall be made in the case of purchase to, and in the case of sale 
 by, a Federal Reserve Bank immediately upon delivery of the Bills 
 of Exchange or other instruments purchased or sold. 
 
 (q) Any or all of the restrictions imposed by these regula- 
 tions may be temporarily suspended by the Federal Reserve Agent 
 subject to review by the Federal Reserve Board. 
 
 III. 
 
 Co rresp ondents. 
 
 (a) There may be selected as required in each principal bank- 
 ing centre of the world at least one bank or banker as corres- 
 pondent subject to the consent of the Federal Reserve Board. From 
 time to time or as the requirements of increased business may 
 direct, and subject to the consent of the Federal Reserve Board, 
 the number of correspondents in any banking centre may he in- 
 creased to two, except as provided in the following paragraph. 
 
 (b) Wherever possible, all correspondents of the Federal Re- 
 serve Banks shall be branches of American banks established in 
 such foreign banking centres, and where there may be more 
 than one branch of an American Bank the business of the Fed- 
 eral Reserve Bank shall be distributed among such Branches in 
 the approximate ratio that the several banks’ capital and sur- 
 plus shall bear to each other. 
 
 (c) Such correspondent shall render a daily report of re- 
 ceipts, disbursements, discounts, and any and all operations under- 
 taken at the direction of or for the account of a Federal Reserve 
 Bank. 
 
 (d) Such correspondent shall render a monthly statement of 
 the account of each Federal Reserve Bank showing in detail all 
 entries to its account and a memorandum of all interest accrued 
 and charges, showing such charges in detail. It shall further 
 send a monthly schedule of all Bills of Exchange, drafts or other 
 instruments, or other property that it may hold on behalf of a 
 Federal Reserve Bank, indicating amount, drawee or acceptor, 
 maturity, and collateral to such instrument, if any. 
 
 (e) Such correspondent shall once each week provide each 
 Reserve Bank with a statement of the contingent liabilities of the 
 Reserve Bank by virtue of endorsement on Bills of Exchange or 
 other instruments which have been discounted or sold on be- 
 half of and for the account of the Reserve Bank. 
 
 (f) There shall exist between the Reserve Banks and corres- 
 pondents a secret code suitable to the transaction of their opera- 
 tions and messages under such code shall be protected by a cipher 
 in the possession of the senior officers of the Reserve Banks, the 
 managers and their immediate assistants. 
 
 90 
 
IV. 
 
 Branches. 
 
 (a) The Board of Directors of each Federal Reserve Bank may 
 from time to time, subject to the consent of the Federal Reserve 
 Board, establish such foreign branches as may be deemed neces- 
 sary or expedient, and unless at the express direction of the 
 Board of Directors or the Federal Reserve Board each Branch 
 shall use (as fixed working- capital) an amount not in excess of 
 . . . percentum of such Reserve Bank’s demand liabilities after 
 deducting- from such liabilities the amount of gold and lawful 
 money on hand or in transit to the Bank. 
 
 (b) All Foreign branches shall be officered by the following, 
 seniority in the order given: 
 
 1 • — ■ Manager. 
 
 2 — Assistant Manager. 
 
 3 — Accountant. 
 
 (c) These Officers shall receive remuneration to be fixed by 
 the Board of Directors. 
 
 (d) The Manager shall have entire charge of the Branch, sub- 
 ject to the direction of the Federal Reserve Bank or banks creat- 
 ing such Branch. His duties shall consist of selecting the Branch’s 
 investments, developing new business, buying and selling Bills of 
 Exchange, gold coin, bullion, obligations of the United States, or 
 any other security eligible by law to be negotiated, subject to 
 the Regulations of the Home Office. He and his assistant shall 
 be responsible for all monies, securities and any and all assets 
 of the Branch and shall make such provision for their safe guard- 
 ing as may be deemed necessary. 
 
 (e) The Assistant Manager shall have charge of the staff 
 and the office, and shall assume charge in the absence of the 
 Manager. 
 
 (f) The Accountant shall have entire charge of the accounts 
 and records of the Branch. He and his assistant or assistants 
 shall make such examinations from time to time as they may 
 deem necessary or as they may be directed. He shall render 
 a daily balance sheet to the Manager and shall submit to the 
 Reserve Bank such statements of the affairs of the Branch as 
 are required by the Regulations. In the absence or disability 
 of both the Manager and Assistant Manager, the Accountant 
 shall assume charge of the Branch. 
 
 (g) A Branch shall make a daily report by mail of its opera- 
 tions to the Reserve Bank, accompanying which shall appear the 
 copy of the balance sheet of such Branch as of the close of busi- 
 ness the preceding day, and shall submit a weekly report of all 
 contingent liabilities by endorsement of Bills, etc., sold or dis- 
 counted, and shall further submit a list of all liability or individ- 
 uals, firms or corporations to the Branch whether as drawer, 
 endorser, guarantor or acceptor. 
 
 91 
 
(h) On the last day of each calendar month the books of a 
 branch shall take up in its Profit and Loss Accounts and Expense 
 Accounts, all interest, commissions, expenses and all other deter- 
 minable incomes or expenditures, and an analysis thereof shall be 
 submitted over the Manager’s signature to the Reserve Bank, in 
 duplicate — one copy to the President of the Reserve Bank, and 
 the other to the manager of the foreign exchange department. 
 
 (i) A schedule of all Bills of Exchange, drafts, checks, notes, 
 or other securities and properties held by the Branch shall be sub- 
 mitted once each month; such schedule shall indicate amount, 
 drawee, acceptor or payor, tenor, maturity, and collateral, if any. 
 
 (j) As of the close of business the last days of February, May, 
 August, and November, the books of each branch shall be closed, 
 clearing into Profit and Loss all amounts standing or accrued as 
 income, or expense, and after charging off all bad debts, the 
 balance in Profit and Loss shall be transferred to the Reserve 
 Bank. 
 
 (k) All losses shall be reported to the Reserve Bank over 
 the signatures of at least two officers. Assets of questionable 
 value shall be reported to the Reserve Bank, and upon confir- 
 mation from the Reserve Bank, may be written off. 
 
 (l) No clean bill of exchange, unless drawn by a bank or 
 banker, shall be purchased by any branch except with the con- 
 sent of at least two of the three officers of the Branch or a 
 line on any name may be fixed by at least two Officers of the 
 Branch, within which line the clean bills of any individual, firm or 
 corporation, may be bought. All matters of credit and responsi- 
 bility of parties shall be subject to the concurrence of at least two 
 Officers and further subject to approval by the Home Office. 
 
 (m) No draft drawn under a Letter of Credit may be pur- 
 chased by any Branch unless a specimen of Letter of Credit and 
 signature of the party who issued it are on file, or unless confirma- 
 tion has been received direct that such a credit is open and that 
 drafts thereunder may be negotiated. 
 
 (n) The Manager may at his discretion deal in or make loans 
 on gold coin or bullion, and shall cause to be rendered to the 
 Reserve Bank a detailed statement of such operations. The state- 
 ment to indicate face value, weight, fineness, and specie value. 
 
 V. 
 
 Accounting of Foreign Exchange Department. 
 
 (a) The regulations covering the accounting system of the 
 Federal Reserve Bank shall apply to the Branches. 
 
 (b) The books of the Foreign Exchange Department shall be, 
 as follows: 1. General Ledger; 2. General Balance Sheet; 3. Journal; 
 4. Cash Receipts Book; 5. Cash Disbursements Book; 6. Agency 
 Ledger; 7. Branch Ledger; 8. Liability Ledger; 9. Remittance Rec- 
 ords; 10. Draft Records, and any other books that may become 
 necessary from time to time in the opinion of the Auditor. 
 
 92 
 
(c) All books shall be bound books, except in cases where 
 expediency requires it, the books may be loose leaf, to which excep- 
 tions, however, the Auditor must concur, and such provisions that 
 he may make in the use of loose leaf records shall be complied 
 with. 
 
 (d) The General Ledger of the department shall carry the 
 control on all accounts in the department, showing - each account 
 separately, except in such cases as the liabilities (see paragraph 
 N) wherein one amount may be shown to control all accounts. 
 The General Ledger shall be posted daily in ink and each page 
 footed in ink and carried forward. 
 
 (e) The General Balance sheet shall be a columnar book show- 
 ing the daily balances in each account on the General Ledger. 
 
 (f) The Journal shall take up all entries not properly handled 
 in the Cash Receipts or Disbursements Books, Remittance or Draft 
 Records. It shall be a columnar book and after proof, a recapit- 
 ulation thereof shall be taken off and handed to the General 
 Bookkeeper. 
 
 (g) The Cash Receipts Book shall record all receipts of cash 
 or checks from whatsoever sources. All receipts of cash unless 
 controlled by preceding entries, shall be acknowledged, a copy of 
 which receipt shall be taken up by the Officer signing the original, 
 and handed to the Auditor. After proof each night a recapit- 
 ulation shall be taken off and handed to the General Bookkeeper 
 of the Department. 
 
 (h) The Cash Disbursements book shall record all cash paid 
 or checks drawn. Unless such payment is controlled by previous 
 enti'y no disbursement may be made without an order, initialed 
 by the Chief Deputy, his assistant, or, in their absence, some 
 temporary authority conferred by the President. After proof 
 each night, a recapitulation shall be taken off and handed to the 
 General Bookkeeper of the Department. 
 
 (i) The Agency Ledger shall record the transactions between 
 the Bank and its Foreign Agents. It shall be posted each day 
 from the books of original entry, proved to the control on the 
 General Ledger at least once a week, reconciled and closed quar- 
 terly. As statements are received monthly, they shall be veri- 
 fied to the postings made from returns indicated by the Daily 
 Advices of the Foreign Agents. All charges incidental to the 
 agent’s operations must be recorded in a book provided for the 
 purpose and verified and initialed by the Deputy or his assistant, 
 and subsequently checked and approved by the Auditor. 
 
 (j) The Branch Ledger shall show the accounts of the Branch- 
 es with the Head Office, this Ledger shall be posted from books 
 of original entry, proved once a week to the general control and 
 reconciled to the Branches’ monthly statement. 
 
 (k) The Liability Ledger shall indicate the names of all par- 
 ties upon whose endorsements or guarantees of acceptance Ex- 
 change has been bought. The total of the line allowed, whether 
 . . . percentum of the capital and surplus or the line approved by 
 
 93 
 
the Board (see Sec. II, Paragraph i. ). As drafts mature or are 
 accepted, and as the responsibilities of the parties terminate, the 
 amount of such draft shall be deducted from the outstanding 
 line. It shall also show the liability of all parties by acceptance 
 on unmatured Bill of Exchange (see Section II, Paragraph J). 
 The balances appearing against any and all parties shall be re- 
 ported to the Board of Directors each week. 
 
 (l) The Remittance Records shall contain the detail of all 
 drafts, cable transfers, Bills of Exchange, etc., purchased and 
 charged to agents or Branches. This record may be loose leaf if 
 expediency so demands and the Auditor approves. No bill may be 
 entered without an authorization of purchase signed by the Deputy 
 or his assistant. A recapitulation shall be given to the General 
 Bookkeeper at the close of each day. 
 
 (m) The Draft Book shall record all sales of checks, drafts, 
 cable transfers and other instruments drawn on and to be credited 
 to any agent or Branch. There shall be kept therein all the 
 detail of such transaction and no draft, check, cable transfer, etc., 
 may be drawn or consummated without an authorization signed 
 by the Deputy or his assistant. After proof, a recapitulation 
 shall be handed to the General Bookkeeper of the Department. 
 
 (n) Among the control accounts on the General Ledger shall 
 appear an account Liability by Endorsement — per contra. Cus- 
 tomers’ Liability on Discounted Paper. This figure shall be altered 
 from time to time by means of a Journal entry. As reports are 
 received from the agents and Branches (See Sec. Ill, paragraph F 
 and Sec. IV, paragraph G) the entries herein ordered shall be 
 made. 
 
 (o) All expenses of the Foreign Exchange Department, except 
 those involved in the operation of accounts such as commissions, 
 charges, Foreign Revenue stamps, etc. (See Section V, Paragraph 
 i), shall be charged to Expense Account maintained on the Gen- 
 eral books of the Bank and supported by a detail book. 
 
 (p) All interest receivable or payable, commissions and other 
 determinable income shall be accrued monthly; all profits on ex- 
 change operations shall be determined and set up in Profit and 
 Loss account quarterly, and all Branch returns shall be carried 
 to Profit and Loss and an estimate of the Profit for the over- 
 lapping month shall be made and passed, based on the return on 
 the average capital used the quarter just received. 
 
 (q) All Profits and Losses shall be cleared into the General 
 Profit and Loss accounts of the Bank on the last days of June 
 and December.* 
 
 *This sketch of the accounting for the foreign exchange de- 
 partment is correlated directly with the accounting plan presented 
 in Appendix I. A different set of records, embodying the same 
 principles, is presented in Appendix II and accompanying forms. 
 
 94 
 
ORGANIZATION OF FEDERAL RESERVE BOARD. 
 
 It is now necessary to devote some attention to the central con- 
 trolling mechanism of the system. The organization of the Federal 
 Reserve Board is partly prescribed by the Federal Reserve act, and 
 is partly left to be determined by the Board itself under the general 
 authority assigned to it by that act. In so far as its organization 
 is prescribed, no discussion needs to be offered. In so far as its 
 organization is left optional with itself it will presumably deter- 
 mine the lines to be followed, when it is created. There is no 
 intention in this report of anticipating what the Board will do 
 with reference to its own internal organization. In discussing 
 the organization of the Federal reserve banks which are under 
 the direct oversight of the Federal Reserve Board, it is, how- 
 ever, necessary to indicate in general terms such elements of 
 the organization of the Federal Reserve Board as will undoubt- 
 edly be required for the proper control of the type of organi- 
 zation contemplated for the several banks. In this report, there- 
 fore, effort is made simply to suggest those features of Federal 
 Reserve Board organization which necessarily must be indicated 
 as complementary to the organization of the reserve banks. 
 
 The outlines of what is believed to be desirable in organizing 
 the Federal Reserve Board may be best set forth in the form of 
 by-laws, as follows: 
 
 BY-LAWS OF 
 
 THE FEDERAL RESERVE BOARD 
 (Organized in 1914 under the Federal Reserve Act). 
 
 ARTICLE I. 
 
 The Chairman. 
 
 The Secretary of the Treasury shall be chairman of the Board. 
 In the absence or disability of the chairman, the Comptroller of the 
 Currency shall be vice-chairman. In the event of the absence or 
 disability of both the chairman and the vice-chairman, the Gov- 
 ernor, and in his absence or disability, the Vice-Governor shall be 
 chairman pro tem. 
 
 ARTICLE II. 
 
 The Governor. 
 
 Section 1. The Governor of the Federal Reserve Board shall be 
 the active executive officer thereof; subject, however to such rides 
 and regulations as may be incorporated herein or may from time 
 to time, by resolution, be established. 
 
 Section 2. The Governor shall have custody of such funds as 
 may be in possession of the Board. He shall open and maintain 
 bank accounts in such institutions as the Board may by resolu- 
 tion designate, and shall sign checks drawn on such accounts. 
 
 Section 3. The Governor shall keep or cause to be kept a con- 
 tinuing record of all receipts and disbursements of the Board. 
 
 95 
 
Section 4. The Governor shall have general charge of all busi- 
 ness of the Board not specifically assigned by resolution to any 
 individual member thereof, or to the committee of the whole. He 
 shall submit a summary of such business at each succeeding meet- 
 ing of the Board. 
 
 Section 5. The Governor shall have custody of the seal of the 
 Board and shall have power to affix the same to all instruments 
 requiring it under the authority of the Board. Such instruments 
 shall be attested by the Secretary. 
 
 ARTICLE III. 
 
 The Vice-Governor. 
 
 Section 1. In the absence or disability of the Governor, his 
 powers shall be exercised and his duties discharged by the Vice- 
 Governor, and in the absence or disability of both of these officers, 
 such powers shall be exercised and such duties discharged by such 
 member of the Board as it may, by resolution, designate chair- 
 man pro tern. 
 
 Section 2. It shall be the duty of the Vice-Governor to co- 
 operate with the Governor in the administration of the general busi- 
 ness of the Board. 
 
 ARTICLE IV. 
 
 The Secretary. 
 
 Section 1. The Board shall appoint a Secretary, whose duty 
 it shall be to attend all meetings of the Board, and keep a record of 
 its proceedings. 
 
 Section 2. The Secretary shall assist the Governor and the Vice- 
 Governor in the administration of the general business of the Board. 
 He shall have general supervision of scientific and expert divisions, 
 devoting himself particularly to supplying the Board with detailed 
 information regarding domestic and international business and 
 banking relations, and such other data as the Board may from time 
 to time require. 
 
 Section 3. In the absence or disability of the Secretary, his 
 duties shall be performed by such member of the Board or the 
 general staff as said Board may, by resolution, appoint Secretary 
 pro tem. 
 
 ARTICLE V. 
 
 The Seal. 
 
 The following is an impression of the seal adopted by the Board. 
 (Seal.) 
 
 ARTICLE VI. 
 
 Meetings. 
 
 Section 1. There shall be a stated meeting of the Board each 
 week day except Saturdays and legal holidays, at such hour of the 
 day as may from time to time be determined by resolution of said 
 Board. 
 
 96 
 
Section 2. A majority of the members present shall constitute 
 a quorum, except that the affirmative vote of at least five members 
 of the Board shall be necessary to require Federal reserve banks 
 to rediscount the discounted paper of other Federal reserve banks. 
 
 Section 3. At least once during each quarter there shall be a 
 joint conference in Washington of members of the Federal Reserve 
 Board and the Federal Advisory Council, at such time as may be 
 mutually agreed upon by said Board and said Council. 
 
 Section 4. At all meetings of the Board the following shall be 
 the order of business: 
 
 (1) Reading or inspection of the minutes of the last regular 
 meeting. 
 
 (2) Report of the Governor. 
 
 (3) Report of the Secretary. 
 
 (4) Reports of members on assigned business, or relative to 
 their particular divisions or bureaus. 
 
 (5) Unfinished business. 
 
 (6) Joint conference with officers or members of Federal Ad- 
 visory Council, when scheduled or otherwise arranged. 
 
 (7) New business. 
 
 ARTICLE VII. 
 
 Budget and Audit. 
 
 Prior to June and December first of each year, the chairman 
 shall appoint a committee consisting of two members of the Board, 
 whose duty it shall be to audit the accounts thereof for the six 
 months’ period for which they shall have been appointed, and re- 
 port to the Board a tentative budget of expenses for the next suc- 
 ceeding six months. 
 
 ARTICLE VIII. 
 
 General Business. 
 
 Section 1. There shall be established by the Board the follow- 
 ing divisions or bureaus: 
 
 Bureau of Currency and Coin. 
 
 Bureau of Foreign Exchange. 
 
 Bureau of Clearings and Domestic Exchange. 
 
 Bureau of Examination and Audit. 
 
 Bureau of Reports and Statistics. 
 
 Bureau of Credit and Discounts. 
 
 Section 2. It shall be the duty of the Federal Reserve Board 
 to provide for a periodical audit of the accounts of, and the securi- 
 ties and currency held by, the various Federal reserve agents. 
 
 , Section 3. The chairman shall once in each six months desig- 
 nate one member of the Board whose duty it shall be to co- 
 operate with its officers in the general supervision of one of its 
 bureaus or divisions. 
 
 97 
 
ARTICLE IX. 
 
 Information. 
 
 Section 1. All persons employed by the Board shall keep invio- 
 late its business, affairs, and concerns, and shall not disclose or 
 divulge the same to any unauthorized person whomsoever, and any 
 employee who shall give information contrary to this by-law shah 
 be liable to immediate dismissal. 
 
 Section 2. The action or policy of the board shall not be ex- 
 pressed through any individual member, but by its duly constituted 
 officers, after formal action by the Board. 
 
 ARTICLE X. 
 
 Amendments. 
 
 These by-laws may be amended at any regular meeting of the 
 Board by a majority vote of the entire Board, provided that a copy 
 of such amendment shall have been delivered to each member at 
 least three days prior to such meeting. 
 
 ARTICLE XI. 
 
 Rules and Regulations. 
 
 Such rules and regulations as may from time to time be adopted 
 by the Board, either in relation to the continuity of its own busi- 
 ness, or to the Federal reserve system, shall be appended to and 
 form a part of these by-laws. 
 
 FEDERAL ADVISORY COUNCIL. 
 
 Section 12 of the Federal Reserve Act provides for a Federal 
 advisory council to consist of as many members as there are Federal 
 Reserve districts. It is required that each Federal Reserve bank 
 shall by its Board of Directors annually select one member of the 
 council, and that the said council shall meet at Washington at 
 least four times a year, as well as oftener if called by the Reserve 
 Board. The council is given power to select its own officers and 
 adopt its own methods of procedure, and it is further given au- 
 thority: 
 
 “By itself or through its officers (1) to confer directly 
 with the Federal Reserve Board on general business condi- 
 tions; (2) to make oral or written representations concern- 
 ing matters within the jurisdiction of said Board. . . . ” 
 
 A review of the provisions of Section 12 as thus set forth 
 shows that the power of the Organization Committee and of the 
 Federal Reserve Board in regard to the organization of the Advisory 
 Council is only of a very broad general kind probably extending no 
 further than the mere making of suggestions. It is, however, 
 recommended that the organization committee shall in organizing 
 Federal Reserve banks make some general recommendations to the 
 said banks with reference to their participation in the task of 
 
 9S 
 
creating this council. The following points are considered to he 
 desirable in the organization of the council: 
 
 1. Appointment of members of the council who shall at least 
 at the beginning be active operating officers, preferably the presi- 
 dents of the several Federal reserve banks. 
 
 2. Establishment of general headquarters in Washington with 
 suitable representative in charge as agent, through whom requests 
 and suggestions may be transmitted to the Federal Reserve Board 
 and who shall transmit information to the Federal Reserve banks 
 at his discretion or as may be asked by them. 
 
 3. Provision of reasonable allowances for this resident agent 
 or officer of the Advisory Council. This point is specifically made 
 subject to the approval of the Federal Reserve Board in the early 
 part of Section 12, and undoubtedly the recommendations made by 
 the Board at the beginning will be largely influential in determining 
 the practice of the several reserve banks. The provision of a suit- 
 able mechanism at the outset will do a good deal toward starting 
 the system upon right lines in the beginning, and it is believed that 
 the general suggestions or recommendations already indicated ought 
 to be applied. 
 
 Consideration should be given to the incorporation in the By- 
 Laws of the Council of the following points: 
 
 (1) Designation of Offices and Election of Officers; 
 
 (2) Powers and Duties of Officers; 
 
 (3) Stated Quarterly Conference at Washington between 
 
 Federal Reserve Board and Federal Advisory Council ; 
 
 (4) Audit of Expenses and Plan for Semi-annual Budget. 
 
 Referring more specifically to the intent of the act in providing 
 
 for conferences with the members of the Federal Reserve Board 
 regarding all matters relative to the Federal Reserve system, it 
 would sseem that the best results would obtain if the active 
 executive officers of the banks of the system participated. 
 The provision that the Federal Advisory Council “shall have 
 power, by itself or through its officers,” implies the ne- 
 cessity of continuity of action at Washington in the 
 
 performance of its duties. The executive officers of the 
 
 Federal Reserve banks manifestly would not be available as 
 
 officers of the Council. It is therefore suggested that it be deemed 
 appropriate for the Council to choose a paid officer or officers, who 
 shall reside in Washington and maintain an office in the general 
 interests of the Federal Reserve banks. They should, of course, co- 
 operate with the Federal Reserve Board in the general interests of 
 the Federal Reserve system. 
 
 If the paid officers of the Federal Reserve banks are chosen as 
 members of the Federal Advisory Council, as herein suggested, 
 there would be no need for their further compensation, other than 
 travelling expenses and maintenance charges during the period of 
 their meetings. 
 
 The compensation of the officers of the Federal Advisory Council, 
 the office rent (unless otherwise provided by the Secretary of the 
 
 99 
 
Treasury), the maintenance of the clerical force, and other expenses, 
 should be assessed upon the various Federal Reserve Banks in the 
 same manner as is provided in the act for the payment of ex- 
 penses of the Federal Reserve Board. 
 
 CODE BOOK. 
 
 The Federal reserve banks should be provided with a private 
 code for use in the cable and telegraphic transmission of advices 
 relative to their business. Such codes are in use in the more im- 
 portant existing banks, each such bank developing its own code, 
 adapted to its own uses and employed for the purpose of trans- 
 mission of cipher messages. It is recommended that such a code 
 be developed for the joint use of the Federal reserve banks and of 
 the Federal reserve board and that this be done at an early date, 
 the work being placed in the hands of one of the recognized code 
 experts who are familiar with existing methods of doing this work 
 and who are trustworthy. In the system of clearing and trans- 
 ferring credits which has been worked out in the present report, 
 there is a large field for the constant use of telegraphic advices; 
 and the Federal reserve board will find that such advices will be 
 largely relied upon in its own communications with the reserve 
 banks. That such communication will in many instances be of a 
 necessarily confidential nature is obvious and provision for a suit- 
 able means of guarding the messages during transmission, while 
 reducing their length to a minimum should be promptly made. 
 
 ACCOUNTING SYSTEM. 
 
 Reference has already been briefly made to the question of 
 accounting. It is now necessary to consider that topic in detail. 
 
 In dealing with accounting it has been found that there would 
 be a necessary difficulty in determining the precise form to be 
 given to the books and records of the Federal reserve banks in 
 the absence of positive knowledge as to the policy to be finally 
 adopted with reference to their clearing, exchange, and other 
 functions. If the banks are to be confined to comparatively 
 limited operations at the outset the form of records then to be 
 employed would naturally take a certain shape; if the banks are 
 to be given a broad scope either at the beginning or shortly 
 thereafter, with large clearing functions, the extent of their op- 
 erations, and the speed with which their daily transactions would 
 require to be recorded would call for a different method of treat- 
 ment. Differences of opinion naturally prevail among accounting 
 authorities with respect to various details in the recording of 
 bank transactions, and some of these details are of a nature 
 which unavoidably alters in a material degree the framing of the 
 accounting system. Again there is difference of view with re- 
 spect to the extent to which the transactions could be recorded 
 by hand with pen and ink and the extent to which machines 
 could and should be employed. 
 
 It has therefore been deemed wise to present two distinct 
 
 100 
 
sets of forms for the use of the Federal reserve banks. Of 
 these, the first has been prepared under the immediate direc- 
 tion of the firm of Marwick, Mitchell, Peat & Co., Chartered and 
 Certified Accountants, of New York City, and is herewith pre- 
 sented as Appendix I; the second — a system of mechanical ac- 
 counting — has been prepared under the direction of Messrs. 
 Harry E. Ward, Cashier of the Irving National Bank of New 
 York City, and C. C. Robinson, Auditor of the Irving National 
 Bank, and is herewith presented as Appendix II. Very sincere 
 expressions of appreciation are offered with respect to the work 
 of Messrs. Ward and Robinson, who in response to the invitation 
 of the committee have designed this system of mechanical account- 
 ing, and have been animated solely by a high sense of public ser- 
 vice in so doing. 
 
 Close study and cooperation in the preparation of the account- 
 ing systems have, of course, been given throughout by the mem- 
 bers of this committee. At the outset a sub-committee on account- 
 ing consisting of Messrs. Benton, Wolfe, and Dawson and another 
 on mechanical accounting consisting of Messrs. Farnham, Fisher 
 and Willis were named. 
 
 DATE OF INSTALLATION. 
 
 It is earnestly recommended: 
 
 1. That all Federal Reserve Banks be simultaneously opened 
 and that they be throughout operated upon a uniform basis. 
 
 2. That the Federal Reserve Banks be opened with their func- 
 tions as nearly complete and fully developed as may be, and that 
 they shall not be opened until the main features of their methods 
 can be prescribed. 
 
 3. That before they begin business there shall be called in 
 Washington a general council of operating officers, that all may 
 be consulted in connection with the prescribed technique. 
 
 Respectfully submitted. 
 
 H. Parker Willis, Chairman. 
 Edmund D. Fisher, 
 
 Andrew A. Benton, 
 
 Joseph A. Broderick, 
 
 O. Howard Wolfe, 
 
 Ralph Dawson, 
 
 Stephen H. Farnham, 
 
 Preliminary 
 Committee on 
 Organization 
 
 101 
 
APPENDIX I. 
 
 (Accompanied by Portfolio of Forms No. I.) 
 
 In furtherance of the plan to develop a complete scheme for 
 the organization of the Federal reserve banks, the committee de- 
 termined to present methods whereby every element in its system 
 could be suitably recorded in a proper accounting plan. To this 
 end the aid of the firm of Marwick, Mitchell, Peat & Co., chartered 
 and certified accountants, of New. York city, was obtained, and 
 Mr. Andrew A. Benton of that firm was invited to become a mem- 
 ber of the committee. Mr. Benton, with the cooperation of the 
 staff of the firm referred to, and in conjunction with a sub-com- 
 mittee including Messrs. Wolfe, Broderick, and Dawson, planned an 
 accounting system designed to afford the basis for the records of 
 the work of the Federal reserve banks. 
 
 The matter prepared as above indicated is presented in the form 
 of a report from Messrs. Marwick, Mitchell, Peat & Co., and is 
 as follows: 
 
 The Preliminary Committee on Organization, 
 
 New York City: 
 
 Gentlemen : 
 
 In accordance with your instructions, we have designed a sys- 
 tem of accounting suitable for the requirements of the regional 
 banks to be organized under the Federal Reserve Act of December 
 23 , 1913 . 
 
 We herewith submit a report descriptive of the proposed sys- 
 tem, accompanied by copies of the forms necessary for its operation. 
 
 INTRODUCTION. 
 
 Our constant endeavor in devising the system of accounting for 
 the Regional Banks has been to combine simplicity and directness 
 of records and procedure with that comprehensiveness of control 
 so essential in bank accounting. In the development of the system, 
 therefore, every effort has been made to simplify and abridge the 
 clerical routine by the use of manifold forms where initial entries 
 could be utilized for a number of purposes; to organize the de- 
 partments and procedure so that needless duplication of work and 
 records would be avoided; and finally, by the introduction of special 
 Departmental Settlement forms which would serve both for the 
 departmental proof and the Auditor’s control, to centralize in the 
 Audit Division complete control over the daily operations. 
 
 A few typical examples will serve to illustrate the extent to 
 which reentry of transactions has been avoided by the use of mani- 
 fold forms. In the Loan Department there will be prepared at one 
 writing the Loan Register entry and the Liability Ledger Voucher 
 from which the debit entries in the Liability Ledgers will be check- 
 ed and the credit entries posted upon maturity of the loan. The 
 form devised for use in connection with transfers to banks in 
 other districts will permit of the preparation at one writing of the 
 
 102 
 
credit or charge to the Regional Bank, the office record, and the 
 advice to be sent to the Member Bank affected. The Member 
 Banks’ form for returning' items unpaid provides for the prepara- 
 tion at one writing' of the letter of enclosure to the Member Bank 
 to which the item is returned, authorization to recipient to credit 
 its Regional Bank; advice to the Regional Bank of the charge to 
 its account for the item; authorization of the transfer of such 
 charge to the Regional Bank in whose district the item originated, 
 and finally, the Member Bank’s record of the return of the item 
 and of its charge to the Regional Bank from which received. In 
 the Bookkeeping Department there will be prepared at one writing 
 the Regional Bank's Ledger record of its transactions with the 
 Member Banks and the statements of account and advices to be sent 
 the Member Banks. While special attention has been given to ar- 
 ranging these and all other forms accompanying this report so 
 that they can be used with any of the standard adding and type- 
 writing machines now on the market, no radical changes in the 
 accounting system should be necessary were special machines 
 utilized. 
 
 In the planning of the departments, the aim has been to restrict 
 them to the smallest number required for the expeditious and cor- 
 rect handling of the work, to group the departments and operations 
 so that conflict of duties and consequent duplication of work would 
 be avoided, and finally, by compelling departments handling funds 
 to account to another department for such funds, to have the de- 
 partments themselves automatically check each other’s work. The 
 extent to which duplication of work and records has been over- 
 come by planning the procedure so that the items will go direct 
 from the department in which they originate to the final recording 
 department, is illustrated by the following: 
 
 Upon receipt, checks drawn by Member Banks on their Regional 
 Banks will be sorted and listed on proof sheets, the number of the 
 Member Bank inserted, and both the proof sheets and the checks 
 forwarded to the Bookkeeping Department. The proof sheets will be 
 delivered to the Journal clerks, who. will post the totals shown 
 thereon to the proper accounts in the Member Banks Journal. The 
 checks themselves will be utilized by the ledger clerks for prepar- 
 ing the Ledger record and the Daily Statement to be sent to the 
 Member Banks. As the entries in the Journal will be compiled 
 from the proof sheets and those on the Ledger direct from the 
 items, and a daily comparison made of the two sets of balances, it 
 is obvious that this procedure affords every possible protection 
 against errors — and moreover with only two entries of the item. 
 
 The following is a brief description of the proof system by 
 means of which the Audit Division will be able to maintain com- 
 plete control over the work of the various departments whose 
 transactions affect the figures in the Daily Statement of Condition, 
 departmental Settlement Sheets (Form A-2) have been provided 
 on which the various departments — or subdivisions of de- 
 partments, in the case of the Clearings and Transit Departments — 
 
 103 
 
will be required to balance their work independently but along 
 uniform lines. The upper section of this form is ruled for entry of 
 the debits and credits of the departments to the Member Banks, 
 Government Deposits, General, and other accounts, and the lower 
 section for entry of the inter-departmental debits and credits 
 in respect of items delivered to or received from them, and such 
 other departmental transactions as may arise. Each department 
 receiving items from another department being required to enter 
 them on its settlement sheet to the credit of the department charg- 
 ing them, it is apparent that for each debit and credit in a certain 
 department there should be a corresponding credit or debit in 
 some other department. At the close of business each day the 
 totals of the Departmental Settlement Sheets are to be assembled 
 by the Auditor on the General Proof Sheet. This General Proof 
 Sheet will at once reveal any errors in the work of the different 
 departments and will serve to centralize in the Audit Division com- 
 plete control over the daily operations of the bank by furnishing 
 the means for tracing and verifying all inter-departmental entries. 
 Furthermore, this control will be obtained without unnecessary re- 
 listing, for the items will go direct from the various Tellers’ Depart- 
 ments to the Bookkeeping Department. 
 
 EXECUTIVE AND CLERICAL ORGANIZATION. 
 
 On Exhibit “A” accompanying this report, we show in graphic 
 form the executive and clerical organization and the proposed dis- 
 tribution of duties. It will be seen by reference to this Exhibit 
 that the clerical organization consists of a Banking Division, -which 
 will include the Loan and Investment Securities, Tellers, Transit, 
 Foreign Exchange, and Bookkeeping Departments; an Audit Divi- 
 sion which will be responsible for the verification of the depart- 
 mental proofs, records and securities; and a Credit Division to 
 which will be entrusted all matters relative to the securing and 
 compiling of data in regard to loans, investments, etc. 
 
 CHIEF CLERIC. 
 
 The Chief Clerk will be the intermediary between the officers 
 and the clerks engaged in the Banking Division. All instructions 
 of the officers affecting the clerks in this Division are to be issued 
 through the Chief Clerk, who should be held responsible for the 
 fulfilment of such instructions, and also for the prompt and effi- 
 cient conduct of the routine work of the Division and for the gen- 
 eral discipline of the clerks under his jurisdiction. 
 
 Subject to the approval of the officer in charge, the Chief Clerk 
 should arrange for the filling of temporary vacancies occasioned 
 by illness, vacations, etc., and for the purchase of stationery and 
 supplies. 
 
 LOAN AND INVESTMENT SECURITIES DEPARTMENTS. 
 
 The Loan and Investment Securities Departments will comprise 
 the Rediscounts Department, the Open Market Purchases Depart- 
 
 104 
 
ment, and the Investment Securities Department. Explanatory of 
 the functions of these Departments and the records to be main- 
 tained therein, we submit the following: 
 
 Rediscounts and Open Market Purchases department. 
 
 The Rediscounts and Open Market Purchases Departments will 
 be responsible for the proper handling and custody of the notes re- 
 discounted for Member Banks and the paper purchased in the open 
 market, and also for the maintenance of the books and forms re- 
 quired for recording the transactions and collecting such of the 
 loans as are payable out-of-town. Briefly, the duties of these de- 
 partments will include the examination, as to their regularity, of 
 the notes, drafts, etc., received: the calculation of the interest, dis- 
 count, and maturities; the entering of the paper in the Discount 
 Registers, Maturity Records, and Liability Ledgers; the filing of 
 the paper pending collection, which is to be effected through Mem- 
 ber Banks in the event of the paper being payable out-of-town, 
 or through the Note Teller’s Department if payable in the city in 
 which the Regional Bank is situated; and the posting of the 
 credits for payments in the Liability Ledgers. 
 
 The forms to be used in the Rediscounts and Open Market 
 Purchases Departments being either similar or common to both, the 
 two departments will be dealt with as a unit in the ensuing de- 
 scription of the forms required. 
 
 Authority to Rediscount (B-l). This form when executed will 
 be a certificate reciting that the Board of Directors of the Member 
 Bank has authorized certain of the officers to rediscount with, sell 
 to, or borrow from their Regional Bank. A copy of this form is 
 to be executed by each Member Bank. 
 
 Application for Loam (B-2). An application is to be executed 
 on this form by the Member Bank and submitted to the Regional 
 Bank with each schedule of notes, drafts, and bills of exchange 
 offered for rediscount. 
 
 Schedule of Notes, Drafts, and Bills of Exchange offered for 
 Rediscount (B-3). This form, after completion by the Member 
 Bank, is to be forwarded to the Regional Bank together with the 
 Application for Loan, Form B-2. 
 
 In order that the Regional Bank may have sufficient details 
 of the paper offered for rediscount, provision has been made for 
 Inclusion in this schedule of the number, name, and location of the 
 offering bank; the name, address, and business of the maker or 
 drawer; the acceptor, endorser, or collateral; where payable; date 
 of note; due date; discount rate, and face amount of note. 
 
 Register of Rediscounts (B-4) ; Register of Open Market Pur- 
 chases (B-5). As the notes, drafts, or bills are received from the 
 Member Banks for rediscount, or purchased in the open market, 
 they are to be entered directly from the notes in the respective Reg- 
 isters. These Registers are arranged so as to show for each item, 
 the consecutive index number; the date rediscounted or purchased; 
 date of note; due date; time; rate of discount; amount of note; 
 
 105 
 
discount; proceeds; for whom rediscounted or from whom pur- 
 chased; the maker or drawer; the acceptor, endorser, or collateral, 
 and where payable. The “a” sections of these forms will be clas- 
 sified as to City and Country items, and thereafter filed in chrono- 
 logical order according to due dates, while the “b” sections will be 
 placed in binders and will constitute the Discount Registers proper. 
 
 Credit tickets for the proceeds of the notes, etc., rediscounted 
 or purchased in the open market will "be prepared at intervals 
 during the day and forwarded to the Bookkeeping Department. 
 
 At the close of business, tickets covering the day’s totals of the 
 rediscounts and open market purchases, and the discount received 
 on each class of paper, as shown by the respective Registers, are 
 to be prepared and forwarded to the Bookkeeping Department. 
 
 City Maturity Record (B-6) ; Country Maturity Record ( B-l) . 
 After the notes, drafts, etc., have been recorded in the Discount 
 Registers, they are to be classified as to “City” and “Country” items 
 and entered in the proper Maturity Record under the respective 
 due dates. As the tickets prepared at the time the entries are 
 made in the Discount Registers will be filed in chronological order 
 according to due dates and will be available for reference, it will 
 be necessary to enter in the City Maturity Record only the index 
 number and the amount of the note, and in the Country Maturity 
 Record only the index number, the amount of the note, and where 
 payable. For such of the items as are sent to Member Banks for 
 collection, the date on which the receipt of the item is ac- 
 knowledged by the collecting bank is to be subsequently added 
 from Form B-l 3. 
 
 At the close of business each day, tickets for the totals of the 
 respective maturities are to be prepared and forwarded to the 
 general bookkeeper for credit to the controlling accounts. 
 
 The Maturity Records are to be footed weekly, and from the 
 footings so obtained will be compiled the totals for the 30-day, 60- 
 day, and 90-day paper rediscounted or purchased by the Regional 
 Bank. 
 
 Notes or other items rediscounted for Member Banks and not 
 paid at maturity are to be charged to the account of the Member 
 Bank for which rediscounted, and returned. Paper bought in the 
 open market not paid at maturity is to be charged to an account 
 entitled “Past Due Paper,” pending payment or other disposition. 
 
 Member Banks’ Liability Ledger (B-SJ. This form is designed 
 to provide a detailed record of the contingent liabilities of each 
 Member Bank to the Regional Bank. 
 
 A separate sheet will be opened for each Member Bank on which 
 will be recorded in the “Rediscounts” section, the date on which the 
 item was rediscounted; its index number; the maker or drawer; the 
 acceptor or endorser; the due date; the discount rate, and the re- 
 discount amount. When paid, the date and amount of the pay- 
 ment will be entered in the “Credits” columns and the amount in 
 the “Balance” column reduced accordingly. In the section desig- 
 nated “Other Liability” will be entered the details of the contingent 
 
 106 
 
liability of the Member Banks as acceptors or endorsers on paper 
 purchased in the open market. 
 
 The debit entries are to be posted direct from the notes and 
 proved by comparison with the tickets prepared at the time the 
 entries are made in the Discount Registers. 
 
 Liability Ledger — Rediscounts and Open Market Purchases 
 (B-9). In this record will be entered under the names of the 
 makers or acceptors, their liability to the Regional Bank in respect 
 of notes rediscounted by member banks and paper purchased in 
 the open market. 
 
 In addition to the name, address, business, and rating of the 
 borrower, there will be entered in this Ledger the date on which 
 the note, draft, etc., was rediscounted or purchased; the index num- 
 ber; from whom received; the endorsers; the due date, and the 
 amount of the liability, subdivided as to rediscounts and open 
 market purchases. When paid, the date and amount of the pay- 
 ment will be entered in the “Credits” columns and the amount in 
 the “Balance” column reduced accordingly. 
 
 Should the notes, drafts, etc., be later hypothecated with the 
 Federal Reserve Agent, this information is to be entered in the 
 "Deposited" column on the line containing the description of the 
 paper. When returned by the Federal Reserve Agent, the date is 
 to be entered in the “Withdrawn” column and the amount in the 
 "Balance” column reduced accordingly. This balance can be very 
 readily proved by listing the open items. 
 
 From the foregoing it will be seen that this Ledger will show 
 both the extent of the borrowers’ liability and the location of the 
 paper — that is, whether it is in the possession of the Regional Bank 
 or whether it is held by the Federal Reserve Agent as collateral. 
 
 In the event of paper being sold by the Regional Bank prior 
 to maturity, the date and amount would be posted in the "Credits” 
 column and the name of the pui'chaser recorded in the “Sold to” 
 column. 
 
 The debit entries are to be posted direct from the notes and 
 proved by comparison with the tickets prepared at the time the 
 entries are made in the Discount Registers. 
 
 Contingent Liability Record — Rediscounts and Open Market 
 Purchases (B-10). Separate sheets of this form are to be used 
 for each endorser on paper rediscounted or purchased in the open 
 market. The form will be headed with the name of the endorser, 
 his address, business, and financial rating, and will show for each 
 item the date on which it was rediscounted or purchased; the index 
 number; the maker or acceptor; the liability amount; the credits 
 for payments, and the balance — representing the net contingent 
 liability. 
 
 The debit entries are to be posted direct from the notes and 
 proved by comparison with the tickets prepared at the time the 
 entries are made in the Discount Registers. 
 
 Weekly Report of Borrower’s Liability (B-ll). It is through 
 the medium of this form, wdhch is to be prepared weekly by the 
 
 107 
 
Regional Banks from the Liability Ledgers, that the Federal Re- 
 serve Board will obtain the data it requires as to the extent and 
 nature of the liabilities of the customers of the Member Banks to 
 the Regional Banks and the amount of the paper hypothecated 
 by the Regional Banks with the Federal Reserve Agent. Two 
 copies are to be made, one of which is to be forwarded to the 
 Board and the other retained by the Regional Bank. So as to 
 minimize the amount of work involved in the preparation of this 
 report, it is suggested that lines of less than say $10,000.00 be ex- 
 cluded. 
 
 Being designed on the unit plan, it will only be necessary for 
 the Federal Reserve Board to assemble in alphabetical order, ac- 
 cording to makers or acceptors, the reports received from the 
 various Regional Banks in order to ascertain the aggregate lia- 
 bility of each individual borrower for notes rediscounted or pur- 
 chased by the Regional Banks. 
 
 Weekly Report of Member Banks’ Credit Balances and Re- 
 discounts (B-12). This form is somewhat similar to Form B-ll, 
 except that it is intended to show, for each Member Bank, its 
 average credit balance with the Regional Bank, the amount of 
 notes rediscounted by it with the Regional Bank, and the con- 
 tingent liability of the Member Bank in respect of acceptances 
 or endorsements on paper purchased by the Regional Bank in the 
 open market. 
 
 The data required for the completion of this form will be 
 obtained from the Member Banks’ Liability Ledger, Form B-8, 
 and from the Member Banks’ Ledger, Form “G-4a.” 
 
 Collection Form for Notes Owned Payable in Discounting Bank’s 
 District (B-13). The several copies of this form w r ill serve re- 
 spectively as a letter of enclosure, receiving bank’s acknowledg- 
 ment, charge ticket, and office record, of notes owned which are 
 sent to a Member Bank for collection. It is to be prepared in 
 quadruplicate, and the following disposition made of the various 
 copies: 
 
 Original — To be sent to collecting bank with item, as a letter of 
 enclosure. 
 
 Duplicate — To be sent with item to collecting bank, by which it 
 will be signed and returned to Regional Bank. 
 Upon receipt by Regional Bank, the date of 
 acknowledgment is to be entered on the Country 
 Maturity Record, Form B-7, and duplicate filed 
 in correspondence file. 
 
 Triplicate — To be filed by Regional Bank in Note File until ma- 
 turity, then turned over to the Note Teller’s De- 
 partment. Thereafter the collecting bank will 
 be charged with the amount of the item and 
 triplicate sent forward as an advice of such 
 charge. 
 
 Quadruplicate — To be retained by the Regional Bank in numeri- 
 cal order as a permanent record. 
 
 108 
 
Collection Form for Notes Owned Payable in Other Districts 
 (B-liJ. This form is to be used in forwarding to other Regional 
 Banks, notes owned which are payable outside the district of the 
 forwarding Regional Bank; it consists of an original to be sent 
 to the collecting Regional Bank with the items and a duplicate to 
 be retained by the forwarding bank. 
 
 On the due date of the items, the duplicate, or debit sheet, is 
 to be turned over to the Note Teller’s Department and used as a 
 charge against the collecting Regional Bank. 
 
 Record of Notes Hypothecated with Federal Reserve Agent 
 (B-15J. This form, which is to be prepared in duplicate, and is 
 to accompany each lot of notes turned over to the Federal Reserve 
 Agent as collateral for Federal Reserve Notes issued, provides for 
 the recording of the serial numbers given the notes by the Federal 
 Reserve Agent and by the Regional Bank, and the amounts of the 
 notes hypothecated. 
 
 Upon delivery of the notes, the original of this form is to be 
 signed by a representative of the Federal Reserve Agent as an 
 acknowledgment of the receipt of the notes, and then returned to 
 the Regional Bank. The duplicate is to be retained by the Fed- 
 eral Reserve Agent as his record of the transaction. 
 
 When the notes are returned to the Regional Bank by the 
 Federal Reserve Agent, the date on which they are so returned 
 is to be inserted on both copies; consequently both the Federal 
 Reserve Agent and the Regional Bank will be in possession of a 
 complete record of the notes pledged as collateral with the Agent 
 and the disposition made of the notes. 
 
 Record of Collateral Withdrawn from Federal Reserve Agent 
 (B-16J. Aside from the fact that it is to be used in withdrawing 
 notes deposited as collateral, this form is somewhat similar to 
 Form B-15. In the case of Form B-16, however, the original is 
 to be retained by the Regional Bank, while the duplicate is to be 
 signed by the Regional Bank as an acknowledgment of the receipt 
 of the notes, and thereafter returned to the Federal Reserve Agent. 
 
 Collateral Card (B-17). The particulars to be recorded on this 
 form will include the name and address of the borrower; the serial 
 number, amount, date, and other details of the loan; and the quan- 
 tity, description, and market value of the collateral. Upon payment 
 of the loan and surrender of the collateral, the borrower or his 
 representative is to sign the collateral card in acknowledgment of 
 the receipt of the securities described thereon. 
 
 Record of Securities Held as Collateral (B-18J. This form will 
 be used for classifying according to issues, the securities pledged 
 as collateral. A sheet will be reserved for each issue on which will 
 be entered the name and description of the security, the date 
 pledged or surrendered, the number and name of the loan upon 
 which pledged, the number of bonds or shares pledged or sur- 
 rendered, and the total par value of the securities pledged, 
 surrendered and on hand. 
 
 Accruals. To ensure the accuracy of the published statements 
 of condition and facilitate the verification of the interest earned on 
 
 109 
 
rediscounts and paper purchased in the open market, it is essential 
 that the Regional Banks should nave an accrual system which will 
 permit of the ascertainment of the actual earnings from this source 
 at daily or weekly intervals. By the adoption of the following pro- 
 cedure the amount of interest earned on loans outstanding could be 
 determined daily with very little difficulty. 
 
 At the close of business each day the total of the interest col- 
 lected as shown by the “Discount” columns in the Register of Re- 
 discounts, Form B-4, and the Register of Open Market Purchases, 
 Form B-5, should be credited to the General Ledger account en- 
 titled “Unearned Interest.” Simultaneously, a charge should be 
 made to this account — the proper earnings account being concur- 
 rently credited — for one day’s interest on the total of the loans 
 outstanding. To facilitate the computation of this charge, a col- 
 umnar book containing debit, credit and balance columns for the 
 loans at each interest rate should be provided, in which should be 
 entered the net increases or decreases in the loans made or paid 
 each day and the revised totals of the loans outstanding at the 
 various interest rates. 
 
 Twice a year the balance in the Unearned Interest Account 
 should be proved by listing in a columnar book, under the respec- 
 tive interest rates, the amount and unexpired days for each loan 
 outstanding, and computing therefrom the total interest unearned. 
 
 Investment Securities Department. 
 
 To this department will be assigned the custody of the bonds 
 and other securities in which the Regional Bank has invested and 
 all matters relating to the recording of the purchases, sales, and 
 maturities of such securities, the receiving of securities purchased, 
 and the delivery or redemption of securities sold or matured. 
 
 Investment Register (B-19). Separate sheets of this register are 
 to be used for each issue of securities acquired. These sheets will 
 be headed with the name and description of the security, the date 
 of maturity, the rate of interest, and where such interest is payable. 
 For the recording of the individual transactions, columns are pro- 
 vided in which will he entered the date purchased or sold, the 
 basis and percentage prices; the number, par value and cost of the 
 bonds, notes, etc., purchased; the number, par value, and selling 
 price or redemption value of the securities sold or redeemed, the 
 falance on hand, and the profit or loss on sales. Ihe reverse of 
 this form is to be utilized for recording the serial numbers of the 
 securities purchased, sold, and redeemed. 
 
 TELLERS' DEPARTMENTS. 
 
 The following is a list of the Tellers’ Departments: 
 
 Paying Teller’s Department. 
 
 Receiving Teller’s Department. 
 
 Note Teller’s Department. 
 
 Transfer Department. 
 
 Clearings Department. 
 
 Collection Department. 
 
 110 
 
The activities of these departments will be confined almost en- 
 tirely to the receiving- and disbursing' of cash and the collection or 
 transmittal of items turned over to them. They will, in conse- 
 quence, require no permanent records of importance except the 
 Proof and Settlement Sheets on which will be listed, in amounts 
 only, the items passing through the departments. 
 
 Paying Teller’s Department. 
 
 The Paying Teller will attend to all payments made over the 
 counter, the certifying of checks, Clearing House settlements, and 
 other duties of a similar nature. He will also be required to pass 
 on the authenticity of the signatures on the drafts, checks, etc., 
 received in his department. 
 
 It is proposed also that the Paying Teller shall supervise the 
 shipping of currency to Member Banks and the forwarding of 
 mutilated currency for redemption. Should the shipments of cur- 
 rency to Member Banks prove to be very numerous, however, a 
 special department might be created to take charge of such ship- 
 ments. 
 
 The Paying Teller should be responsible only for the counter 
 cash, as it is suggested that the reserve cash be placed under the 
 joint control of two officers. 
 
 Stop Payment Notice fC-1). This form will be used by the Pay- 
 ing Teller in acknowledging receipt of a Member Bank's request to 
 stop payment of a draft drawn by it on the Regional Bank and in 
 advising- the Bookkeeping Department of such stop payment. The 
 three copies to be prepared will be utilized as follows: 
 
 Original — To be sent to Member Bank at whose request pay- 
 ment was stopped as an acknowledgment of the re- 
 ceipt of its instructions. 
 
 Duplicate — To be delivered to the Bookkeeping Department and 
 held there pending presentation of draft. Should the 
 request to stop payment be cancelled later on, the 
 duplicate is to be so marked and then filed. 
 
 Triplicate — After receipt of duplicate has been acknowledged, 
 this copy is to be filed in the Paying Teller’s De- 
 partment. 
 
 Certification Record (C-2). This form is designed to provide a 
 suitable record of checks certified for account of Member Banks. 
 
 The original, or Certification Debit, is to be sent to the Member 
 Bank, together with the Daily Statement. The duplicate, which will 
 constitute the Regional Bank’s record of the transaction, will be 
 stamped “Paid” as the originals are redeemed. This record could 
 be prepared in either pad or book form. 
 
 At the close of business a credit ticket for the total of the 
 .day’s certifications is to be prepared and forwarded to the General 
 Bookkeeper. The certified checks paid each day will be listed on 
 Bookkeeping- Department Form G-6, which is intended to support 
 the debits to the controlling account. The total of the checks issued 
 
 111 
 
but not paid should equal the balance in the General Ledger con- 
 trolling account for certified checks. 
 
 It may be explained at this point that the certifications would 
 probably be few in number, and in most cases would be for the 
 purpose of establishing the genuineness of the signatures on drafts. 
 
 Notice of Currency Shipments (C-3). The original of this form 
 will be used both as a charge ticket and as an advice to the Member 
 Bank that the shipment has gone forward; the duplicate will be 
 retained by the Regional Bank and filed with the Member Bank’s 
 requisition for the currency. 
 
 Receiving Teller’s Department. 
 
 The chief duties of the Receiving Teller will be to accept the 
 deposits made by local Member Banks and to receive shipments of 
 currency forwarded by out-of-town Member Banks. He will, in 
 addition, maintain the Cashier’s Check Register, and attend to such 
 other duties as may be assigned him. 
 
 All cash on hand in this department at the close of business 
 each day is to be surrendered to the Paying Teller. 
 
 Deposit Ticket (C-4). A form similar to this is to be used by 
 the Member Banks when depositing currency or coin in their 
 Regional Bank. 
 
 Cashier’s Checks Register (C-3). This form is intended to pro- 
 vide a detailed record of the Cashier’s checks issued in settlement 
 of balances, notes and bills purchased, and other necessary trans- 
 actions. 
 
 The checks are to be recorded in the Register in numerical 
 order, the date, payee, and amount being entered, as well as the 
 account for which the payment was made. 
 
 At the close of business the total of the day’s entries in the 
 “Amount” column is to be extended in the “Daily Total” column 
 and the General Bookkeeper supplied with a credit ticket for the 
 amount of the checks issued during the day. The Cashier’s checks 
 paid each day will be listed on Bookkeeping Department Form G-7, 
 which will support the debits to the controlling account. 
 
 When the checks are paid, the date is to be entered in the last 
 column. The total of the checks issued but not paid as shown 
 by the Register should equal the balance in the General Ledger 
 controlling account for Cashier’s checks. 
 
 Note Teller’s Department. 
 
 This department will be the medium through which all pay- 
 ments made on account of loans, interest, etc., will be received. 
 From the Loan and Collection Departments will be received the 
 daily maturities, and from the other departments, returns and 
 other items payable within the City. The proceeds of the items 
 collected by this Department are to be distributed and charged to 
 the proper departments, all cash being turned over to the Paying 
 Teller’s Department. The messengers will be under the jurisdic- 
 tion of the Note Teller. 
 
 112 
 
Memoer Banks’ Form for Returning Items Unpaid (C-6). This 
 form will be used by the Member Banks in returning- unpaid items 
 direct to the Member Banks in which they were deposited and in 
 charging back such items to the Regional Bank from which they 
 were received. The four copies to be made of this form are to be 
 disposed of as follows: 
 
 Original — To be enclosed with the item, which is to be returned 
 direct to the Member Bank in which it was 
 deposited. 
 
 Duplicate — To be sent to the Regional Bank from which the 
 Member Bank received the item, as advice that 
 item has been returned direct and charged to 
 the account of the Regional Bank to which 
 advice is sent. The Regional Bank will utilize 
 this ticket as a credit to the account of the 
 Member Bank returning the item. 
 
 Triplicate — To accompany the duplicate. If the item originated 
 in another district, the triplicate will be utilized 
 by the Regional Bank to which it is sent in 
 preparing Form C-7, Statement of Returned 
 Items. 
 
 Quadruplicate — To be retained by the Member Bank returning 
 the item as authority for its charge to the 
 account of the Regional Bank from which the 
 item was received. 
 
 Regional Bank’s Statement of Returned Items ( C-7) . The data 
 required to complete this form, which is to be used in charging 
 back to other Regional Banks items returned to their Member 
 Banks, will be obtained from Form C-6. The original is to be 
 sent to the Regional Bank from which the items were received 
 as an advice of the charge to its account. It will be used by the 
 recipient as authority for crediting the account of the Regional 
 Bank from which received, and charging- the accounts of the 
 Member Banks to which the items have been returned. The 
 duplicate will be retained as an office record. 
 
 Debit Ticket for Returned Items (C-8). The data required to 
 complete this form will be obtained from the Member Banks’ Form 
 for Returning Items Unpaid (C-6), or from the Regional Bank’s 
 Statement of Returned Items (C-7), depending on whether the 
 Member Bank to which the item was returned is situated in the 
 same or in another district. 
 
 After the account of the Member Bank has been charged, this 
 form is to be sent to the Member Bank as an advice of such 
 charge. 
 
 Transfer Department. 
 
 It is intended that this department shall handle all matters 
 relating to the transfer of funds from one Member Bank to an- 
 other Member Bank. 
 
 113 
 
Transfer Ticket ( C-9 ). This form will be used only when both 
 banks are situated in the same district. The three copies to be 
 prepared are to be utilized as follows: 
 
 Original — ■ To be used as a credit ticket and then sent to the 
 Member Bank to which the transfer is made, as an 
 advice. 
 
 Duplicate — To be used as a debit ticket and then sent to the 
 Member Bank requesting- the transfer, as an advice. 
 
 Triplicate — To be retained and filed after confirmation has been 
 received from the Member Bank requesting the 
 transfer. 
 
 Statement and Debit Ticket for Telegraphic Transfers to Banks 
 in Other Districts (C-10). The several sections of this form will 
 be used respectively as a confirmation of telegraphic transfers to 
 Member Banks in other districts and as a charge to the Member 
 Bank requesting the transfer. 
 
 The original of the statement section (b) is, to be sent to the 
 Regional Bank to which the transfers are made as a confirmation 
 of the transfers and advice of credit; the duplicate is to be retained 
 as an office record. The debit ticket section (a) is to be sent to 
 the Member Bank requesting the transfer, as an advice of the 
 charge. 
 
 Statement and Credit Ticket for Telegraphic Transfers from 
 Banks in Other Districts (C-ll). Except that it will be completed 
 by the Regional Bank to which the transfers were made, this form 
 will be used in somewhat the same manner as Form C-10. 
 
 The original of the statement section of this form (b) is to be 
 sent to the Regional Bank at whose request the transfers were 
 made as a confirmation of the transfers and advice of charge; the 
 duplicate is to be retained as an office record. The credit ticket 
 section (a) is to be sent to the Member Bank to which the transfer 
 was made, as an advice of the credit. 
 
 Statement and Debit Ticket for Correspondence Transfers to 
 Banks in Other Districts (C-T2). As indicated by its title, this 
 form is to be used only when the transfers are to be effected by 
 correspondence. 
 
 The original of the statement section (b) is to be sent to the 
 Regional Bank to which the transfers are made as authorization 
 of transfer and advice of credit for the amount of such transfers; 
 the duplicate is to be retained as an office record. The debit ticket 
 section (a) is to be sent to the Member Bank requesting the 
 transfer, as an advice of the charge. 
 
 Correspondence Transfer Credit Ticket (C-13). This form will 
 be used by the Regional Bank when crediting its Member Banks 
 for transfers made to them by banks situated in other districts. 
 It will be prepared from the Statement of Correspondence Trans- 
 fers, Form C-12, and is intended to serve both as a credit ticket 
 and as an advice to the Member Bank to which the transfer is 
 made. 
 
 114 
 
Clearings Department. 
 
 The In-Clearings and Out-Clearings Divisions of this department 
 will handle, respectively, the checks received from the Clearing 
 House and the checks sent to the Clearing House. 
 
 The records of this department will be limited to Proof and 
 Settlement Sheets containing a record of the amounts of the 
 checks received from and sent to the various banks. 
 
 It is intended that the Clearings Department shall sort the 
 checks received according to the ledgers to which they apply, and 
 so far as possible, according to the accounts in these ledgers. 
 Thereafter the Proof Sheets are to be delivered to the Bookkeeping 
 Department where they will be utilized in posting the debits to 
 the accounts of the Member Banks and Government Departments. 
 The items also are to be sent to the Bookkeeping Department for 
 entry in the Ledger and Daily Statement. As totals only will be 
 posted in the Journals and the items themselves will be utilized 
 in preparing the Regional Bank’s record of the charge and the 
 Daily Statements, all relisting and other duplication of work will 
 bo avoided. 
 
 Collection Department. 
 
 In addition to being the custodian of all notes received from 
 other Regional Banks for collection, this department will have 
 charge of the recording and transmitting of country items collect- 
 ible through Member Banks. Items payable locally are to be de- 
 livered to the Note Teller’s Department at maturity for collection. 
 
 Collection Form for Notes sent out ~by Collection Department 
 (C-lIf). The several copies of this form will serve respectively as 
 a letter of enclosure, receiving bank’s acknowledgment, charge 
 ticket and office record. Four copies are to be made and disposi- 
 tion made of them, as follows: 
 
 Original — To be sent with item, as a letter of enclosure, to col- 
 lecting bank. 
 
 Duplicate — To be sent with item and original to collecting bank, 
 by which it is to be signed and returned to Re- 
 gional Bank. 
 
 Triplicate — To be filed by Regional Bank in note file until ma- 
 turity, and then turned over to the Note Teller’s 
 Department, where it will be utilized as a debit 
 ticket for the charge to the account of the 
 collecting bank and then sent forward with the 
 daily statement as an advice of such charge. 
 
 Quadruplicate — To be retained by tne Regional Bank in numeri- 
 cal order as a permanent record. 
 
 TRANSIT DEPARTMENT. 
 
 The duties of the Transit Department will be confined to the 
 receiving and transmitting of checks, drafts, etc., for Member 
 Banks. It Is intended that the incoming and outgoing mail shall 
 be handled by separate sub -departments and that the work of each 
 shall be proved independently. 
 
 115 
 
Aside from the charge letter for outgoing items, the records 
 originating in this department will be limited to Proof and 
 Settlement Sheets. 
 
 Member Banks Remittance Letter (D-l). While it is highly 
 desirable that the member banks use a standard form for listing 
 the checks deposited with their Regional Bank, their regular stock 
 can be utilized if it allows for the entering of the place where the 
 checks are payable. Whatever form is used, however, two copies 
 are to be prepared — one of which will be forwarded with the items 
 to the Regional Bank and the other retained by the Member 
 Bank. 
 
 The items are to be assorted and thereafter listed on separate 
 letters according to the following classification: 
 
 Items drawn on the Regional Bank in which they are deposited. 
 
 Items payable in the city in which the depositing bank's Re- 
 gional Bank is situated. 
 
 Items payable in the same reserve district, but outside the city 
 in which the Regional Bank is situated — one letter for each 
 state or other subdivision adopted. 
 
 Items payable in other reserve districts — one letter for “inside” 
 items and another for “outside” items. The “outside” items, 
 however, are to be classified and listed according to the 
 states in which they are payable, or other subdivisions 
 adopted. 
 
 Member Banks’ Recapitulation of Deposits with Regional Bank 
 (D-2). This form is to be used by the member banks for sum- 
 marizing and classifying the items deposited according to the 
 Transit Time Schedule. 
 
 On the books of the Member Banks, the total amount of the 
 deposits will be charged immediately to a Transit Account, to 
 which credits will be made daily for the amounts due to be col- 
 lected on that day, the account with the Regional Bank being 
 correspondingly charged. 
 
 Upon receipt of the items by the Regional Bank, the account of 
 the Member Bank will be credited immediately with the total 
 amount of the deposit, regardless of the time required for the col- 
 lection of such of the items as are payable out-of-town. In order, 
 however, that the Regional Bank may know the actual free bal- 
 ances, a memorandum column has been provided in the Member 
 Banks’ Journal, Form G-l, in which the credits will be analyzed 
 under the dates on which they are due to be collected. 
 
 For further information relative to the handling of the transit 
 items reference is made to the section of the Committee’s detailed 
 report devoted to Transit Department matters. 
 
 Regional Bank’s List of Items drawn on Member Banks (D-3). 
 This form will be used by the Regional Banks when transmitting 
 checks to their Member Banks. The original is to accompany the 
 items and the duplicate retained as an office record. 
 
 116 
 
FOREIGN EXCHANGE DEPARTMENT. 
 
 Under the terms of the Federal Reserve Act, the Foreign Ex- 
 change Department will be empowered to purchase and sell bills 
 of exchange, demand and time drafts, cable transfers, and other 
 classes of commercial paper and securities; also gold coin, bullion, 
 etc. To provide for the proper recording of these transactions, 
 books and forms will be required as follows: Cash Books, Draft 
 
 and Remittance Registers, Liability Records, a Journal, a Cor- 
 respondent’s Ledger, and a General Ledger in which will be car- 
 ried the controlling accounts of the Department and from which 
 the Daily Statement of Condition will be compiled. 
 
 Cash Receipts Book (F-l). This book will be kept by the 
 Receiving Clerk of the Department, and is intended to contain a 
 complete record of all transactions involving the receipt of cash 
 or checks. 
 
 In the columns reserved for the “date,” “particulars” and 
 “debits” will be entered, respectively, the date and a brief ex- 
 planation of the transaction and the amount of cash received. 
 The “credits” columns are to be utilized for classifying the entries 
 in the “debits” section according to the accounts to which such 
 receipts should be credited. 
 
 At the close of business each day the columns in both the 
 “debits” and “credits” sections are to be totalled and proved, tickets 
 being prepared thereafter for the day’s receipts of each currency, 
 and for the total credits applicable to each of the accounts enumer- 
 ated in the “credits” section. These tickets, after approval by the 
 proper officer, are to be delivered to the General Bookkeeper of the 
 Department for entry. 
 
 Cash Disbursements Book (F-2). In this book, which is to be 
 kept by the Disbursing Clerk of the Department, will be entered 
 the details of the cash disbursed and the checks issued for bills 
 of exchange and cable transfers purchased, and for other purposes. 
 
 All entries are to be supported by properly approved memo- 
 randa. In every case, such memoranda should bear the initials 
 of the clerks responsible for the calculation and verification of the 
 rates and conversions, as well as the initials of the approving- 
 officer. 
 
 Except as regards the nature of the transactions to be re- 
 corded therein, the Cash Disbursements Book is to be used in 
 precisely the same manner as the Cash Receipts Book. 
 
 Draft Advice and Record (F-S). The record of drafts drawn 
 consists of four sections, which are to be prepared at one writing 
 and utilized as follows; 
 
 Section “a” — Original advice — To be sent by first steamer to 
 the bank on which the draft is drawn. 
 
 , “b” — Duplicate advice — To be sent by second steamer 
 
 to the bank on which the draft is drawn. 
 
 “c” — To be filed with the correspondence relating to 
 the bank on which the draft is drawn. 
 
 117 
 
“d” — To be inserted in a suitable binder and preserved 
 as the Department’s record of drafts drawn. 
 
 All four sections, when /completed, will show the name and 
 address of the bank on which the draft is drawn; the date and 
 number of the draft; to whose order it is drawn; the tenor; the 
 amount; and the names of the steamers by which the drafts and 
 advices are being- forwarded. On Sections “c” and “d” will be 
 entered, in addition, the rate, the amount in United States cur- 
 rency, and to whom the draft was sold. 
 
 At the close of business each day tickets are to be prepared 
 for the daily totals of the drafts drawn, which tickets, after ap- 
 proval, are to be delivered to the General Bookkeeper of the 
 Department for entry. 
 
 Remittance Advice and Record (F4). This also is a manifold 
 form consisting of four sections, which are to be utilized as follows: 
 
 Section “a” — Original advice — To be sent by first steamer to 
 the correspondent. 
 
 “b” — Duplicate advice — To be sent by second steamer 
 to correspondent. 
 
 “c” — To be used as a voucher for the debit postings 
 to the liability records, and then filed in chron- 
 ological order. 
 
 “d” — To be inserted in a suitable binder and preserved 
 as the Department’s record of remittances to 
 its correspondents. 
 
 Upon completion, all four sections will show the name and 
 address of the correspondent to which the bill is remitted; the 
 names of the steamers by which the bills and advices will be 
 forwarded; the date; index number; the names of the drawer, 
 endorser and drawee; the tenor and amount of the bill; a de- 
 scription of documents accompanying it, and the terms under 
 which such documents are to be surrendered. The office copies — 
 Sections “c” and “d” — will contain, in addition to the foregoing 
 data, the rate, amount in United States currency, date of credits, 
 and remarks if necessary. 
 
 At the close of business each day tickets are to be prepared 
 for the daily totals of the remittances, which tickets, after ap- 
 proval, are to be delivered to the General Bookkeeper of the De- 
 partment for entry. 
 
 Customers’ Liability Record (F-5). In this record will be 
 entered under the names of the customers their contingent lia- 
 bility to the Department as drawers, endorsers, and guarantors. 
 
 The particulars to be entered will include the name, address, 
 business, and rating of the customer, the date and number of the 
 item, the names of the drawer and drawee, the tenor, the ap- 
 proximate due date, and the liability amount. Provision being 
 made for entry in separate columns of the liability of the cus- 
 tomer as drawer, as endorser, and as guarantor, this record will 
 of course show the nature of the customer’s liability, as well as 
 the aggregate amount. 
 
 US 
 
The debit entries will be posted from Section “c” of the Re- 
 mittance Advice and Record, Form F-4. 
 
 As the items mature and are paid or otherwise disposed of, 
 the customer should be credited in the proper columns, and the 
 amounts in the “Balance” columns reduced accordingly. 
 
 Payers’ Liability Ledger (F-6). This ledger will contain the 
 details of the payers' liability to the Department, both as drawees 
 and as acceptors. 
 
 The ledger sheets will be headed with the name, address, busi- 
 ness, and rating- of the payer, and will show for each item the date, 
 the index number, the name of the customer, the tenor, the ap- 
 proximate due date, and the liability amount. Separate columns 
 being provided for the entry of the liability as drawee and as ac- 
 ceptor, the extent of the payers’ liability under each of these 
 classifications is already ascertainable. 
 
 The debit entries will be posted from Section “c” of the Remit- 
 tance Advice and Record, Form F-4. 
 
 As the items mature and are paid, the payments should be 
 posted in the proper credit column and the amount in the “Balance” 
 columns reduced accordingly. 
 
 Journal (F-7). Transfers from one account to another, ad- 
 justments occasioned by interest charges, and other transactions 
 not originating in the Cash Books and the Draft and Remittance 
 Registers, are to be entered in the Journal. Being columnar in 
 arrangement, the posting of individual items to the ledgers will 
 be necessary only in connection with the miscellaneous items ap- 
 pearing in the column head “Sundry Accounts.” 
 
 All entries are to be supported by properly approved tickets. 
 
 Correspondents’ Ledger (F-8). In this ledger will be carried 
 the accounts of the foreign banks selected as correspondents 
 or agents. 
 
 All entries other than those posted direct from the draft and 
 remittance records are to be supported by self-explanatory and 
 properly approved tickets. 
 
 The particulars to be recorded include the date and a brief 
 description of the transaction, the index number assigned the 
 item, the value date, and the amount. Both the foreign amount 
 and its equivalent in dollars are to be entered. The balance is 
 to be carried in the dollar amount only, as the foreign currency 
 balance would not be needed except when the account is to be 
 reconciled. As advices for charges are received from the foreign 
 correspondents, the amounts of such charges are to be entered 
 in the “Charges” column opposite the item to which they apply, 
 after which the net amounts are to be extended in the column 
 so headed. 
 
 The Auditor will be required to attend to the reconciliation of 
 the statements received from correspondents. Form Y-3 has been 
 provided for use in this connection. 
 
 General Ledger (F-9). The General Ledger of the Foreign 
 Exchange Department is to be a bound book and will contain all 
 
 119 
 

 of the control accounts relating to the resources and liabilities of 
 the Foreign Exchange Department, and the earnings, expenses, 
 and Profit and Loss Accounts. 
 
 All entries are to be supported by properly approved tickets. 
 
 Daily Statement Book, (F-10). At the close of business each 
 day the General Ledger balances are to be entered in this book, 
 which will thus constitute a daily record of the resources and 
 liabilities of the Department. 
 
 BOOKKEEPING DEPARTMENT. 
 
 The Bookkeeping Department will have charge of the accounts 
 of the Member Banks and Government departments, also the gen- 
 eral accounts. In addition, it will be responsible for the preparation 
 of the Daily Statement of Condition and the Monthly Statement of 
 Earnings and Expenses and for the maintenance of the analytical 
 records of earnings and expenses. 
 
 Member Banks’ Journal (G-l). This Journal will be used for 
 assembling the daily debits and credits and determining the balances 
 of the Member Banks at the close of each day’s business. 
 
 In the “Debit” columns will be posted the daily charges to each 
 account as shown by the Proof Sheets prepared by the Clearings, 
 Transit, and other departments. In the column headed “Credits to 
 Ledger,” will be posted the total of the Credit Letters received from 
 the Member Banks. At the close of business each day the balances 
 are to be extended and proved. 
 
 In order that the free balance in each account may be readily 
 ascertained, we have included under the heading “Credits” a memo- 
 randum column entitled “Credits in Transit,” in which the sub- 
 totals of the Credit Letters are to be distributed according to the 
 dates on which the items are due to be collected. 
 
 While this style of Journal would not be suitable for a bank 
 having a large number of accounts, many of which are inactive, 
 it is especially desirable in the case of the Regional Banks, where 
 there will be a comparatively small number of accounts, all of 
 which will probably be very active. 
 
 In addition to serving as a medium for assembling the daily 
 debits and credits, the Member Banks’ Journal will furnish a check 
 on the entries in the Member Banks' Ledger — the entries in the 
 Journal being compiled from the Proof Sheets and those in the 
 Ledger direct from the items. 
 
 Government Deposits Journal (G-2). Except that it does not 
 contain a column for credits in transit, this form is very similar 
 in arrangement to the Member Banks’ Journal and is to be used 
 in the same manner. 
 
 General Journal (G-3). By the use of this Journal for assem- 
 bling the daily debits and credits to the General accounts, the daily 
 statement will be completed simultaneously with the balancing of 
 the accounts. The daily statement could, of course, be prepared 
 direct from the General Ledger, but in that event it would be far 
 more difficult to locate any differences which might arise. 
 
 120 
 
Member Bank’s Ledger and Daily Statement (G-4a). This form 
 will be prepared in duplicate direct from the items. After the day’s 
 transactions have been entered, the original — the Ledger Sheet — 
 is to be inserted in a suitable binder for use as the Regional 
 Bank’s record, and the duplicate forwarded to the Member Bank 
 concerned for use as an account current and advice of the 
 charges and credits made by the Regional Bank. 
 
 An explanation of the key letters to be used in the preparation 
 of the Ledger accounts and statements of the Member Banks will 
 be found in a subsequent section of this report. 
 
 Federal Reserve Bank’s Ledger and Daily Statement ( G-lfib) 
 Except that it will be reserved for recording transactions with other 
 Regional Banks, this form is very similar to the Member Bank’s 
 Ledger and Daily Statement, and is to be used in precisely the 
 same manner. 
 
 General Ledger (G-5). This is to be a bound book and will con- 
 tain an account for each item appearing in the Statement of Con- 
 dition. All entries must be supported by properly authorized debit 
 and credit tickets. 
 
 Record of Certified Checks Paid ( G-6) . Record of Cashier’s 
 Checks Paid (G-7). These forms will be used for listing, by num- 
 bers and amounts, the Certified Checks and Cashier’s Checks paid 
 each day. The daily totals of the checks paid, as recorded on these 
 forms, are intended to support the debits to the General Ledger 
 controlling accounts for Certified Checks and Cashier’s Checks. 
 
 Expense Voucher (G-8). This consists of a check and statement 
 to be forwarded to the creditor and a carbon duplicate to be attached 
 to and filed with the relative invoice. Before signing the check sec- 
 tion, the Cashier should see that the duplicate bears the approval 
 of the proper persons. 
 
 Expense Distribution Record (G-D). This form will be used 
 for distributing under appropriate headings the charges to Expense 
 Account. Separate columns are provided for salaries, directors’ fees, 
 legal services, postage, printing and stationery, light and water, 
 rent, freight and express, insurance and bonds, telephone and tele- 
 graph, taxes, etc. The details of the expenses incurred will be 
 obtained from the debit tickets covering cash disbursed by the 
 Paying Teller or from the Expense Voucher in the event of the 
 payment being made by check. 
 
 A somewhat similar form could be used for analyzing the 
 earnings. 
 
 Comparative Statement of Earnings and Expenses (G-10). This 
 statement, which is to be prepared monthly, will show in compara- 
 tive form the details of the earnings and expenses for the current 
 month and the fiscal period to date as well as the increases or de- 
 creases over the previous month and period. 
 
 Most of the data required for the completion of this statement 
 will be obtainable from the General Ledger and the Expense Dis- 
 tribution Record. 
 
 121 
 
Statement of Condition ( G-ll J. This is to be prepared daily 
 from the General Journal and supporting records. 
 
 Suggested Condensed Gross Statement for Report to Federal 
 Reserve Board (G-12) ; Suggested Condensed Net Statement for Re- 
 port to Federal Reserve Board (G-13). These are alternative forms. 
 Whichever is adopted will be compiled from the Daily Statement 
 of Condition (Form G-ll). 
 
 KEY LETTERS TO BE USED IN THE PREPARATION OF THE 
 LEDGER ACCOUNTS AND DAILY STATEMENTS. 
 
 In order to minimize the clerical work involved in the prepara- 
 tion of the Ledger accounts and the statements for Member Banks 
 and other Regional Banks, it is proposed that key letters shall be 
 used for describing routine transactions. For convenience, these 
 key letters and their definitions will be printed on the back of the 
 daily statements. 
 
 Following is a list of the key letters relating to transactions 
 with the Member Banks, their definitions, and a full description of 
 the transactions where necessary. For illustrative purposes, the 
 transactions are described from the standpoint of the Regional 
 Bank situated in New York. 
 
 DEBITS. 
 
 A. Items on you forwarded you preceding business day. 
 
 Items drawn on Member Banks and forwarded to them by 
 Regional Banks are to be charged to the Member Banks 
 the day on which they will be received by the Member 
 Banks, being carried until that time in a transit account 
 on the Regional Bank’s books. Assuming that all Mem- 
 ber Banks will be within one day’s mail of their Regional 
 Banks, the charges would be for items forwarded the pre- 
 ceding business day. 
 
 AT. Deposited with Assistant Treasurer. 
 
 For deposits made by Regional Bank with the Assistant 
 Treasurer of the United States for credit of Member Banks. 
 
 CA. Charged as per separate advice to-day. 
 
 To be used for special charges not covered by other key 
 letters. 
 
 CC. Currency or coin shipped as per advice to-day. 
 
 CL. Clearing expenses. 
 
 For monthly charges to Member Banks for expense incurred 
 in the collection of items. 
 
 CN. Note in your hands for our account due to-day. 
 
 For Regional Bank’s notes or bills sent to Member Bank for 
 collection and charged to it on due date, also for notes and 
 bills received from other Regional Banks and forwarded to 
 a Member Bank for collection, for which a charge will be 
 made on the due date. 
 
 HD. Held as per advice to-day. 
 
 For item temporarily unpaid and retained for collection. 
 
 122 
 
NT. Handed to Notary as per advice to-day. 
 
 For items received from Member Banks, unpaid at close of 
 day, which have been protested and returned to the Mem- 
 ber Banks from which received. 
 
 PF. Protest Fees as per advice to-day. 
 
 For fees charged on protested items returned. 
 
 RT. Item returned as per advice to-day. 
 
 For items drawn on Member Banks in other districts which 
 were not paid and have been returned direct to our Mem- 
 ber Bank. 
 
 TC. Transfer t>y correspondence as per advice. 
 
 TT. Transfer t>y telegraph as per advice. 
 
 CREDITS. 
 
 A. Cash letter received. 
 
 For items drawn on Member Banks in our district and in 
 other districts received from our Member Banks for credit. 
 CA. Credited as per separate advice to-day. 
 
 To be used for special credits not covered by other key 
 letters. 
 
 CC. Currency or coin received. 
 
 DC. Deposit for your account as per advice to-day. 
 
 For deposits made by third party with Regional Bank for 
 credit of Member Bank. 
 
 DI. Dividend payable to-day. 
 
 For dividends payable to Members Banks, which are to be 
 credited direct to their accounts. 
 
 IR. Interest rebated. 
 
 For unearned interest or discount on loans or discounts 
 taken up prior to due date. 
 
 RD. Proceeds of Doan or Rediscount. 
 
 PF. Protest Fees. 
 
 For fees on unpaid items returned by our Member Banks. 
 RT. Item returned as per your advice. 
 
 For unpaid collection items returned. 
 
 TC. Transfer by correspondence as per advice. 
 
 TT. Transfer by telegraph as per advice. 
 
 The key letters to be used in describing- the transactions arising 
 among the Regional Banks are similar to those prescribed for 
 transactions between the Regional Banks and their Member 
 Banks, except for such changes as are necessary on account of 
 the altered character of the transactions. The following is a 
 list of the key letters to be used for Regional Bank transactions, 
 with explanations: 
 
 DEBITS. 
 
 A. Items on Member Banks in your district forwarded you. 
 
 For items drawn on Member Banks in other districts for- 
 warded their Regional Bank for credit. 
 
 CA. Charged as per separate advice to-day. 
 
 To be used for special charges not covered by other key 
 letters. 
 
 123 
 
CC. Currency or coin shipped as per advice to-day. 
 
 CN. Notes due to-day as per our list. 
 
 For notes or bills sent to other Regional Banks for collec- 
 tion, which are to be charged on due date. 
 
 EC. Entered for collection as per advice to-day. 
 
 For items received from other Regional Banks temporarily 
 unpaid and retained for collection. 
 
 NT. Handed to Notary as per advice to-day. 
 
 For items received from other Regional Banks unpaid at 
 close of day which have been protested and returned to 
 the Member Banks from which received. 
 
 PF. Protest fees as per advice to-day. 
 
 For fees charged on protested items returned. 
 
 RT. Items returned as per our list. 
 
 For unpaid collection items. 
 
 TC. Transfer by correspondence as per advice. 
 
 TT. Transfer by telegraph as per advice. 
 
 CREDITS. 
 
 A. Items on Member Banks in our district received from you. 
 
 For items drawn on 'Member Banks in our district, forward- 
 ed us for credit. 
 
 CA. Credited as per separate advice to-day. 
 
 To be used for special credits not covered by other key 
 letters. 
 
 CC. Currency or coin received. 
 
 CN. Notes due to-day as per your list. 
 
 For notes or bills received from other Regional Banks for 
 collection, which are to be credited on due date. 
 
 EC. Item entered for collection now paid. 
 
 For items received from other Regional Banks temporarily 
 unpaid as described under EC. in “Debits,” now paid and 
 credited. 
 
 IR. Interest rebated. 
 
 For unearned interest or discount on loans or discounts 
 taken up prior to due date. 
 
 PF. Protest Fees. 
 
 For fees charged on protested item returned. 
 
 RD. Proceeds of rediscount. 
 
 RT. Items returned as per your list. 
 
 For items returned unpaid to our Member Banks. 
 
 TC. Transfer by correspondence as per advice. 
 
 TT. Transfer by telegraph as per advice. 
 
 MISCELLANEOUS FORMS. 
 
 Stock Subscription Ledgers (M-l and M-2). These forms will 
 be used for recording the subscriptions received from Member 
 Banks and from individuals, and the instalments paid on account of 
 such subscriptions. 
 
 The record of Member Banks’ subscriptions— Form M-l — is de- 
 signed to show the number, name and location of the subscribing 
 
 124 
 
bank, its paid up Capital Stock and Surplus, the amount of the 
 subscription required by law, and the instalments paid thereon. 
 As the amount of the subscription, divided by the par value per 
 share ($100.00) will give the number of shares represented by the 
 subscription, it has not been considered necessary to provide a 
 special column for entry of the number of shares. 
 
 For recording subscriptions received from individuals, Form M-2 
 will be utilized. The front of this form is ruled for entry of the 
 name, address and legal residence of the subscriber, the date and 
 amount of the subscription, and the date and amount of the pay- 
 ments on account of such subscription. The reverse will contain 
 a record of the stock certificates issued to the subscriber and the 
 stock certificates surrendered for transfer. 
 
 Stock Subscription Certificate (MS). This form is designed to 
 serve both as a subscription certificate and as a receipt for the 
 instalment payments. It is intended to be used principally in 
 connection with subscriptions received from individuals. 
 
 Stock Subscription Receipt (M-4). The stock aliotted to the 
 Member Banks being non-transferable it is recommended that they 
 be given receipts for the individual payments instead of the Stock 
 Subscription Certificate described in the preceding paragraph. 
 
 Stock Certificate Receipt (M-5). This form consists of a stub 
 and a detachable receipt on which the subscribers will be required 
 to acknowledge receipt of the stock certificates issued to them. 
 
 Stock Transfer Record ( M-6 ). This form will be used for re- 
 cording transfers for account of stockholders other than the Mem- 
 ber Banks. It is ruled for entry of the date of the transfer; the se- 
 rial number of the certificate surrendered and the number of shares 
 represented thereby; the name of the transferrer; the number of 
 the certificate issued in exchange; the number of shares repre- 
 sented by the new certificate, and the name and address of the 
 transferee. 
 
 Standing Order to Mail Dividend (M-7). Each stockholder to 
 whom dividend checks will be issued, should be required to com- 
 plete a copy of this form. If the dividends are to be remitted to 
 some one other than the owner of the stock, the signature of the 
 stockholder should be acknowledged before a notary public. 
 
 Dividend Register (MS). As most of the stockholders of the 
 Regional Banks will be Member Banks, whose holdings are not 
 transferable, a Dividend Register of this type should meet all re- 
 quirements. It is ruled to show the names and addresses of the 
 stockholders and the dividends applicable to their holdings, also 
 the number, rate and total amount of the dividend, the date on 
 which it was declared, the date paid, and the date credited to the 
 liability account for dividends declared. 
 
 , Dividends payable to Member Banks are to be credited to their 
 accounts direct from the Dividend Register. For the dividends 
 payable to other stockholders, dividend checks will be issued. 
 
 Authority to Open Account until Regional Bank ( M-9 ). Each 
 
 125 
 
Member Bank opening an account with its Regional Bank should 
 be required to furnish the latter with a certified copy of the reso- 
 lution of the Board of Directors authorizing such action. Form M-9 
 is recommended for use in this connection. 
 
 Signature Card (M-10). Simultaneously with the opening of an 
 account, the Member Bank will be required to file with its Regional 
 Bank, on this form, a list of the signatures to be recognized by 
 the Regional Bank in the payment of funds or the transaction of 
 ether business for account of the Member Bank. 
 
 Purchase Order (M-ll). This form is designed to furnish a 
 suitable record of the orders issued for the purchase of stationery 
 and other supplies. The original of the order is to be forwarded 
 to the supplier and the duplicate retained for office use. 
 
 Stock Record for Supplies (M-12). For each article carried in 
 stock separate cards of this form are to be used, on which will be 
 entered the description, the index number and the location of the 
 stock; the purchases; the issues; and the balance. 
 
 FEDERAL RESERVE AGENT. 
 
 The Act stipulates that the Federal Reserve Agent shall be a 
 person of tested banking experience and that he shall maintain, 
 under regulations to be established by the Federal Reserve Board, 
 a local office of said Board on the premises of the bank with which 
 he is connected. These stipulations will necessitate the Federal 
 Reserve Agent keeping suitable records of the notes received, issued 
 and withdrawn, of the rediscounts and other paper held as col- 
 lateral to note issues, and such other records as may be prescribed 
 by the Federal Reserve Board. 
 
 Record of Federal Reserve Notes Received from the Comptroller 
 of the Currency (X-l). In the respective columns of this record 
 will be entered the date and nature of the transaction, the amount 
 of notes received from the Comptroller, the amount returned to the 
 Comptroller and the balance to be accounted for by the Federal 
 Reserve Agent. This balance should equal the amount of notes on 
 hand as shown by Form X-2 and the notes issued to the Regional 
 Bank as recorded on Form X-3. 
 
 Record of Federal Reserve Notes on Hand (X-2). This record 
 will show the details of the notes received from the Comptroller of 
 the Currency or returned by the Regional Bank, the notes issued 
 to the Regional Bank or returned to the Comptroller, and the bal- 
 ance, subdivided as between notes on hand which are fit for cir- 
 culation and notes which are not fit for circulation and are to 
 be returned to the Comptroller. 
 
 Record of Security furnished hy Regional Bank and Federal 
 Reserve Notes Issued (X-8). From this record the Federal Reserve 
 Agent will be able to ascertain at any time the amount of redis- 
 counts and other paper hypothecated with him by the Regional 
 Bank and the amount of Federal Reserve Notes issued against 
 such security. 
 
 126 
 
The total amount of each 'borrower’s paper hypothecated with 
 the Federal Reserve Agent being- ascertainable from the Loan De- 
 partment records, it will not be necessary for the Agent to maintain 
 a special record for this purpose. 
 
 Application for Federal Reserve Notes This form, which 
 
 will be used by the Regional Bank when applying for Federal 
 Reserve Notes, is to be prepared in duplicate. The original is to 
 be retained by the Regional Bank as authority for the credit to 
 Circulation Account, while the duplicate is to be signed by the 
 Paying Teller of the Regional Bank in acknowledgment of the re- 
 ceipt of the notes and returned to the Federal Reserve Agent for 
 entry on his records. 
 
 Retirement of Federal Reserve Notes (X-5). Except that it is 
 to be used in connection with the retirement of Federal Reserve 
 Notes, this form is very similar to X-4. 
 
 Record of Notes Hypothecated ivith Federal Reserve Agent 
 (B-15). Record of Collateral Withdrawn from Federal Reserve 
 Agent (B-16). As explained in a preceding section of this report, 
 the Loan Department will prepare these forms in duplicate in 
 order that the Federal Reserve Agent may be able to retain a copy 
 for his own use. 
 
 Advice of Currency Returned to Comptroller (X-6). This form 
 will be used by the Federal Reserve Agent for advising the Comp- 
 troller of shipments of mutilated currency. 
 
 Each package of currency returned to Washington should be 
 accompanied by a detailed schedule of the contents, showing both 
 the serial numbers of the notes returned and their denomination. 
 
 Daily Report on Note Circulation (X-7) . The Federal Reserve 
 Agent will report daily to the Federal Reserve Board on this form, 
 the total issues and withdrawals of Federal Reserve Notes, the 
 amount of unfit notes returned to Washington, and the total amount 
 of notes on hand at the close of the day. 
 
 AUDIT DIVISION. 
 
 The function of the Audit Division will be to audit the records 
 and securities of the various departments comprising the Banking 
 Division, also those of the Federal Reserve Agent. 
 
 The Auditor in charge of this division should be thoroughly ac- 
 quainted with the banking business in all its phases and competent 
 to judge if every part of the work is being properly performed. 
 While not under their jurisdiction, the Auditor should cooperate 
 with the officers conducting the Banking Division so far as is nec- 
 essary to safeguard the interests of the bank. 
 
 Under no circumstances should either the Auditor or his assist- 
 ants be allowed to prepare or approve tickets of original entry. On 
 the other hand, the Audit Division should be required to prepare 
 all tickets needed for the correction of errors; all error tickets 
 should, however, be referred to r.n officer in the Banking Division 
 for approval before delivery to the bookkeepers for entry. 
 
 A classification and analysis of the duties of the Audit Division 
 follow: 
 
 127 
 
General Proof. At the close of business each day the various 
 departments will deliver their settlement sheets to the Audit Divi- 
 sion, where the inter-departmental transactions will be verified and 
 the departmental totals assembled on the Auditor’s General Proof 
 Sheet, Form T-l. 
 
 Reconcilements. The reconciliations of the accounts carried 
 with other Regional Banks, with Member Banks and Government 
 Departments, and with correspondents abroad, will be prepared by 
 the Audit Division. The domestic accounts are to be reconciled on 
 Form Y-2 and the foreign accounts on Form Y-3. Reference to 
 these forms will show that in each case the reverse can be utilized 
 for listing the outstandings. 
 
 Departmental Audits. Each of the departments comprising the 
 Banking Division should be audited at irregular intervals during 
 the year. These audits should include a verification of the cash, 
 loans, investment securities, and other resources; a comparison of 
 the securities held as collateral with the collateral records; a proof 
 of the liability accounts and a detailed check of the accrual ac- 
 counts and the accounts relating to earnings and expenses. 
 
 The securities and accounts of the Federal Reserve Agent 
 should also be subject to audit at frequent intervals. 
 
 Loose Leaf Records. The Audit Division should have charge of 
 all sheets for loose leaf records, furnishing them as required and 
 keeping an accurate record of those in use and in the transfer files. 
 
 Cancelled Vouchers. All cancelled vouchers relating to the gen- 
 eral accounts, debit and credit tickets, etc., should be promptly de- 
 livered to the Audit Division for filing. 
 
 GENERAL. 
 
 We shall be pleased to furnish any further information or 
 explanations which may be necessary in connection with the 
 matters dealt with in this report. 
 
 Yours truly, 
 
 Marwick, Mitchell, Peat & Co. 
 
 Portfolio III, containing forms relating particularly to the 
 keeping of credit records, the presentation of regular reports 
 by the banks, etc., is also presented and should be studied in 
 connection both with Portfolio I and Portfolio II. 
 
 .28 
 
APPENDIX II. 
 
 (Accompanied by Portfolio of Forms No. II.) 
 
 From the beginning- of its work, the Committee determined 
 to present a complete system of mechanical accounting in accord 
 with methods in use in the largest banks, and with this in view 
 Mr. Stephen H. Farnham, an expert on mechanical accounting, 
 was invited to become a member of the Committee. Later the 
 Sub-Committee on Mechanical Accounting secured the co-opera- 
 tion of Mr. Harry E. Ward, Cashier of the Irving National Bank, 
 New York City, and Mr. Charles C. Robinson, Auditor of the 
 Irving National Bank. 
 
 The system of accounting to be chosen, and the extent to 
 which machines are used in it, will depend upon the scope and 
 activity which the Reserve Banks are to have from the begin- 
 ning, and, in the event that they are assigned large clearing 
 functions, it will necessarily be a matter of extreme importance 
 in assuring the smooth working of the system, the accurate 
 and prompt collection of items, and the development of reports 
 and statistics comparable in character and truly reflecting 
 the internal conditions of each of the several institutions. 
 The accounting system as subsequently outlined may be made 
 a fundamental factor in providing the means for a careful esti- 
 mate of credit conditions throughout the country, as it provides 
 for a daily transmission, if desired, of detailed reports to the 
 Federal Reserve Board at Washington, in order that that Board 
 may be constantly in touch with the operations of each Bank, 
 and the comparative condition of all the Banks. In this way 
 the Board will be enabled to act with full knowledge as to rates 
 of discount and to advise the several Banks concerning the 
 lines of paper that are outstanding throughout the country. 
 
 In designing the plan, these points have been observed: 
 
 (A.) Particular care has been taken to introduce 
 the most modern systems, using machinery 
 wherever possible, thereby securing the ad- 
 vantages of mechanical accuracy as com- 
 pared with the method of maintaining rec- 
 ords by hand. 
 
 (B. ) The majority of the forms have been con- 
 structed to carry their respective items 
 from the time of receipt to final dispo- 
 sition. There is also a system of control 
 throughout, with the result that their use 
 will materially reduce labor and increase 
 efficiency. 
 
 (C. ) The entire accounting system has purposely 
 been made elastic, so that it will fulfil the 
 needs of the largest as well as the smallest 
 Federal Reserve Bank, and as the banks 
 grow it will not be necessary to revise the 
 accounting plan. 
 
 129 
 
(D. ) There has been constant recognition of tin 
 desirability of keeping the Federal Reserve 
 Board in daily contact with the Federal 
 Reserve Banks. 
 
 ( E. ) The system is adapted for use with any of the 
 standard typewriting and adding machines 
 now on the market. 
 
 MAIL TELLER. 
 
 As there will in all probability be a large accumulation of mail 
 from Member Banks, consisting of remittances for credit, collec- 
 tions, etc., between the hours of 2:30 P. M. and 8:30 A. M., this 
 department has been designed as the first operating unit, looking 
 to the avoidance of congestion in the morning. 
 
 The work of the Mail Teller will begin, say at midnight, and 
 will consist in handling incoming mail up to 5 A. M., the result 
 being: 
 
 1 — Preparation for morning clearance of such items as will be 
 payable through the Clearing House (Federal Reserve or other- 
 wise). 
 
 2 — Delivery to the Transit Department in one total of such 
 items as may have been received, payable out of town. 
 
 3 — Delivery to the Distributing Desk in one total of such Cred- 
 its and Debits as relate to the accounts appearing upon the books 
 of the Federal Reserve Bank. 
 
 4 — Delivery to the Note Teller in one total of such miscella- 
 neous items not covered in the three subdivisions outlined. 
 
 The Block System will be used in this, as in all other depart- 
 ments, the sectional proofs of the work being accomplished by 
 means of blocks, with the result that the ultimate proof of the 
 department will consist only of interlocking balances. 
 
 FORM M. T. 1. 
 
 This will be the Block Sheet of the Department, to be used as 
 previously outlined. 
 
 FORM M. T. 2 -3 -A 
 
 These vari-colored slips to be used in correctly routing the dif- 
 ferent batches of Debits and Credits after they are proved upon 
 each block. 
 
 Form Nos. 3 and 4, will cover the majority of the work leaving 
 the department, and consequently are imprinted “Transit Depart- 
 ment” and “Note Teller,” while form M. T. 2, is to be used for such 
 miscellaneous items as may necessarily be forwarded to other de- 
 partments. 
 
 FORM M. T. 5 
 
 This is a Proof Sheet for the department, the figures for which 
 will be obtained from a recapitulation of the Block Sheets. 
 
 FORM M. T. 6 
 
 This is a suggested envelope which will enclose items intended 
 for presentation to the different Members of the Clearing House. 
 
 130 
 
CLEARING HOUSE DEPARTMENT 
 
 This department will be the successor of the Mail Teller, its 
 work consisting- in handling' incoming mail received subsequent to 
 5 A. M., the plan of operation of the two departments being iden- 
 tical, except that the supervision and proof of incoming exchanges 
 from the Clearing House will also be handled by this department. 
 
 The forms will consist of the following: 
 
 FORM Cli. 1. 
 
 This will be the Block Sheet for the department. 
 
 FORM CH 2-S-4-5. 
 
 These vari-colored slips will be used in correctly routing the 
 batches of items from each Block Sheet, after its proof. 
 
 FORM CH 6. 
 
 This is the Proof Sheet of the department, the figures for which 
 will be obtained by a recapitulation of all the Blocks. 
 
 FORM CH 7. 
 
 This is a Block Sheet to be used in effecting the proof of in- 
 coming exchanges from the Clearing House. 
 
 FORM CH S. 
 
 This is a Proof Sheet for the assembling of an individual proof 
 of the morning Exchanges received from the Clearing House, the 
 figures being subsequently passed through the proof of the Dis- 
 tributing Desk. 
 
 FORM CH 9 
 
 This is a suggested envelope which will enclose items intended 
 for presentation to the different Members of the Clearing House. 
 
 DISTRIBUTING DESK 
 
 For the concentration of figures, avoidance of errors, facilita- 
 tion of work in the Tellers’ cages, and simplicity of posting for the 
 General Ledger this department has been instituted in order that 
 the different Tellers after the proof of each block may route to it 
 such items as may have been received, both Debits and Credits, 
 effecting accounts appearing upon the books of the Federal Re- 
 serve Bank. 
 
 The advantages of the Distributing Desk are many, and it will 
 be found of particular value as to apparent over-drafts, by the 
 quick concentration in the bookkeepers’ hands of such Debits and 
 Credits as may affect the accounts, but which under ordinary cir- 
 cumstances would not reach the bookkeeper until the close of the 
 day’s business. 
 
 The Forms of the department are as follows: 
 
 FORM D D 1 
 
 This is a Block Sheet to be used in establishing sectional proofs 
 of Debits. 
 
 FORM D n 2 
 
 ■ This is a Block Sheet to be used in establishing sectional proofs 
 of Credits. 
 
 FORM D D 3 
 
 This is a Proof Sheet for the department, the figures of which 
 will be obtained from a recapitulation of the Block Sheets. 
 
 131 
 
PAYING TELLER 
 
 The principal duties of the Paying- Teller will be to make such 
 cash disbursements over the counter as may be necessary, effect 
 the settlement of Clearing House balances, examination of checks 
 for correct signatures, arrange for the shipment of money to 
 Member Banks, provide for the forwarding of mutilated currency 
 for redemption to the Treasurer of the United States at Washing- 
 ton, and likewise provide for the redemption of Federal Reserve 
 Notes with the Federal Reserve Agent. 
 
 The Paying Teller will be responsible only for such cash as may 
 be allotted to him, the principal cash reserves of the Bank being 
 under the joint control of other officers or directors. 
 
 The Forms of the Department are: 
 
 FORM PT-1 
 
 This will be used in arranging shipments of money to Member 
 Banks. Its explanation is as follows: 
 
 Slip No. 1 — Notification to the Member Bank that its account 
 has been charged and that the shipment has gone forward. 
 
 Slip No. 2 — Carbon copy of original advice, which will be en- 
 closed with the shipment of money. 
 
 Slip No. 3 — Acknowledgment from Member Bank of receipt of 
 the shipment. 
 
 Slip No. 4 — Tracing slip to be retained as a follow-up, looking 
 to the receipt of the acknowledgment. 
 
 Slip No. 5 — Debit to Member Bank’s Account. 
 
 FORM PT-2 
 
 This will be used in forwarding mutilated currency to the 
 Treasurer of the United States at Washington. Its explanation is 
 as follows: 
 
 Slip No. 1 — Advice to the Treasurer of the United States, de- 
 scriptive of the forwarding of the currency. 
 
 Slip No. 2 — Carbon copy of original advice, to accompany the 
 shipment. 
 
 Slip No. 3 — Debit to “Redemption Account.” 
 
 Slip No. 4 — Credit to “Redemption Account.” 
 
 All of the above slips will be made use of upon the day the 
 money is shipped, with the exception of Slip No. 4, which will 
 be retained, awaiting the return of the equivalent currency from 
 Washington. The outstanding slips will, of course, prove to the 
 controlling account upon the General Ledger. 
 
 FORM PT-3 
 
 To be used in forwarding mutilated Federal Reserve Notes to 
 the Federal Reserve Agent, its explanation being: 
 
 Slip No. 1 — Application to the Federal Reserve Agent for the 
 issuance of new currency. 
 
 Slip No. 2 — Acknowledgment from the Federal Reserve Bank to 
 the Federal Reserve Agent of receipt of the new currency. 
 
 Slip No. 3 — Debit to “Federal Reserve Notes.” 
 
 Slip No. 4 — Credit to “Federal Reserve Notes.” 
 
 132 
 
Slips Nos. 1, 2, and 3 will be attached and delivered to the Fed- 
 eral Reserve Agent with the mutilated currency, Slip No. 3 being 
 provided upon its reverse side with a form of acknowledgment 
 from the Federal Reserve Ag'ent of the receipt of the mutilated 
 currency. When the new currency is delivered to the Federal Re- 
 serve Bank it will be accompanied by an acknowledgment of its 
 receipt by the Federal Reserve Bank. Upon delivery of the new 
 currency to the Bank, Slip No. 4 will be used as a Credit to “Fed- 
 eral Reserve Notes.” 
 
 FORM PT-4 
 
 This will be used by the Federal Reserve Bank in forwarding 
 Federal Reserve Notes for cancellation to the Federal Reserve 
 Agent, its explanation being: 
 
 Slip No. 1 — Instructions to the Federal Reserve Agent, as to 
 the cancellation of the described Federal Reserve Notes. 
 
 Slip No. 2 — Debit to “Federal Reserve Notes.” 
 
 As the notes are delivered to the Federal Reserve Agent they 
 will be accompanied by Slips Nos. 1 and 2, Slip No. 1 being a record 
 of the transaction for the Federal Reserve Agent, while Slip No. 
 2 is for use in reducing the outstanding Federal Reserve Notes, 
 provision having been made upon its reverse side for a form of 
 acknowledgment of the receipts of the notes by the Federal Reserve 
 Agent. 
 
 FORM PT-5 
 
 This is a form to be used in effecting the “Stop Payment” ol 
 checks. 
 
 FORM PT-6 
 
 This will be used when the notification for stopping payment 
 has not been received upon the form provided for the purpose. 
 FORM PT-7 
 
 This is for use in acknowledging receipt of the regular form of 
 “Stop Payment” notice. 
 
 FORM PT-8 
 
 A loose-leaf record, upon which will be inscribed under the 
 name of the Member Bank, a complete description of the checks 
 upon which it is desired to stop payment. 
 
 FORMS PT -9-10-11-12-13 
 
 Vari-colored slips to be used in routing the different batches of 
 items to the several Departments. 
 
 FORM PT-l-'t 
 
 Proof Sheet for the Department, upon which will be assembled 
 the total figures of the day. Upon the reverse side of the sheet, 
 provision has been made for the accumulation of the different 
 Debits and Credits to the several Departments. 
 
 FORM PT-15 
 
 This will be used for the occasional necessity of certifying 
 checks of Member Banks, its explanation being: 
 
 Slip No. 1 — Notification to Member Bank of the fact that its 
 account has been charged, covering the certification of a specific 
 check. 
 
 133 
 
Slip No. 2 — Debit to the Member Bank’s Account. 
 
 Slip No. 3 — Credit to Certified Checks. 
 
 FORM FT -16 
 
 When the certified checks are returned to the Bank for re- 
 demption, they will pass through the controlling account upon 
 the General Ledger and then be forwarded to the Auditing De- 
 partment in order that their control may be in agreement with 
 the General Ledger. The Auditing Department will then affix 
 this form to the checks and deliver them to the Bookkeeping 
 Department to be enclosed with the daily statement. 
 
 This is a proposed sheet which will be prepared by the Paying 
 Teller each morning and will be delivered to the Secretary-Treas- 
 urer for examination, its purpose being to place the officials of the 
 Bank in touch with the condition of the cash of the Bank. 
 
 RECEIVING TELLER 
 
 This Department will receive deposits from Member Banks lo- 
 cated within the city in which the Federal Reserve Bank is situat- 
 ed, and will also account for shipments of currency received from 
 other Federal Reserve Banks and Member Banks. 
 
 The Forms of the Department are as follows: 
 
 FORM RT-1 
 
 This is for use in handling shipments of currency received for 
 credit of Member Banks, its explanation being: 
 
 Slip No. 1 — Advice to the Member Bank descriptive of the re- 
 ceipt of the Currency and the amount placed to their credit. 
 
 Slip No. 2 — Credit to the Member Bank’s Account 
 FORMS RT-2-3-4-5-6 
 
 These are vari-colored slips to be used in routing the different 
 classes of items to the several Departments. 
 
 FORM RT-1 
 
 A Block Sheet for the sectional proof of the day’s work. 
 
 FORM RT-8 
 
 This is a proof sheet, the figures for which will be obtained 
 from a recapitulation of the Block Sheets. 
 
 NOTE TELLER. 
 
 The duties of this Department will consist of the presentation 
 and collection of notes, drafts, and checks drawn upon non-mem- 
 bers of the Clearing House, all of which are payable within the 
 radius covered by the messengers of the Federal Reserve Bank. 
 
 The runners or messengers will be under the control and form 
 a part of this Department. 
 
 The forms are as follows: 
 
 FORM NT-1 
 
 This is a proposed Block Sheet for the proof of the messen- 
 gers’ routes, upon one side of which are listed the individual items 
 comprising the route and upon the reverse side the checks, cur- 
 rency, etc., which have been received in payment. The initial 
 
 134 
 
“N” is indicative of a cash item charged to the Note Teller and 
 which has been returned by the messenger unpaid. The initial 
 “C” is indicative of collection items (not cash), which have been 
 returned unpaid by the messengers. 
 
 The total of the items as appearing upon each side of the block 
 must be in agreement and constitute, as previously outlined, a 
 proof of the messengers’ routes. 
 
 FORM NT-2 
 
 A Block Sheet for the distribution to the different Depart- 
 ments, of the checks, currency, etc., which have been received 
 in settlement of items charged to the Note Teller. A recapitu- 
 lation of these blocks constitutes a proof of the day’s work. 
 FORMS NT-3-4-5-6- 7 
 
 These are vari-colored slips to be used in routing items to the 
 different Departments, after they are proved upon the Block 
 Sheets. 
 
 FORM NT-S 
 
 This is for use in charging back and returning cash items, 
 which are unpaid after presentation. Its explanation is as follows: 
 
 Slip No. 1 — Letter accompanying the item. 
 
 Slip No. 2 — Debit to the Member Bank. 
 
 Slip No. 3 — To be placed in a chronological file, awaiting the 
 return of the acknowledgment postal. 
 
 Slip No. 4 — A postal card to be attached to the item when it is 
 charged back and which will be dated, signed, and returned by 
 the Member Bank as an acknowledgment of receipt. 
 
 FORM NT -9 
 
 In the event of the postal card as outlined in NT-8 not being 
 regularly returned, FORM NT-9, being a postal tracer, will be used. 
 FORM NT-10 
 
 This is a Proof Sheet for the Department, the figures of which 
 will be obtained from a recapitulation of the Block Sheets as out- 
 lined in FORM NT-2. 
 
 TRANSIT DEPARTMENT. 
 
 The Transit Department should be equipped with steel racks 
 providing suitable compartments for each Member Bank of its 
 district, together with eleven other compartments, larger in size 
 for the other Federal Reserve Banks. 
 
 These compartments will be divided into units, for the purpose 
 of evenly distributing the volume of business. 
 
 The handling and proof of the Transit items will be obtained 
 in the following manner: 
 
 (a) Items received by the different Departments will be charged 
 
 to the Transit Department in batches, accompanied by 
 slips designating the Teller forwarding them and the 
 amount of each batch. 
 
 (b) Accumulated batches will be assorted to the different units 
 
 listed, and proved under the sectional proof of the block 
 
 system. 
 
 (c) A recapitulation of the block sheets will constitute a proof 
 
 of the interlocking balances with the Tellers, and pro- 
 duce the figures to which each unit must prove. 
 
 135 
 
(d) The proof of each unit will be obtained by adding together 
 the totals appearing upon the carbon copies of the 
 remittance letters in process of being forwarded. 
 
 The forms of the Department are — 
 
 FORM T-l 
 
 A form to be used by Member Banks in their relations with 
 Federal Reserve Banks, when forwarding for credit such items 
 as they may receive, drawn upon Member Banks located within 
 the Federal Reserve city. The top sheet will accompany the 
 checks, while the carbon will be retained by the Member Banks 
 to be used as a debit to their reserve account with the Federal 
 Reserve Banks. 
 
 It will be noted that this form, as well as FORMS NOS. T-2-3-4- 
 5-G-7-8 and 9, has been equipped with a form of acknowledgment 
 as well as a “follow-up,” the acknowledgment to be dated, 
 signed, and returned by the receiving bank, and the “follow- 
 up” to be placed in chronological file under the date upon which 
 the acknowledgment should be received — this will enable the 
 banks to trace intelligently any overdue cash letters. 
 
 Attention is called to the fact that the reverse side of Sheet 
 No. 1 of FORMS NOS. T-l-2-3-4-5-6-7-8 and 9, is to be carbon- 
 ized, consequently it will not be necessary to place the usual 
 carbon paper between the original and duplicate parts of the form. 
 FORM T-2 
 
 To be used by Member Banks in forwarding for credit such 
 items as they may receive which are drawn upon 
 
 (a) Member Banks located within their own district but with- 
 
 out the local radius to be determined by the Federal 
 Reserve Board. 
 
 (b) Federal Reserve Banks of other districts. 
 
 (c) Member Banks of other Federal Reserve districts. 
 
 FORM T-3 
 
 To be used by Federal Reserve Banks in their relations with 
 Member Banks located in their own city, but which because of 
 inaccessibility may not clear through the Clearing House 
 (Federal Reserve or otherwise), necessitating the items being for- 
 warded to them by mail for collection. Ihe top sheet will ac- 
 company the checks, while the second sheet, or duplicate, will 
 be the debit to the Member Bank’s account. 
 
 FORM T-4 
 
 This is identical with FORM T-5, except that it is intended 
 to cover instances where there will not be many checks to forward. 
 FORM T-5 
 
 To be used in forwarding items drawn upon Member Banks 
 located without the city in which the Federal Reserve Bank is 
 situated, the top sheet accompanying the checks and the second 
 sheet, or duplicate, being the debit to Member Bank’s account. 
 FORM T-6 
 
 This is identical with FORM T-5, except that it is intended 
 
 136 
 
to cover instances where the number of checks to be forwarded 
 are fewer in number. 
 
 FORM T- 7 
 
 For use of the Federal Reserve Banks in forwarding items 
 to each other, the top sheet accompanying- the checks while the 
 second sheet, or duplicate, will be a debit to “Transit Account.” 
 FORM T-S 
 
 For use of the Federal Reserve Banks in forwarding Federal 
 Reserve Notes to each other. The top sheet will accompany the 
 notes while the duplicate will be a debit to “Transit Account.” 
 FORM T-9 
 
 For use of Federal Reserve Banks in returning- to each other 
 unpaid cash items, the original sheet accompanying the items 
 while the duplicate sheet is a debit to “Transit Account.” 
 
 FORM T-10 
 
 A claim ticket to be used in adjusting- discrepancies in cash 
 letters, such as incorrectness in listing, non-enclosure of items, etc. 
 FORM T-ll 
 
 To be used in confirming the action of correspondents, in sup- 
 plying missing endorsements. 
 
 FORM T-12 
 
 A form of postal tracer to be used in tracing overdue cash 
 letters. The pink, or duplicate, sheet will be retained in a chron- 
 ological file, as a follow-up, looking to the receipt of a reply to 
 the tracer. 
 
 FORM T-13 
 
 For use of Member Banks in returning- unpaid cash items 
 to the Federal Reserve Banks. 
 
 FORMS T-U-15-16 
 
 Vari-colored slips to be used in routing batches of items to 
 the different departments. 
 
 FORM T-17 
 
 A form of block sheet for use in establishing sectional proofs 
 of the day’s work. 
 
 FORM T-18 
 
 Proof sheet of the Department, the figures for which will be 
 obtained from a recapitulation of the block sheets. 
 
 It is quite possible that an electric endorsing machine can 
 be used to good advantage in the Transit Department, and this 
 thought should receive consideration. 
 
 COLLECTION DEPARTMENT 
 
 The following forms have been designed for Regional Banks, in 
 handling such items as may be forwarded to them for Collection 
 only. 
 
 FORM COLL 1 
 
 This is intended for notes payable within the radius covered by 
 messengers of the Federal Reserve Banks. Its description follows: 
 
 Slip No. 1 — Advice of disposition to Member Bank. 
 
 137 
 

 Slip No. 2 — Credit to Member Bank (if paid). 
 
 Slip No. 3 — Permanent Record (to be filed chronologically, as 
 to day of receipt, under name of Member Bank). 
 
 Slip No. 4 — Maturity Slip, serving the same purpose as the or- 
 dinary “tickler.” 
 
 FORM COLL 2 
 
 This is designed for notes payable without the district cover- 
 ed by messengers of the Federal Reserve Bank, necessitating the 
 items being forwarded to corresponding banks for collection. Its 
 explanation follows: 
 
 Slip No. 1 — Letter enclosing item to corresponding bank. 
 
 Slip No. 2 — Acknowledgment of receipt from corresponding 
 bank. 
 
 Slip No. 3 — Maturity Slip, to be used in following up returns. 
 
 Slip No. 4 — Permanent Record, to be filed chronologically, as to 
 day of receipt, under the name of Member Bank. 
 
 Slip No. 5- — Advice of disposition to Member Bank. 
 
 Slip No. 6 — Credit to Member Bank (if paid). 
 
 Slip No. 7 — Debit to corresponding bank (if paid). 
 
 FORM COLL 3 
 
 This will cover drafts and special items (exclusive of Coupons), 
 requiring specific advice of payment and which are paid upon the 
 day of presentation. Its explanation follows: 
 
 Slip No. 1 — Advice of credit to Member Bank. 
 
 Slip No. 2 — Credit to Member Bank. 
 
 FORM COLL 
 
 This will be for items, other than notes, which are payable with- 
 out the district covered by messengers of the Federal Reserve 
 Bank. Its explanation follows: 
 
 Slip No. 1 — Letter accompanying item to corresponding bank. 
 
 Slip No. 2 — Tracing Slip, to be used in following up returns. 
 
 Slip No. 3 — Permanent Record, to be be filed chronologically, 
 as to day of receipt under the name of Member Bank. 
 
 Slip No. 4 — Advice of disposition to Member Bank. 
 
 Slip No. 5 — Credit to Member Bank (if paid). 
 
 Slip No. G — Debit to Corresponding Bank (if paid). 
 
 FORM COLL 5 
 
 This is for use in returning unpaid items, payable within the 
 district covered by messengers of the Federal Reserve Bank. Its 
 explanation follows: 
 
 Slip No. 1 — Letter to Member Bank returning the item unpaid. 
 
 Slip No. 2 — Carbon copy for files. 
 
 FORM COLL 6 
 
 Postal acknowledgment of the receipt of items entered for col- 
 lection. 
 
 FORM COLL 7 
 
 This has been constructed for items (documentary or otherwise) 
 requiring special care and which will be held indefinitely awaiting 
 payment. Its explanation follows: 
 
 Slip No. 1 — Acknowledgment of receipt to Member Bank. 
 
 138 
 
Slip No. 2 — Advice of credit to Member Bank. 
 
 Slip No. 3 — Credit to Member Bank. 
 
 It will be noted that on slip No. 3, of the above form, space has 
 been allotted for notations descriptive of the progress being made 
 looking' to the ultimate disposition of the items. 
 
 FORM COLL 8 
 
 This is a postal form of tracer, to be used in tracing the dispo- 
 sition of items forwarded to Corresponding Banks for collection. 
 The pink slip attached, is a carbon of the postal and will be filed 
 chronologically under the approximate day upon which a reply 
 to the Tracer should be received. 
 
 FORM COLL 9 
 
 This form is to be used in requesting the return of items, for- 
 warded to Corresponding Banks for collection. The yellow sheet 
 attached is a carbon copy and record of the original. 
 
 FORM COLL 10 
 
 This is intended to reduce letter-writing to a minimum, the 
 form being designed as a departmental advice to Member Banks 
 concerning their collections. 
 
 FORM COLL 11 
 
 This is the Block Sheet for the Department, and will be used in 
 accordance with the Block System of proof throughout the Bank. 
 FORMS COLL 12 and 13 
 
 These are slips to be used in routing debits and credits to the 
 different departments and upon which will be inscribed the total 
 amount of each batch. Form No. 12, is for Credits and form No. 
 13 is for Debits. The difference in color being indicative of the 
 different classes. 
 
 FORM COLL Ht 
 
 This is a Proof Sheet for the Department and upon which will 
 be inscribed a recapitulation of the day’s work, obtained from the 
 Block Sheets. 
 
 LOANS AND DISCOUNTS 
 
 As re-discounting for Member Banks and the proposed pur- 
 chase of Domestic Bills of Exchange, etc., in the open market, may 
 be extensive, it is thought , that the application of forms to ma- 
 chinery will materially facilitate the work of the Department, and 
 with this in view the following plan has been designed: 
 UNEARNED DISCOUNT 
 
 It is suggested that the Federal Reserve Banks, instead of fol- 
 lowing the usual practice of crediting to Current Earnings such 
 discount as may have been collected, adopt the plan of placing 
 the discount in an account to be known as “Unearned Discount,” 
 and each day this balance will be charged with the actual dis- 
 count earned and the amount thus obtained credited to Current 
 Earnings under the subdivision of “Discount.” 
 
 This would mean that the statement of the Bank would al- 
 ways appear upon a liquidating basis, and from an analytical point 
 of view would materially assist in showing the true percentage 
 of earnings to Loanable Funds. 
 
 139 
 
LIABILITY 
 
 While the usual method of ascertaining the amount of liability 
 is from detailed statistics compiled in book records, it will be noted 
 that such entries in the Liability Ledgers cause a duplication of 
 work, entailing unnecessary labor in keeping them in a state of 
 efficiency, while, under the proposed plan, full details concerning 
 liability are obtained at the same time that the bookkeeping en- 
 tries, advices, etc., are typewritten by the stenographer. 
 
 For the purpose, however, of ready availability of figures, con- 
 cerning the total liability of concerns, under the classifications of 
 “Payer” and “Endorser,” a skeleton Ledger in loose-leaf form will 
 be maintained, the entries in which will be posted in total only, 
 and the entire liability of which must be in proof with the con- 
 trolling balances on the General Ledger. 
 
 As the Federal Reserve Banks will be principally interested in 
 the credit standing of the Payer and the last Endorser, and as 
 it is very desirable to maintain only such figures of liability as 
 may be subject to proof, it is suggested that the liability records 
 of the Federal Reserve Banks consist of Payer and Endorser, in- 
 stead of Drawer, Acceptor, and Endorser, as the establishment 
 of liability figures under the latter three classifications would not 
 be possible of proof and would result in a lack of confidence as to 
 the accuracy of such figures. 
 
 In the event, however, of it being considered necessary to main- 
 tain liability figures other than that of Payer and the last En- 
 dorser, this may be done by inserting additional sheets in the 
 skeleton loose-leaf Liability Ledger, the postings in tne accounts 
 to be executed in red ink, which would be indicative of tne fact 
 that such figures are not to be included in the proof of liability. 
 
 It is the purpose of this plan to provide the Federal Reserve 
 Board at Washington with a continuous record, in detail, of all 
 notes or bills of exchange discounted for Member Banks or pur- 
 chased in the open market — these continuous records to be execut- 
 ed at the same time the forms are written, without any additional 
 labor upon the part of the Federal Reserve Banks, such continuous 
 records being mailed to the Federal Reserve Board at the conclu- 
 sion of each day’s business, and which will be used by the Credit 
 Bureau at Washington for the accumulation of such credit in- 
 formation as they may desire. This will enable the Federal Re- 
 serve Board at Washington to be in close touch with that por- 
 tion of the business of the Federal Reserve Banks and place it in a 
 position to accumulate, automatically, from twelve different 
 sources, most valuable statistics, concerning the credit standing of 
 the borrowers from the Federal Reserve System. 
 
 In FORMS BD-2-3-5 and 6 it will be seen that two of the last 
 vari-colored slips have been allotted for liabilities, the thought 
 being that the slips in question, after being posted in total in the 
 skeleton Liability Ledger, will be filed in a steel cabinet, under 
 an alphabetical arrangement of the names of the debtors. 
 
 The result of this would be an accumulation into one compart- 
 ment, properly indexed, of the entire concentrated liability (except 
 
foreign exchange) of any concern, the controlling figures of which 
 would be in the skeleton Liability Ledger, which, as previously 
 outlined, would be posted in totals only. 
 
 As fast as the liabilities, represented by the slips, are liquidat- 
 ed, either at or before maturity, the slips are taken from the steel 
 cabinet and filed in usual course by the Filing Department, so 
 that the retention of the slips in this way furnishes a permanent 
 record which may be consulted at any time. 
 
 It will be observed that this method will leave in the Liabil- 
 ity files, only “live” matter of a current nature, consequently they 
 will not be glutted by a mass of records relating to past liabilities, 
 while the easy maintenance of the subsidiary skeleton Liability 
 Ledger will furnish immediate information, in total, as to the past 
 and present liability of any concern. 
 
 TICKLER 
 
 The last slip of the forms bears the designation of “Maturity 
 Slip” and its use will be that of providing the Department with 
 the information usually contained in a book “tickler.” The slips 
 will be filed chronologically under the Maturity of the Notes, with 
 the result that the Maturities of each day are accumulated in one 
 compartment, properly indexed, and in the right-hand corner of 
 which the total amount maturing is immediately available. 
 
 As the day of Maturity is reached, the City slips are taken from 
 the Maturity File and checked to the City Notes delivered to the 
 Note Teller, likewise the Country slips are checked to the forms 
 covering Country Notes in possession of the Collection Department. 
 It will, therefore, be seen that the slips have served the purpose 
 of the usual book “tickler” in every possible way, both as to avail- 
 able information and the checking of missorted items. 
 
 The Maturity slips then will be used to reduce the liability of 
 the different concerns in the skeleton Liability Ledger, and to re- 
 tire from the liability files the Matured liabilities, keeping, as out- 
 lined before, only “live” records in the liability files. 
 
 STATISTICS 
 
 Maturities falling due within thirty, sixty, or ninety days and 
 after, can easily be obtained from the Discount Clerk, who will 
 compute the figures from the totals appearing in the upper right- 
 hand corners of the Indexes, in the Maturity File. 
 
 Attention is called to the fact that it is not practical to carry 
 the above statistics upon the General Ledger, inasmuch as daily 
 adjustments would be obligatory. It is, however, feasible to have 
 the Maturities of the items show under the classifications of the 
 different months of the year, such as the Maturites falling due in 
 January, February, etc. 
 
 All of the forms have been provided with space which may 
 be used to either place, automatically, upon the General Ledger the 
 month of Maturity, or the industry, etc., affected. 
 
 CONTINUOUS RECORDS 
 
 As outlined before, it is suggested that the record of all Notes 
 Discounted for or loans made to Member Banks, or paper pur* 
 
 141 
 
chased in the open market, be transcribed upon what is known as 
 a “Continuous Record,” this record furnishing- an exact description 
 of the Note and being written in the same operation that the man- 
 ifolding entries are being prepared by the stenographer. 
 
 These “Continuous Records” will be made use of in advising the 
 Federal Reserve Board at Washington and in the interrelations 
 between the Federal Reserve Agents and the Federal Reserve 
 Banks. 
 
 ACCOUNTS 
 
 For the purpose of distinguishing between the classes of Bills 
 Discounted, the following titles have been assigned: 
 
 Bills Discounted — Customers 
 
 Bills Discounted — Bought 
 
 FORM BD-1 
 
 For use of Member Banks, in empowering proper officials 
 to re-discount with the Federal Reserve Banks. 
 
 FORM BD-2 
 
 This is intended to cover Notes Discounted for Member Banks, 
 which are payable within a radius covered by the Federal Reserve 
 Bank’s messengers. Its explanation is as follows: 
 
 Slip No. 1— Debit to Bills Discounted-Customers. 
 
 Slip No. 2 — Credit to Bills Discounted-Customers. 
 
 Slip No. 3 — Advice of Credit to Member Bank. 
 
 Slip No. 4 — Credit to Member Bank’s Account. 
 
 Slip No. 5 — Credit to Unearned Discount. 
 
 Slip No. 6 — Endorser’s Liability. 
 
 Slip No. 7 — Payer’s Liability. 
 
 Slip No. 8 — Maturity Slip. 
 
 All of the slips comprising the Form are made use of upon the 
 day of Discount, either in bookkeeping entries, advices, or for the 
 establishment of Liability, with the exception of Slip No. 2, being 
 a Credit to Bills Discounted-Customers, which remains attached to 
 the Note and is filed away with it awaiting Maturity. 
 
 FORM BD-3 
 
 This is identical with FORM BD-2, with the exception that it is 
 designed to cover Notes Discounted for Member Banks, which 
 would be payable without the radius covered by messengers of the 
 Federal Reserve Banks, consequently it would be necessary to for- 
 ward them to other institutions for Collection. The explanation 
 of the Form follows: 
 
 Slip No. 1 — Debit to Bills Discounted-Customers. 
 
 Slip No. 2 — Letter to Corresponding Bank enclosing the item 
 for Collection. 
 
 Slip No. 3 — Acknowledgment from Corresponding Bank as to 
 the receipt of the Note. 
 
 Slip No. 4 — Credit to Bills Discounted-Customers. 
 
 Slip No. 5 — Debit to the Collecting Bank. 
 
 Slip No. 6 — Advice of Credit for the Member Bank. 
 
 Slip No. 7 — Credit to the Member Bank. 
 
 142 
 
Slip No. 8 — Credit to Unearned Discount. 
 
 Slip No. 9 — Endorser’s Liability. 
 
 Slip No. 10 — Payer’s Liability. 
 
 Slip No. 11 — Maturity Slip. 
 
 As to Slips Nos. 2-3-4 and 5, Slips Nos. 2 and 3 would be at- 
 tached to the Note when forwarded to the Corresponding Bank for 
 Collection, while Slips 4 and 5 would be retained by the Collection 
 Department of the Federal Reserve Bank and filed by it in a 
 Maturity File under the Due Date of the item, at which time they 
 would be proved to the controlling slips in the Discount Depart- 
 ment, then being separated, would form the Credit to Bills Dis- 
 counted-Customers and a Debit to the Collecting Bank. 
 
 It will be noted that Slips 2-3-4 and 5 were typewritten when the 
 item was first handled by the Discount Department, consequent- 
 ly it was delivered to the Collection Department with the -neces- 
 sary forms to carry it to its final disposition, with the exception 
 of the day of forwarding, together with the name of the Collecting 
 Institution, both of which will be transcribed on the form by the 
 Collection Department. 
 
 As the Country Notes will be delivered to the Collection Depart- 
 ment the day following their discount, provision has been made 
 upon the reverse side of the Maturity Slips for an acknowledg- 
 ment of the receipt of the items by the Collection Department. 
 FORM BD-Jf 
 
 This is a continuous record, in loose-leaf form, forwarding to 
 the Federal Reserve Board at Washington, exact details of the 
 Bills Discounted for Member Banks. 
 
 FORM BD-5 
 
 This is similar to FORM BD-2, with the exception that it is 
 intended to cover Bills Discounted-Bought, being purchases made 
 in the open market, instead of items Discounted for Member Banks, 
 and which are payable within the district covered by Messengers 
 of the Federal Reserve Banks. 
 
 FORM BD-6 
 
 This is similar to FORM BD-3, with the exception that it has 
 been designed to cover Country Notes purchased in the open mar- 
 ket, rather than Discounted for Member Banks. 
 
 FORM BO -7 
 
 This is identical with FORM BD-4, except that it is designed to 
 advise the Federal Reserve Board at Washington of the exact de- 
 scription of Bills Purchased in the open market, rather than Dis- 
 counted for Member Banks. 
 
 FORM BD-8 
 
 This is a draft of an Alphabetical Index, to be used in separating 
 the Liability of Debtors. 
 
 That portion of the Index descriptive of the name of the con- 
 cern, will be modelled after the usual form of indexes, permitting 
 the changing of names at leisure. 
 
 FORM BD-9 
 
 This is a draft of an Index to be used in apportioning the Brok- 
 
ers’ Slips in the Liability Files, the purpose of placing such Brokers’ 
 Slips in the Liability Files being merely to enable a proof of lia- 
 bility to be established, as of course there will be no liability at- 
 tached to the Brokers unless they be compelled to endorse the com- 
 mercial paper sold to the Federal Reserve Banks. 
 
 FORM BD-10 
 
 A Chronological Index, to be used in apportioning the Maturity 
 Slips under the Maturity of the Notes, the upper right-hand corner 
 being glazed with a coating of celluloid, or something of a similar 
 nature. 
 
 FORM BD-11 
 
 Designed for Collateral Loans supported by Government Bonds, 
 Warehouse Receipts for Merchandise, etc. Its explanation follows: 
 
 Slip No. 1 — Debit to Collateral Loans. 
 
 Slip No. 2 — Credit to Collateral Loans. 
 
 Slip No. 3 — Advice to Member Bank. 
 
 Slip No. 4 — Credit to Member Bank. 
 
 Slip No. 5 — Credit Unearned Discount. 
 
 Slip No. 6 — Endorser’s Liability. 
 
 Slip No. 7 — Payer’s Liability. 
 
 Slip No. S — Maturity Slip. 
 
 While it is assumed the Federal Reserve Banks will in addition 
 to making collateral loans supported by United States Government 
 Bonds, be obliged to make other loans supported by collateral, 
 such as warehouse receipts, etc., covering merchandise, it is 
 thought that loans of this character should be somewhat re- 
 stricted and, in every case, bear a Maturity. 
 
 It may be well to note in addition to the above that there 
 will be instances in which the Federal Reserve Banks will redis- 
 count items supported by collateral, so that the accounts “Collat- 
 eral Loans secured by United States Government Bonds” and “Col- 
 lateral Loans — Merchandise” would not be indicative of all the 
 collateral loans made. 
 
 FORM BO-12 
 
 A continuous record, in loose-leaf form, forwarding to the Fed- 
 eral Reserve Board at Washington, exact details of the Collateral 
 Loans made each day. 
 
 FORM BD-13 
 
 This is a card record for Collateral Loans supported by Govern- 
 ment Bonds, the card being descriptive of the Collateral and al- 
 lowing space for substitutions, etc. 
 
 FORM BD-14 
 
 This is a card record of Collateral Loans supported by Ware- 
 house Receipts for Merchandise, etc., the card being descriptive of 
 the Collateral and allowing for payments covering withdrawals. 
 FORM BO-15 
 
 For use in Re-Discounting until other Federal Reserve Banks 
 and supports a controlling balance upon the Liability side of the 
 General Ledger known as “Re-Discounts with other Federal Re- 
 serve Banks.” Its explanation follows: 
 
 144 
 
Slip No. 1 — Credit to “Re-Discounts with other Federal Reserve 
 Banks.” 
 
 Slip No. 2 — Debit to the Discounting Federal Reserve Bank. 
 
 Slip No. 3 — Letter enclosing item to Discounting Federal Re- 
 serve Bank. 
 
 Slip No. 4 — Acknowledgment of receipt from Discounting Fed- 
 eral Reserve Bank. 
 
 Slip No. 5 — Maturity Slip. 
 
 Slip No. 6 — Debit to “Re-Discounts with other Federal Reserve 
 Banks.” 
 
 Slip No. 7 — Credit to Bills Discounted. . . . 
 
 All of the above slips are made use of upon the day the items 
 are forwarded for Re-Discount, with the exception of Slips Nos. 5, 
 ti, and 7, being, respectively, a Maturity Slip, and the subsequent 
 liquidating entries. Slip No. 5, descriptive of the Maturity, will be 
 filed chronologically in a separate Maturity File covering items “Re- 
 Discounted with other Federal Reserve Banks,” so that the total of 
 the slips in this file will at all times prove the controlling balance 
 upon the General Ledger. Slips Nos. 6 and 7 will be substituted in 
 place of the Note and held awaiting Maturity, at which time they 
 will be separated and the debit to “Re-Discounts with other Fed- 
 eral Reserve Banks” will be charged to the Note Teller and the 
 credit to Bills Discounted forwarded to the General Ledger. 
 
 The original Maturity Slip in the regular Maturity File need not 
 be disturbed in this instance, as the reduction of Bills Discounted 
 does not take place until the Maturity of the items, consequently 
 it is necessary that they be left where originally placed, viz., the 
 regular Maturity File, in order that it will be in agreement with 
 the controlling balances. 
 
 An adjustment of Unearned Discount would, of course, be neces- 
 sary upon receipt of the advice of credit. 
 
 FORM BD-16 
 
 This form is to be used in handling items re-discounted for 
 other Federal Reserve Banks, and which are payable within the 
 district covered by the Messengers of the Federal Reserve Bank 
 discounting the items. 
 
 It provides a Controlling Balance upon the “Resources” side of 
 the General Ledger, to be known as “Re-Discounts for other Fed- 
 eral Reserve Banks.” An explanation of the Form follows: 
 
 Slip No. 1 — Debit to “Re-Discounts for other Federal Reserve 
 Banks.” 
 
 Slip No. 2 — Credit to “Re-Discounts for other Federal Reserve 
 Banks.” 
 
 Slip No. 3 — Advice of Credit to Federal Reserve Bank Of . . . 
 
 Slip No. 4 — Credit of Federal Reserve Bank Of . . . 
 
 Slip No. 5— Credit to Unearned Discount. 
 
 Slip No. 6 — Liability Slip of Federal Reserve Bank Of . . . 
 
 Slip No. 7 — Maturity Slip. 
 
 FORM BD-17 
 
 This is identical with FORM BD-16, with the exception that it 
 
 145 
 
is intended to cover Notes re-discounted for other Federal Reserve 
 Banks, which are payable without the district covered by Messen- 
 gers of the Federal Reserve Bank. Its explanation follows: 
 
 Slip No. 1 — Debit to ‘‘Re-Discounts for other Federal Reserve 
 Banks.” 
 
 Slip No. 2 — Letter forwarding- the Item for Collection. 
 
 Slip No. 3 — Acknowledgment of its Receipt. 
 
 Slip No. 4 — Credit to “Re-Discounts for other Federal Peserve 
 Banks.” 
 
 Slip No. 5. — Debit to Collecting Bank. 
 
 Slip No. 6 — Advice of Credit to the Federal Reserve Bank 
 Of. . . . 
 
 Slip No. 7 — Credit to the Federal Reserve Bank Of . . . 
 
 Slip No. 8 — Credit to Unearned Discount. 
 
 Slip No. 9 — Liability of Federal Reserve Bank Of . . . 
 
 Slip No. 10 — Maturity Slip. 
 
 FORM BD-18 
 
 A continuous loose-leaf record to be forwarded to the Federal 
 Reserve Board at Washington, D. C., by the Federal Reserve Bank 
 discounting items for another Federal Reserve Bank. 
 
 FORM BD-19 
 
 A sample loose-leaf sheet, to be used in effecting the daily ac- 
 crual of Earned Discount, the resulting figures to be used in a 
 Debit to “Unearned Discount” and a Credit to “Discount.” 
 
 FEDERAL RESERVE NOTES 
 
 It is proposed that when a Federal Reserve Bank wishes to is- 
 sue Federal Reserve Notes, it will reduce Bills Discounted and 
 Debit a Controlling Balance in its resources to be known as “With 
 Federal Reserve Agent to secure Federal Reserve Notes.” After 
 the Federal Reserve Notes have been received from the Federal 
 Reserve Agent, which it is assumed will be the same day, the 
 Federal Reserve Notes will be placed in the assets of the Bank, 
 their offset being a Credit to “Federal Reserve Notes.” 
 
 As the hypothecated Notes mature, it will be incumbent upon 
 the Federal Reserve Banks to either notify the Federal Reserve 
 Agent of their desire to cancel the equivalent of Federal Reserve 
 Notes, or, as is most likely, exercise the option of substituting Notes 
 with more distant maturities than those already hypothecated. 
 FORM BO-20 
 
 This has been designed to cover both the hypothecation and 
 possible substitution of discounted Notes, held by the Federal Re- 
 serve Agent to secure Federal Reserve Notes. Its explanation fol- 
 lows: 
 
 Slip No. 1 — Debit “With Federal Reserve Agent to secure Fed- 
 eral Reserve Notes.” 
 
 Slip No. 2 — Credit to “Federal Reserve Notes.” 
 
 Slip No. 3 — Maturity Slip. 
 
 Slip No. 4 — Credit “With Federal Reserve Agent to secure Fed- 
 eral Reserve Notes." 
 
 Slip No. 5 — Credit to “Bills Discounted.” . . . 
 
 146 
 
In hypothecating- the Notes with the Federal Reserve Agent it 
 does not appear advisable to retire the liability slips typewritten 
 at the time of the first handling of the Note, as the hypothecation 
 does not in any way affect liabilities and as the Notes will even- 
 tually be returned to the Federal Reserve Banks for collection, but 
 it will be obligatory, however, to remove the Maturity Slip from 
 the regular Maturity File, stamp it “With Federal Reserve Agent 
 to secure Federal Reserve Notes,” and then forward it to the Fil- 
 ing Department to be filed in the permanent record. 
 
 In substitution of the Maturity Slip described in the foregoing 
 paragraph, slip No. 3 of FORM BD-20 will be used and filed chron- 
 ologically in a separate Maturity File covering the outstanding 
 Notes with the Federal Reserve Agent, as in this way the Bank will 
 be in a position to know at any time the exact Notes held by the 
 Federal Reserve Agent and also will be placed in position to see 
 upon what days subsitution of Notes will be required. 
 
 FORM BD -21 
 
 A continuous record, in triplicate, will be obtained from FORM 
 BD-20 and delivered with the discounts to the Federal Reserve 
 Agent by the Bank. The First sheet of the Continuous Record 
 will serve as an application of the Federal Reserve Bank to the 
 Federal Reserve Agent, while the Duplicate will be the receipt of 
 the Federal Reserve Agent to the Federal Reserve Bank, acknowl- 
 edging the Collateral as security, and the Triplicate sheet will be 
 the advice of the Federal Reserve Agent to the Federal Reserve 
 Board at Washington, descriptive of the issuance of Federal Reserve 
 Notes and the supporting collateral. 
 
 FORM BD-22 
 
 This is a Continuous Record, in triplicate, covering the substi- 
 tution of Collateral by the Federal Reserve Bank -with the Feder- 
 al Reserve Agent, upon the reverse side of each of which are listed 
 the Notes which it is desired to retire, while upon the face of the 
 sheets will be listed the proffered Collateral in substitution. The 
 first sheet of the Continuous Record will be the application of the 
 Federal Reserve Bank to the Federal Reserve Agent, the Dupli- 
 cate sheet will be the receipt of the Federal Reserve Agent to the 
 Federal Reserve Bank covering the acknowledgment of the Col- 
 lateral received in substitution, while the Triplicate will be the Fed- 
 eral Reserve Agent’s advice to the Federal Reserve Board at Wash- 
 ington of the substitution of Collateral. 
 
 FORM BD-23 
 
 This is a draft for the proposed skeleton loose-leaf Liability 
 Ledger, which will be descriptive of the total indebtedness of con- 
 cerns under the classification of “Payer” and “Endorser.” 
 
 FORM BD-24 
 
 This is a Block Sheet to be used in establishing sectional proofs 
 of the day’s work. 
 
 ,rOR31S BD-25-26. 
 
 Slips to be used in routing the different batches of Debits and 
 Credits to the General Ledger, Note Teller, and Distributing De- 
 partment. 
 
 147 
 
FORM BD-27 
 
 A proof sheet for the Department, the figures for which will be 
 obtained through a recapitulation of the Block Sheets. 
 
 FORM BD-28 
 
 This is a triplicate record, which will be used in the release 
 of collateral by the Federal Reserve Agent when Federal Reserve 
 Notes have been tendered to him for cancellation, its explanation 
 being : 
 
 Sheet No. 1 — Application to the Federal Reserve Agent for the 
 release of the Collateral. 
 
 Sheet No. 2 — Permanent record for the Federal Reserve Agent. 
 
 Sheet No. 3 — Advice to the Federal Reserve Board of the re- 
 lease of the Collateral by the Federal Reserve Agent. 
 
 Sheet No. 1 will serve as a permanent record for the Federal 
 Reserve Bank, while sheet No. 2 will serve the same purpose for 
 the Federal Reserve Agent and, in addition, place him in a posi- 
 tion to prove the amount of notes being held as collateral; like- 
 wise sheet No. 3 will enable the Federal Reserve Board to prove 
 the correctness of “Re-Discounts to Secure Federal Reserve Notes,” 
 as it appears upon the daily statement of the Federal Reserve 
 Agent. 
 
 BOOKKEEPING DEPARTMENT 
 
 This Department will have charge of the maintenance of the 
 accounts of the depositors of the Federal Reserve Banks. 
 
 The usual method of handling such accounts is by means of 
 bound ledgers, supported by monthly statements, descriptive of 
 the different debits and credits entering the accounts, while under 
 the proposed plan the bookkeeper will obtain, by machinery, a 
 daily statement for the depositor, at the same time that he is pre- 
 paring his loose-leaf ledger sheet, indicative of the day’s transac- 
 tions. 
 
 If not too expensive, it is suggested that the cancelled checks 
 of each account be returned with the daily statement, inasmuch 
 as it would place them in the possession of the depositors at the 
 earliest possible moment, and would do away with the necessity 
 of filing and, likewise, the maintenance of steel cabinets in which 
 they must be assorted. 
 
 It will be observed that no provision has been made upon the 
 daily statement for a “Key,” as this will not be necessary under 
 the general system as outlined in the Bank — that of giving specific 
 advices covering the different debits and credits entering the ac- 
 counts. 
 
 The Forms of the Department will be: 
 
 FORM B-l 
 
 This is a combined ledger and statement sheet designed for 
 machinery, but which with a slight modification of ruling could 
 be adapted to hand work. 
 
 The first duty of the bookkeeper in the morning will be to 
 transcribe upon the top sheet of the Form, the balance brought 
 forward from the day prior, after which he will deliver the pre- 
 
 148 
 
vious day’s ledger sheets to the Filing Department to be filed 
 chronologically in a Transfer Binder under the name and style of 
 the depositor’s account. He will then prove the total of the as- 
 sembled balances to his controlling- account on the General Ledger. 
 
 It may be well to note at this point, that the daily statement 
 to the Member Banks will not contain the balance appearing- to 
 their credit at the close of business each day, but instead will 
 simply be a statement giving- the balance of the day prior, together 
 with the debits and credits entering- the account, inasmuch as it 
 would hardly be advisable to forward a balance, the accuracy of 
 which would not be proved until the following morning. This, 
 however, is a matter of detail, which will best be determined after 
 the first few days of operation, as it is quite possible the nature 
 of the work will enable all the Tellers to forward their figures 
 to the General Ledger in time to have the controlling- balances in 
 proof for the bookkeepers before the conclusion of each day. 
 
 After the previous day’s balances have been transcribed, the 
 routine of the bookkeeper’s work will depend largely upon the time 
 of receipt of the morning mail, exchanges, and other departmental 
 entries. 
 
 FORM B-2 
 
 To be used in reporting overdrafts to the proper official. 
 
 FORM B-3 
 
 A form of card index, upon which will be accumulated the over- 
 drafts appearing in any particular account. 
 
 FORM B-4 
 
 A loose-leaf record, upon which will be inscribed, under the 
 name of the Member Bank, a complete description of the checks 
 upon which it is desired to stop payment. 
 
 FORM B-5 
 
 This is a form, in quadruplicate, which will be used in handling 
 “Transit Account,” its explanation being: 
 
 Page No. 1 — Loose-leaf ledger sheet of “Transit Account” to 
 be retained as a permanent record by the Federal Reserve Bank. 
 
 Page No. 2 — Loose-leaf ledger sheet of “Transit Account” for 
 the Federal Reserve Agent, to be retained by him as a permanent 
 record. 
 
 Page No. 3 — Advice from Federal Reserve Agent to the Secre- 
 tary of the Treasury, which will be signed by the Agent after veri- 
 fication, and which will be the authority to the Secretary of the 
 Treasury to execute the debits and credits in the gold reserve 
 balances of the different Federal Reserve Banks. 
 
 Page No. 4 — Statement of the account to be forwarded by the 
 Federal Reserve Bank to the Secretary of the Treasury. 
 
 Pages 2 and 3 will be delivered to the Federal Reserve Agent, 
 page 2, as previously outlined, being his permanent record, and 
 fage 3, his advice to the Secretary. Page 4 has been designed 
 to afford the Secretary the opportunity of checking the correct- 
 ness of the Federal Reserve Agent’s figures and also to remove 
 the possibility of confusion in the event of the Federal Reserve 
 Agent’s advice going astray in the mails. 
 
 149 
 
GENERAL BOOKS 
 
 It is proposed that the General Ledger, Daily Statement Book. 
 Profit and Loss Ledger, and other ledger records which vitally af- 
 fect the Bank, be segregated from the regular Bookkeeping De- 
 partment, in order that the controlling figures of the Bank be un- 
 der close observation and not open to the casual examination of 
 clerks. 
 
 The General Ledger bookkeeper will also prepare any state- 
 ments of condition (exclusive of statistics) which may be required 
 by the Directors or Officials of the Bank, Federal Reserve Agent, 
 or Federal Reserve Board. 
 
 Sample pages of the principal books which he will maintain 
 have been drafted, and are explained as follows: 
 
 GB-1 
 
 Proposed sheet of a bound book to be styled a “General Ledger” 
 and which will contain the controlling accounts of the Bank. 
 
 GB-2 
 
 Proposed loose-leaf sheet for the "Daily Statement Book,” the 
 figures for which will be obtained from a concentration of Gen- 
 eral Ledger accounts. 
 
 This book will be proved and delivered to the President or 
 Secretary-Treasurer of the Fedex-al Reserve Bank each morning 
 not later than 9:30 A. M., in order that they may know the con- 
 dition of the Bank prior to the opening of business. 
 
 It will be noted that the leaves of the book are in duplicate, 
 the plan being that the duplicate statement of the condition of the 
 Bank will be delivered to the Federal Reserve Agent for examina- 
 tion and that he in turn will forward it, the same day, to the 
 Federal Reserve Board at Washington for their information. 
 
 On Friday of each week, if it is desired, the figures may be 
 transmitted by telegraph to the Federal Reserve Board for the 
 compilation at their end, of the concentrated figures of the twelve 
 different banks. 
 
 GB-3 
 
 Sample sheet of a bound book to be known as “Profit and Loss 
 Ledger.” 
 
 This will contain the descriptive record of Profit and Loss ac- 
 count and such other accounts as may be deemed advisable. 
 GB-'t 
 
 To be used in preparing a Difference record of the several 
 departments, and will be placed upon the desk of the Secretary- 
 Treasurer on Monday morning of each week. 
 
 GB-5 
 
 A Ledger sheet for a subsidiary record giving the details of 
 the Short and Over-Differences of the several departments, and 
 must be in agreement with the Difference Account upon the 
 General Ledger. 
 
 GB-C, 
 
 This form has been designed for use of the Directors of the 
 Federal Reserve Bank, at their regular weekly meetings, the plan 
 
 150 
 
being that the form will be manifolded so that each Director will 
 receive a copy. 
 
 GB-7 
 
 This is an Expense Ledger which will be posted daily and must 
 be in agreement with the General Ledger. It will be noted that 
 it has been prepared with the thought of showing every item of 
 Expense, although, of course, conditions will arise which may 
 necessitate modifications. 
 
 ACCOUNTING DEPARTMENT 
 
 This Department will handle the transfer of funds; redeem 
 unpaid cash items which have been cleared through the Clearing- 
 House; issue Letters of Advice; prepare for official signature ex- 
 pense vouchers, and checks drawn upon other Federal Reserve 
 Banks, and arrange for the depositing of funds for the credit of 
 the Five Per Cent Fund of Member Banks. 
 
 It likewise will be entrusted with the custody of contracts and 
 will prepare such statistics of earnings and expenses as may be 
 desired. 
 
 It will also handle the analysis of accounts, under whatever 
 method may be determined. 
 
 The forms of the Department are: 
 
 FORM AC-1 
 
 This will be used in transferring funds of Member Banks through 
 other Federal Reserve Banks, its explanation being; 
 
 Top Slip, Page 1 — Advice to Federal Reserve Bank, requesting 
 the transfer to be made. 
 
 Slip 2, Page 1 — Advice to Member Bank that their account has 
 been charged and the transfer arranged. 
 
 Top Slip, Page 2 — Credit to Federal Reserve Bank of 
 
 Slip 2, Page 2 — Debit to Member Bank’s Account. 
 
 FORM AC -2 
 
 This is identical with FORM AC-1, with the exception that it 
 is intended to cover a telegraphic transfer of funds, its explana- 
 tion being-; 
 
 Top Slip, Page 1 — Advice to Federal Reserve Bank, requesting 
 the transfer to be made. 
 
 Slip 2, Page 1 — Advice to Member Bank, descriptive of the 
 charge and informing- them that the transfer has received atten- 
 tion. 
 
 Top Slip, Page 2 — Credit to Federal Reserve Bank of 
 
 Slip 2, Page 2 — Debit to Member Bank’s Account. 
 
 FORM AC -3 
 
 For use in making transfers from one account to another, both 
 of which keep balances with the Federal Reserve Bank, its explana- 
 tion being: 
 
 Top Slip, Page 1 — Advice to Member Bank, requesting the trans- 
 fer. 
 
 Slip 2, Page 1 — Advice to the Member Bank whose account will 
 be credited. 
 
 151 
 
Top Slip, Page 2 — Debit to the Member Bank, requesting the 
 transfer. 
 
 Slip 2, Page 2 — Credit to the Member Bank whose account is 
 to be credited. 
 
 FORM AC-4 
 
 This will cover the depositing of funds over the counter, for 
 credit of Member Banks’ Accounts, its explanation being: 
 
 Slip No. 1 — Letter of advice to Member Bank. 
 
 Slip No. 2 — A duplicate of the above, which will be tendered 
 as a receipt to the Bank or individual depositing the funds. 
 
 Slip No. 3 — Credit to the Member Bank’s Account. 
 
 Slip No. 4 — Auditor’s Checking Slip. 
 
 FORM AC-5 
 
 Intended to cover the receipt of instructions from Member 
 Banks to deposit funds with other banking institutions located in 
 the same city in which the Federal Preserve Bank is situated, its 
 explanation being: 
 
 Slip No. 1 — Advice to the Member Bank that their instructions 
 have received attention and also giving the amount charged to 
 their account. 
 
 Slip No. 2 — Accompanied by a check of the Federal Reserve 
 Bank, this slip will serve the purpose of a letter of instructions to 
 the institution receiving the funds. 
 
 Slip No. 3 — Debit to Member Bank’s Account. 
 
 FORM AC-6 
 
 This will be used in arranging deposits with the Treasurer of 
 the United States for the credit of the Five Per Cent Fund of 
 Member Banks, its explanation being: 
 
 Slip No. 1 — Advice to Member Bank of the amount deposited. 
 
 Slip No. 2 — Debit to Member Bank’s Account. 
 
 FORM AC-7 
 
 A sample check to be used in redeeming unpaid items which 
 have been cleared through the Clearing House: 
 
 No. 1 — Form of proposed check. 
 
 No. 2 — Credit to “Returned Items.” 
 
 FORM AC-8 
 
 A proposed check to be used in drawing upon other Federal 
 Reserve Banks, its explanation being: 
 
 No. 1 — Form of check, together with Auditor’s stub. 
 
 No. 2 — Credit to the account of the Federal Reserve Bank upon 
 whom the check is drawn. 
 
 FORM AC-9 
 
 A proposed form of expense voucher, which would be descriptive 
 of the particular invoice intended to be covered, its explanation 
 being: 
 
 No. 1 — Form of check, to which is attached a statement of ac- 
 count. 
 
 No. 2 — Credit to “Expense Checks” and Debit to “Provision for 
 Disbursements.” 
 
 152 
 
In this connection, it may be suggested that a daily charge to 
 Expense with a corresponding credit to “Provision for Disburse- 
 ments,” sufficient to cover the average expense of the Bank, would 
 tend to indicate more clearly the actual current earnings. 
 
 If it is determined to debit Expense only at the time of actual 
 disbursement, then, of course, the debit ticket in this instance 
 would be labelled “Expense” instead of “Provision for Disburse- 
 ments.” 
 
 FORM AC-10 
 
 Proposed form of envelope, which is intended to enclose such 
 contracts as may be entrusted to the Department. 
 
 It will be noted that the face of the envelope provides full par- 
 ticulars concerning the contract, dates of payment, and various 
 other details. 
 
 FORM AC-11 
 
 A tentative form of Analysis, which could only be made 
 use of when the actual conditions surrounding the accounts can 
 be determined, and, likewise, after the base of operative expense 
 has been established. It has been tendered simply for the pur- 
 pose of guidance when the time arrives for its completion. 
 
 FORM AC-12 
 
 Block Sheet for the Department, to be used in establishing sec- 
 tional proofs. 
 
 FORMS AC-13-11,-15-16 
 
 Vari-colored slips to be used in routing the different batches 
 to the several departments. 
 
 FORM AC-11 
 
 A Proof Sheet, upon which will be assembled the figures ob- 
 tained from a recapitulation of the Block Sheets. 
 
 FORM AC-18 
 
 This is a form which will be prepared and delivered to the 
 different departments, in order that they may be in touch 
 with the expense of their respective department. 
 
 SECURITIES DEPARTMENT. 
 
 As this Department will have charge of the purchase, sale, 
 and custody of such securities as will be classified under the 
 General Ledger account known as “Investments,” it is suggested 
 that the manager be an officer of the Bank. 
 
 The Department will also have charge of the purchase and 
 sale of securities for the account of Member Banks, and in the 
 event of the Federal Reserve Banks permitting Member Banks 
 to deposit securities with them for safekeeping, they will have 
 charge of such Custodies. 
 
 The preparation of such statistics as may be required con- 
 cerning the status of the different classes of investments, -will 
 also be entrusted to the Department. 
 
 The Forms are — - 
 
 153 
 
FORM 8-1 
 
 This will be used in purchasing- securities for account of Fed- 
 eral Reserve Banks, its explanation being — 
 
 Slip No. 1 — Debit to Investments. 
 
 Slip No. 2 — Debit to Interest Accrued Rec-Inv. 
 
 FORM 8-2 
 
 This is a continuous record for the Federal Reserve Board 
 at Washington, which will be written at the same time the 
 above form is executed, and which will be forwarded to the 
 Board with the thought of placing it in a position to know, with 
 the least possible delay, what investments have been made by the 
 Federal Reserve Banks. 
 
 FORM 8-3 
 
 This is a loose-leaf book which will be used in maintaining a 
 descriptive balance of the different classes of securities on hand, 
 and will be in agreement with the General Ledger at all times. 
 Upon the reverse side of the sheet provision has been made for 
 the listing of bond numbers. 
 
 FORM 8-4 
 
 This is a sample page of a bound book which will be used to 
 record purchase and sale of securities for account of Member 
 Banks. 
 
 FORM 8-5 
 
 Furnishes a summary of the condition of the investments, 
 which will be made to the Board of Directors of the Federal 
 Reserve Bank each week. 
 
 FORM 8-6 
 
 A sample loose-leaf sheet to be used in effecting the daily 
 accrual of interest, the resulting figures to be used as a debit 
 to “Interest Accrued Receivable-Investments,” and a credit to 
 “Interest-Investments.” 
 
 FORM 8-7 
 
 In the event of the Federal Reserve Banks holding securities 
 in safe deposit for account of Member Banks, this form will be 
 used, and is designed to fully describe such Custodies, provision 
 having been made for a nominal balance based upon par value 
 and also for the date and other details, etc., of their delivery. 
 
 Before filing- the form, all indices, except those covering the 
 months when interest payments are to be made, should be re- 
 moved, so that at a glance it may be seen what interest pay- 
 ments are due in any month. 
 
 In order that a proof of the Custodies be possible, it is sug- 
 gested that a controlling balance be placed upon the General 
 Ledger which will in no way affect the assets or liabilities of 
 the Banks, such as, on the debit side, “Custodies,” and, on the 
 credit side, “Custodies due Correspondents.” 
 
 Forms have not been drafted covering the handling of cou- 
 pons, inasmuch as it is assumed the Federal Reserve Banks will 
 not burden themselves with their collection. 
 
 154 
 
FOREIGN DEPARTMENT 
 
 In general explanation of the following- forms, it is suggested 
 that they have been constructed along two distinct lines, viz.: 
 
 No. 1 — That it will be the purpose of Branch Banks in the 
 original handling of items to so manifold their entries that the 
 Regional Banks will be obliged to do the least possible work. 
 
 No. 2 — That the Regional Banks only will maintain balances 
 abroad and, as a consequence, any foreign exchange transactions 
 originating with Branch Banks, will be for account of their Re- 
 gional Banks. 
 
 FORM FX-1 
 
 Intended for use of Regional Banks, when forwarding Cash 
 items for credit, such items being drawn in the currencies of their 
 respective countries at ten days’ sight and under, together with 
 such long items as may be forwarded for immediate discount. 
 
 It will be noted in this form, as well as subsequent FORMS NOS. 
 2, 3, 4, 5, and 6, that provision has been made for a double-ac- 
 cumulating typewriter adding machine, whereby at the completion 
 of the listing of the different items, a total is readily obtainable 
 both in foreign currencies and dollars. It may also be added that 
 this necessitates a machine with Sterling equipment. 
 
 The first page of Form No. 1 will accompany the original 
 drafts and documents. The second page will be forwarded with 
 the duplicate drafts and documents. The third, or first Liability 
 Sheet, is for use of the Liability Clerk in the Regional Bank. The 
 fourth, or second Liability Sheet is to be forwarded to the Federal 
 Resei've Board at Washington for the accumulation of their credit 
 record. The fifth serves as Remittance Register as well as a Debit 
 to the Foreign Bank to whom the items have been sent. 
 
 It will be noted that the plan of a Remittance Register will 
 give full particulars as to the entry, tenor, and amount of the 
 bills, and at the same time assemble them in totals so that the 
 bookkeeper attached to the department is materially assisted in 
 the correct postings of the different accounts. It might alsb be 
 suggested that the clerk detailed for checking the correctness of 
 discounts, value dates, etc., has all particulars before him. 
 
 Attention is called to the fact that provision has been made 
 in the last sheet for a “follow-up” system looking to the prompt 
 acknowledgment of the cash letters, the covering receipts of which 
 have already been attached to the original and duplicate letters 
 forwarding the items abroad. 
 
 FORM FX-2 
 
 This has been constructed identically with FORM FX-1, with 
 the exception that it has been designed to cover the forwarding 
 of exchange to a Branch or a Correspondent of the institution 
 abroad, providing, as will be noted, a simultaneous advice to 
 the Regional Bank’s correspondent. An example of this would be 
 the forwarding of exchange to the Dresdner Bank in Hamburg for 
 account of Dresdner Bank, Berlin, for Credit of the Federal Re- 
 
 155 
 
serve Bank in Chicago. The pages of the form will be used as 
 follows: 
 
 Page 1 — Letter accompanying original drafts and documents 
 abroad. 
 
 Page 2 — Letter accompanying duplicate drafts and documents 
 abroad. 
 
 Page 3 — Notification of the forwarding of the items to the for- 
 eign bank with whom the checking balance is maintained. 
 
 Page 4 — Liability Sheet for use of the Regional Bank. 
 
 Page 5 — Liability Sheet to be forwarded to the Federal Reserve 
 Board at Washington. 
 
 Page 6 — Sheet for Remittance Register. 
 
 FORM FX-3 
 
 This is also for use of Regional Banks and intended to cover 
 the handling of Australian Exchange when forwarded to the place 
 of payment for collection, and at the same time for a realization 
 of the proceeds through negotiation at London. Explanation of 
 its pages follow, viz.: 
 
 Page 1 — Letter accompanying the original drafts and documents 
 to Australia. 
 
 Page 2 — Letter enclosing seconds of Exchange to London, look- 
 ing to the negotiation of the items. 
 
 Page 3 — Liability Sheet for use of the Regional Bank. 
 
 Page 4 — Liability Sheet to be forwarded to the Federal Reserve 
 Board at Washington. 
 
 Page 5 — Sheet for Remittance Register. 
 
 FORM FX-h 
 
 This is identical with FORM FX-1, being intended to cover 
 short items drawn at ten days’ sight and under, with the excep- 
 tion that it is designed for the forwarding by Branch Banks of 
 exchange for account of Regional Banks and includes a notifica- 
 tion to the Regional Bank of the forwarding of the items. 
 
 FORM FX-5 
 
 This is similar to FORM FX-2, covering the same purpose, with 
 the exception that it includes a notification of the forwarding of 
 the items abroad to the Regional Bank. 
 
 FORM FX-6 
 
 This will cover the same ground as FORM FX-3, except that 
 it includes a notification to the Regional Bank of the forwarding 
 of the Australian Exchange. 
 
 Concerning FORMS FX-4-5-G, it will be necessary for the Re- 
 gional Banks to execute entries at their end upon receipt of the 
 notification from the Branch Banks, who will mail the following 
 day the Remittance Register sheets, to be placed in the Regional 
 Bank’s Binder, awaiting the acknowledgment of Credit from the 
 Banks abroad. 
 
 FORM FX-1 
 
 For the purpose of maintaining a controlling balance upon such 
 long items as may be purchased and which will be held without 
 discount to maturity, it is proposed to establish an account upon 
 the General Ledger to be known as “Unmatured Foreign Bills.” 
 
 156 
 
This form is intended to cover these bills when forwarded by 
 a Federal Reserve Bank direct to a correspondent abroad with 
 whom it keeps a checking' balance. 
 
 Page 1 — Letter accompanying the original draft and documents 
 abroad. 
 
 Page 2 — Letter accompanying the duplicate draft and docu- 
 ments abroad. 
 
 Page 3 — Serves as an acknowledgment of receipt and provides 
 for a “follow-up.” 
 
 Page 4 — Is an advice of Credit to customer. 
 
 Page 5 — Is a Credit to the customer’s account. 
 
 Page 6 — Is a Debit to “Unmatured Foreign Bills.” 
 
 Page 7 — Is a Credit to “Unmatured Foreign Bills.” 
 
 Page 8 — Is a Debit to “Due from Foreign Banks.” 
 
 It will be noted that the entire record and bookkeeping entries 
 have been executed when first handling the bill. Pages 7 and 8, 
 being attached to one another, are filed in a chronological manner, 
 reflecting the maturity abroad of the item, consequently the bills 
 are charged to the Foreign Banks at the approximate due date, 
 thereby keeping our books more closely in touch with the bal- 
 ances abroad. It is provided, of course, that non-payment of 
 the items will be cabled promptly. This resume also applies to 
 FORMS FX-8-10-11. 
 
 This is identical with the above form, with the exception that 
 it is designed to cover long bills forwarded to Branches or Cor- 
 respondents of the Federal Reserve Bank’s correspondent abroad. 
 Its explanation follows: 
 
 Page 1 — Letter accompanying the original draft and documents 
 abroad. 
 
 Page 2 — Letter accompanying the duplicate draft and documents 
 abroad. 
 
 Page 3 — A notification to the Regional Bank’s correspondent 
 that the item has been forwarded to one of its Branches or Corre- 
 spondents. 
 
 Page 4 — Serves as an acknowledgment of receipt and provides 
 for a “follow-up.” 
 
 Page 5 — Advice of Credit to customer. 
 
 Page 6 — Credit to customer’s account. 
 
 Page 7 — Debit to “Unmatured Foreign Bills.” 
 
 Page 8 — Credit to “Unmatured Foreign Bills.” 
 
 Page 9 — Debit to “Due from Foreign Banks.” 
 
 FORM FX-9 
 
 This will cover short items drawn at ten days’ sight and under, 
 in the following classifications, viz. : 
 
 No. 1 — When payable and forwarded to places where no re- 
 lations have been established. 
 
 No. 2 — When the items are drawn in currencies other than 
 the currency of the countries in which they are payable. 
 
 This class of items is quite apt to be very troublesome in 
 handling, usually being drawn upon distant points, and for the pur- 
 
 157 
 
pose of control it is suggested that they be grouped under a Gen- 
 eral Ledger Account, to be known as “Foreign Collection Banks,” 
 and it is for this account that FORM FX-9 has been constructed. 
 An explanation of the form follows: 
 
 Page 1 — Accompanies the original draft and documents abroad. 
 Page 2 — Accompanies duplicate draft and documents abroad. 
 Page 3 — Serves as an acknowledgment of receipt and provides 
 for a “follow-up.” 
 
 Page 4 — An advice of credit to the Customer. 
 
 Page 5 — Credit to Customer’s account. 
 
 Page 6 — A Debit to “Foreign Collection Banks.” 
 
 Page 7 — Credit to “Foreign Collection Banks.” 
 
 Page 8 — Debit to “Due from Foreign Banks.” 
 
 FORM FX-10 
 
 For long bills purchased by a Branch Bank and forwarded to 
 a direct connection for account of the Regional Bank maintaining 
 the balance abroad. 
 
 It will be noted in the following explanation of the form that 
 the record of the Regional Bank as well as the Member Bank has 
 been made at one writing, viz.: 
 
 Page 1 — Letter accompanying the original draft and documents 
 abroad. 
 
 Page 2 — Letter accompanying the duplicate draft and documents 
 abroad. 
 
 Page 3 — Provides for an acknowledgment and “follow-up.” 
 Page 4 — Advice of Credit for Branch Bank’s customer. 
 
 Page 5 — Credit to Branch Bank’s customer. 
 
 Page 6 — Debit to “Unmatured Foreign Bills.” 
 
 Page 7 — Debit to the Regional Bank for whose account the 
 item is handled abroad. 
 
 Page 8 — Credit to “Unmatured Foreign Bills.” 
 
 Page 9 — Notification to Regional Bank of the forwarding of 
 the Bill. 
 
 Page 10 — Advice of Credit from the Regional to the Branch 
 Bank. 
 
 Page 11 — Credit to the Branch Bank. 
 
 Page 12 — Debit to “Due from Foreign Banks.” 
 
 FORM FX-11 
 
 This is for long bills purchased by Branch Banks and handled 
 as outlined above, when the items are forwarded to a Branch 
 or a correspondent of the banking connection abroad. Its ex- 
 planation follows: 
 
 Page 1 — Letter accompanying the original draft and documents 
 abroad. 
 
 Page 2 — Letter accompanying the duplicate draft and documents 
 abroad. 
 
 Page 3 — Letter of notification to the foreign bank for whose 
 account the item will be handled. 
 
 Page 4 — Serves as an acknowledgment and a “follow-up.” 
 Page 5 — Advice to the Branch Bank’s customer. 
 
 158 
 
Page 6 — Credit to the Branch Bank’s customer. 
 
 Page 7 — Debit to “Unmatured Foreign Bills.” 
 
 Page 8 — Debit to the Regional Bank in whose account the 
 item will be credited when paid. 
 
 Page 9 — Credit to “Unmatured Foreign Bills.” 
 
 Page 10 — Letter of notification from the Branch to the Re- 
 gional Bank of the forwarding of the item. 
 
 Page 11 — Advice of credit to the Branch Bank. 
 
 Page 12 — Credit to the Branch Bank. 
 
 Page 13 — Debit to “Due from Foreign Banks.” 
 
 FORM FX12 
 
 This is designed for items covered by FORM FX-9, except in 
 this case they will be purchased by a Branch Bank and be handled 
 in accordance with the thought outlined in FORMS FX-10 and 11. 
 Its explanation follows: 
 
 Page 1 — Letter accompanying the original draft and documents 
 abroad. 
 
 Page 2 — Letter accompanying the duplicate draft and documents 
 abroad. 
 
 Page 3 — Serves as an acknowledgment and “follow-up.” 
 
 Page 4 — Advice of credit to the Branch Bank’s customer. 
 
 Page 5 — Credit to Branch Bank’s Customer. 
 
 Page 6 — Debit to “Foreign Collection Banks.” 
 
 Page 7 — Debit to the Regional Bank. 
 
 Page 8 — Credit to “Foreign Collection Banks.” 
 
 Page 9 — Letter of notification to the Regional Bank of the for- 
 warding of the item. 
 
 Page 10 — Advice of credit to the Branch Bank. 
 
 Page 11 — Credit to the Branch Bank. 
 
 Page 12 — Debit to “Due from Foreign Banks.” 
 
 FORM FX-13 
 
 This will be a continuous record for items covered by FORMS 
 FX-7-8 and 9, the original of which will go to the Liability clerk of 
 the Regional Bank, while the duplicate will be mailed to the Fed- 
 eral Reserve Board at Washington. 
 
 FORM FX-14 
 
 This will be a continuous record covering FORMS FX-10-11 
 and 12, the original of the form being used by the Liability Clerk 
 of the Branch Bank, while the duplicate will be forwarded to the 
 Federal Reserve Board at Washington. 
 
 FORM FX-15 
 
 This will serve as an advice of credit to the Member Banks 
 covering such items as might be bought by the Regional Banks 
 and which will be forwarded abroad on FORMS FX-1-2 and 3. The 
 attached duplicate will be a credit to the Member Bank’s account. 
 FORM FX-16 
 
 As only certain individuals in the Foreign Department will be 
 authorized to quote rates, this form has been devised for the pur- 
 pose of supplying the clerks who will receive and deliver exchange, 
 with authenticated rates, so that there will be no confusion in- 
 cidental to prompt handling. 
 
 159 
 
FORM FX-17 
 
 This is a daily balance sheet of the Department, which will 
 be prepared by the bookkeeper and delivered to the head of the 
 Department, daily, in order that he may be in close touch with 
 the condition of balances abroad, without the necessity of ex- 
 amining- the Foreign Ledger. It is understood, of course, that in 
 the left-hand column the names of the correspondents abroad will 
 be printed. 
 
 FORM FX-18 
 
 This form will serve the purpose of recording special cable 
 words not covered in the codes, and which may be required as 
 a notification of prompt payment or non-payment. 
 
 FORM FX-19 
 
 This form consists of a Debit and Credit Ticket to be used in 
 the transfer of funds from one Foreign account to another, prin- 
 cipally because of cable transfers and arbitrage operations. 
 
 FORM FX-20 
 
 This form serves as a confirmation covering the purchase of 
 cable transfers from institutions, through their brokers. 
 
 FORM FX-21 
 
 The Foreign Department may require for counter use, as well 
 as for the use of Member Banks, a supply of drafts and the form 
 tendered herewith is to supply that want. 
 
 FORM FX-22 
 
 In arranging for postal remittances ordered by Member Banks, 
 this form has been constructed, the original of which will be for- 
 warded abroad with the necessary instructions. The carbon copy 
 will be retained in a loose-leaf binder awaiting the return of the 
 receipts. 
 
 FORM FX-23 
 
 Upon the above receipts being received, they will be returned 
 to the Member Banks upon this form, the full data being obtained 
 from the duplicate of FORM FX-22, which, as previously out- 
 lined, will be retained in a binder for the purpose. 
 
 The receipts covering postal remittances, returned from abroad, 
 are usually written in an undecipherable way, and the above forms 
 and method of handling will materially assist in completing the 
 record. 
 
 FORM FX-24 
 
 (OUT — Travelers’ record not required) 
 
 FORM FX-25 
 
 This has been modeled to relieve as much as possible formal 
 letters being written by the Department, as it is felt that many 
 routine matters can easily be covered by this form. The duplicate 
 will serve as a record for the files. 
 
 FORM FX-26 
 
 This is a series of postal cards to be used in tracing overdue 
 items. The duplicate is filed away under a maturity “follow-up” 
 system* so that all overdue items will receive intelligent and care- 
 ful tracing. 
 
 160 
 
FORM FX-27 
 
 This form will be executed in triplicate and is intended to 
 cover the depositing- of funds in institutions in accordance with 
 instructions received from Foreign Banks. The first sheet is to 
 the hank receiving- the funds. The two remaining- portions of 
 the form serve as an original and duplicate receipt, the original 
 being forwarded to the bank requesting- the depositing of the funds, 
 and the duplicate is for the flies. 
 
 FORM FX-2S 
 
 (OUT) 
 
 FORM FX-29 
 
 This is for use in arranging cable transfers and serves as a 
 confirmation and bill (inclusive of cable charges) to the customer, 
 as well as a credit to the Foreign Bank and a “follow-up” to see 
 that the amount due is received. 
 
 FORM FX-30 
 
 This covers the offerings of the Foreign Department, looking 
 to the establishment of lines of credit needed for the purchase and 
 sale of Exchange. 
 
 FORM FX-31 
 
 For use of the Liability Clerk in the Foreign Department, and 
 is indicative of the total liability of customers, both as drawer and 
 drawee. 
 
 FORM FX-32 
 
 For use of the Liability Clerk in the Foreign Department and 
 shows the total of payer’s liability under Unmatured Long Items. 
 FORMS FX-33 and 34 
 
 This is a suggested “Block Sheet” together with a tab for 
 use in routing items to different departments. 
 
 FORM FX-35 
 
 A Ledger Sheet for the Foreign Department Ledger and from 
 which it will be noted a balance in dollars is obtainable at any 
 time. A balance in foreign amounts is deemed unnecessary, as it 
 would serve no useful purpose except for the reconciliation of the 
 account at stated intervals, at which time the Auditing Department 
 can easily strike the balance. 
 
 FORM FX-36 
 
 This is for use of the Manager of the Foreign Department who 
 will do the trading, or who will influence the trading, and arrange 
 for the establishment of quotations. It has been arranged upon 
 a Chicago basis, but, of course, it may easily be adjusted to what- 
 ever center it is determined to have the rates emanate from. 
 FORMS FX-37 and 38 
 
 These sheets are intended to be compiled weekly by the Liability 
 Clerk of the Foreign Department and in turn to be delivered 
 to the Manager of the Department for the purpose of keeping him 
 ih close touch with the liabilities of his clients, without the neces- 
 sity of consulting the Liability Ledger. It is also suggested, if 
 required, that the originals, or perhaps duplicates, of the form 
 be delivered to the Board of Directors of the Federal Reserve Bank 
 at stated intervals. 
 
 161 
 

 FORM FX-39 
 
 This is designed to cover the receipt of a cable from abroad, 
 concerning which it is necessary to cable a reply and may be of 
 use in relations with Member Banks as well as for those from 
 whom Bills of Exchange have been purchased in the open market 
 FORM FX-40 
 
 This form is somewhat descriptive of its use and is intended 
 to be a matter of record of the addition of any word in the private 
 cable code. 
 
 FORM FX-bl 
 
 This is an added Ledger Sheet for the Foreign Department 
 Ledger, descriptive of the record of purchases and sales of Foreign 
 currency, over the counter. Its use will enable any Examiner 
 to know just how much of any particular Foreign currency is 
 being held in the Department, together with the dollar value at 
 which it is being carried on the books. 
 
 FORMS FX-42 and 43 
 
 These are Credit and Debit tickets descriptive of the different 
 classes of Foreign currency bought and sold, and from which the 
 bookkeeper will post to the Foreign Currency Sheet. 
 
 FORM FX-U 
 
 This is a labor-saving form which covers an advice to the 
 customer, together with a Debit and Credit to different accounts. 
 FORM FX-45 
 
 This is identical with FORM FX-44, with the exception that 
 the advice to the customer reflects a Debit in his account, the 
 manifolding entry being a Credit to some other account. 
 
 FORM FX-46 
 
 A suggested form of Daily Statement for the Foreign De- 
 partment, showing its condition in a similar manner to that 
 of the rest of the Bank. This Daily Statement should be in the 
 hands of the administration of the Bank each morning at the 
 same time that the Daily Statement Book of the General Bank 
 is being examined, so that the two may be compared, if necessary 
 FORM FX-47 
 
 This form has been arranged in order that the Regional Banks 
 might be equipped to handle strictly collection items payable in 
 foreign countries, and upon which no advance or credit would be 
 made, until the actual settlement of the item. Its explanation 
 follows: 
 
 Page 1 — Accompanies the original draft and documents abroad. 
 
 Page 2 — Accompanies the duplicate draft and documents abroad 
 
 Page 3 — Serves as an acknowledgment of the receipt of the 
 item, together with a “follow-up.” 
 
 Page 4 — Is an advice of credit to the customer. 
 
 Page 5 — Is a credit to the customer’s account. 
 
 Page 6 — Is a debit to “Due from Foreign Banks.” 
 
 FORM FX-48 
 
 This is identical with FORM FX-47, with the exception that 
 it is intended to cover strictly Collection Items payable in foreign 
 
 162 
 
countries, which may be received by Branch Banks and which 
 would be forwarded abroad for account of its Regional Bank. Its 
 explanation follows: 
 
 Page 1 — Accompanies the original draft and documents abroad. 
 
 Page 2 — Accompanies the duplicate draft and documents abroad. 
 
 Page 3 — Serves as an acknowledgment to Regional Bank of 
 the receipt of the item. 
 
 Page 4 — Serves as an acknowledgment to Branch Bank of the 
 receipt of the item, together with a “follow-up.” 
 
 Page 5 — Advice for customer of the Branch Bank. 
 
 Page 6 — Credit for customer of the Branch Bank. 
 
 Page 7 — Debit to the Regional Bank. 
 
 Page 8 — Letter to the Regional Bank descriptive of the for- 
 warding of the item. 
 
 Page 9 — Advice for Branch Bank. 
 
 Page 10 — Credit for Branch Bank. 
 
 Page 11 — Debit to “Due from Foreign Banks.” 
 
 FORM FX-49 
 
 A sample check to be used by the Regional Bank in drawing 
 upon their direct connections abroad, and concerning which it 
 will be noted that the original and duplicate advices, together 
 with the Credit to the Foreign Bank’s account, as well as the 
 Auditor's checking stub, have been written at the time of the 
 issuance of the check. 
 
 FORM FX-50 
 
 A sample check to be used by the Regional Banks in drawing 
 upon a branch or a correspondent of their foreign connection. 
 FORM FX-51 
 
 A sample check for the use of Regional Banks in drawing their 
 long drafts upon a direct connection abroad. 
 
 FORM FX-52 
 
 This is the departmental daily proof sheet, upon which is tran- 
 scribed the totals as obtained from the recapitulation of the “Block” 
 sheets. 
 
 It will be noted that in each case the accounts described upon 
 the proof sheet represent simply interlocking balances with the 
 General Ledger and other departments, so that the proof of the 
 accuracy of the figures is controlled by other departments. 
 
 AUDITING DEPARTMENT. 
 
 The duties of the Auditor will be largely governed by his vested 
 power and authority, but in no sense should his department form 
 an operating unit of the Bank. 
 
 His functions should be those of verification and control, sys- 
 tematic examinations of the different departments, criticism of 
 discipline and system, and he should have a general knowledge 
 of the earnings and expenses of the Bank. 
 
 The routine of the Auditing Department would consist of ex- 
 aminations: verification of correction entries; scrutiny of Gen- 
 
 163 
 
eral Ledger tickets; adjustment of errors; reconciliation of bal- 
 ances, both domestic and foreign; maintaining direct correspon- 
 dence with Member Banks, etc., in reply to inquiries affecting the 
 adjustment of accounts; investigations resulting from the mark- 
 ing of mail matter to the Auditing Department by the officers of 
 the Bank who desire special investigations to be made; control 
 with a daily proof and by means of checking to stubs, all cashier’s 
 checks, expense vouchers, redemption checks, and certified checks; 
 arranging for the handling and re-forwarding of National Bank 
 Examiners’ requests for information, and establishing a proof upon 
 the General Ledger. 
 
 The forms of the Department would be: 
 
 FORM A-l 
 
 This will be used for the registration of such inquiries as may 
 be received in connection with examinations by bank examiners, 
 directors, etc. 
 
 FORM A-2 
 
 To be used in forwarding the balance of any account, as at 
 the close of business on a certain day, in response to an authorized 
 request. 
 
 FORM A-3 
 
 Reconcilement blank to accompany the daily statement which 
 will be forwarded to each accohnt upon the last business day of 
 the month. 
 
 FORM A-k 
 
 Sample envelope to be enclosed with the above form of recon- 
 cilement, in order that its return may be made directly to the 
 Auditing Department. 
 
 FORM A-5 
 
 Card record for registering the receipt of reconcilements. 
 FORM A-6 
 
 A tracer to be forwarded no later than the 15th of the succeed- 
 ing month, to such accounts as have not reconciled their balance 
 of the month prior. 
 
 FORM A- 7 
 
 A form to be used in decreasing formal letter writing, looking 
 to the adjustment of exceptions as shown upon the reconcile- 
 ments. 
 
 FORM A-8 
 
 Form of reconcilement to be retained by the Auditing Depart- 
 ment and upon which will be inscribed the reconciliation of bal- 
 ances with other Federal Reserve Agents as well as with Foreign 
 Banks. 
 
 FORM A-9 
 
 To be used after the reconciliation of Foreign Accounts, in in- 
 structing the Foreign Department to make entries covering Com- 
 mission charges, Postage, etc. 
 
 FORM A-10 
 
 Auditor’s proof of General Ledger, the figures for which will 
 be assembled from a recapitulation of the different Departmental 
 proof sheets. 
 
 164 
 
FORM A-ll 
 
 Suggested letterhead for the correspondence of the Auditor. 
 FORM A-12 
 
 Card record to be filed chronologically in a special Examination 
 File, and upon which will be inscribed the Teller or subject to be 
 examined, the salient points to be covered, and the best methods 
 of procedure. This will enable the Auditor to make systematic 
 examinations at irregular periods, owing to the fact that upon 
 each day of examination the card will be replaced in the file in 
 the compartment of a future determined date. 
 
 FORM A-13 
 
 To be used in requesting special reports from clerks who have 
 made errors, either of commission or omission. 
 
 In this connection, it is suggested that the Secretary-Treasurer 
 and an assistant, or any two officers who might be determined 
 upon, meet with the Auditor each business morning, for the purpose 
 of examining the typewritten reports which will be the result of 
 using FORM A-13, as in this way the designated officials of the 
 Bank will be kept in close touch with the clerical force. Possible 
 defects of system will be obtained in this way, which it would 
 be difficult to develop in any other manner. 
 
 FORM A-H 
 
 This will be used in reporting the results of departmental and 
 other examinations. 
 
 There will be no Cashier-Check Registers maintained in the de- 
 partment, inasmuch as this work is a duplication of labor, and 
 for the purposes of proof and control the same object will be 
 served by retaining the Credit Tickets executed at the same time 
 the checks are drawn. 
 
 MAIL DEPARTMENT 
 
 This Department will receive and distribute all mail matter 
 received between the hours of 9:00 A. M. and 2:30 P. M., and 
 likewise it will be entrusted with the forwarding to Member Banks, 
 etc., of all mail matter emanating from the officers and the dif- 
 ferent departments. 
 
 It is suggested that the equipment include steel racks with 
 suitably-sized compartments, in which the mail for each Member 
 Bank may be accumulated (in this way a saving of postage will 
 be made) ; an electric envelope opener, and an electric envelope 
 sealer. 
 
 FILING DEPARTMENT. 
 
 The object of this Department will be the collection and filing 
 of all mail matter which has accumulated during the day. There 
 are no distinctive forms for the Department, but it is suggested 
 that the files be operated upon a plan of assembling into separate 
 compartments, under an alphabetical arrangement of Member 
 Banks, such mail matter and carbon copies of transactions as may 
 affect each individual bank. 
 
 165 
 
The daily accumulation of ledger sheets from the Bookkeeping 
 Department, liability slips from the Discount Department, Gen- 
 eral Dedger tickets, cancelled checks from the Auditing Depart- 
 ment, and the proof sheets and block sheets of all Departments, 
 will likewise be filed and cared for by this Department. 
 
 M ISCELL ANEOUS 
 
 The following described forms are general in character and 
 cannot be directly assigned to any particular department: 
 
 FORM MISC-1 
 
 A sample of check to be used in the different departments, the 
 distinguishing red numbers being indicative of the department 
 originating the transaction. It is suggested that the Discount, Se- 
 curities, Accounting, and Foreign Exchange Departments be sup- 
 plied with their own Cashier’s checks to bear the distinctive num- 
 bers 1, 2, 3, and 4, respectively. 
 
 It will be noted that at the time the check is drawn a corre- 
 sponding credit has also been executed by means of a carbon im- 
 pression. 
 
 An auditor’s stub has been affixed to the check, which will pro- 
 tect the signing officer, who upon affixing his signature will de- 
 tach the stub and place it in a box situated upon his desk. The 
 Auditing Department will collect the stubs the following morning 
 and check them to their proper entries. 
 
 FORMS MISC-2 and 3 
 
 These are sample credit and debit tickets, -which will be used 
 by the departments in executing entries which have not been cov- 
 ered by other forms. 
 
 FORM MISC-i 
 
 This is a form of debit ticket which will be used by clerks work- 
 ing after hours and to whom a disbursement of a nominal sum 
 will be made. 
 
 FORM MISC-5 
 
 This will be used in handling expense incidental to the for- 
 warding or receiving of telegrams for account of Member Banks, 
 etc., its explanation being: 
 
 Slip No. 1 — Advice to Member Bank of the Charge. 
 
 Slip No. 2 — Debit to Member Bank’s Account. 
 
 Slip No. 3 — Credit to “Provision for Disbursements.” 
 
 FORM MISC-6 
 
 This will be used by all departments in forwarding registered 
 mail matter to the Mail Department, the purpose being that each 
 department will obtain a signed receipt from the Mail Depart- 
 ment that the contents of the letters or parcels have been received 
 by them. 
 
 FORM MISC-1 
 
 A vault record to be used by the different departments and is 
 designed to show the time their particular compartments were 
 closed, as well as the opening and closing of the main doors of the 
 vault. 
 
 166 
 
FORM MI SC-8 
 
 This is a card to be used by the Chief Clerk, which is descrip- 
 tive of applications for employment, as well as an employee’s 
 record. 
 
 FORM MISC-9 
 
 A sheet to be used by all departments in reporting to the Chief 
 Clerk the time of closing of the previous day, together with any 
 debit or credit difference which might have occurred in their gen- 
 e ai work. Provision has also been made for the reporting of 
 absentees and the reason for absence. 
 
 FORM MISC-10 
 
 A form to be used by the Chief Clerk in reporting to the 
 Secretary-Treasurer the time of closing of all departments on 
 the day prior, together with any debit or credit differences in 
 their work, names of absentees and the reason for their absence. 
 The data for this form will be supplied from the departmental 
 record as outlined in FORM MISC-9. 
 
 FORM MI SC -11 
 
 This will be used by the different departments in requisitioning 
 supplies from the Chief Clerk. The second sheet of the form 
 is a carbon copy of the requisition, which will be retained by the 
 department, in order that they may be in a position to check 
 the departmental bill which will be rendered, say, semi-monthly, 
 by the Chief Clerk or the Purchasing Agent. 
 
 FORM MI SC -12 
 
 A card, upon which will be inscribed the signatures of those 
 authorized in the Member Banks to transact business with the 
 Federal Reserve Banks. 
 
 FORM MISC-13 
 
 A card, upon which will be inscribed the signatures of Govern- 
 ment officers authorized to transact business with the Federal Re- 
 serve Banks. 
 
 FEDERAL RESERVE AGENT 
 
 As the Federal Reserve Agent will have relations with the Fed- 
 eral Reserve Bank and the Comptroller of the Currency, and as 
 he likewise will be under the necessity of making certain reports 
 to the Federal Reserve Board at Washington, all of the forms to 
 be used by the Agent have been designed to cover his necessary 
 bookkeeping entries as well as to provide for a concentrated ad- 
 vice of his operations to the Federal Reserve Board. 
 
 The forms of the Agent are: 
 
 FORM FRA-1 
 
 This is intended to cover the receipt by the Federal Reserve 
 Agent of Federal Reserve Notes from the Comptroller of the Cur- 
 rency, its explanation being: 
 
 Slip No. 1 — Acknowledgment of receipt to the Comptroller of 
 the Currency. 
 
 Slip No. 2 — Credit ‘‘Federal Reserve Notes from Comptroller of 
 Currency.” 
 
 Slip No. 3 — Debit “Federal Reserve Notes on Hand.” 
 
 167 
 
FORM FRA-2 
 
 This will be used in forwarding mutilated Federal Reserve 
 Notes to the Comptroller of the Currency for destruction, its ex- 
 planation being: 
 
 Slip No. 1 — Notification to the Comptroller of the forwarding of 
 the Notes. 
 
 Slip No. 2 — To accompany the shipment. 
 
 Slip No. 3 — Credit “Federal Reserve Notes on Hand.” 
 
 Slip No. 4 — Debit “Federal Reserve Notes from Comptroller of 
 Currency.” 
 
 FORM FRA-3 
 
 This will be for use of the Federal Reserve Agent when issuing 
 Federal Reserve Notes to the Federal Reserve Bank, its explana- 
 tion being: 
 
 Slip No. 1 — Credit to “Federal Reserve Notes on Hand.” 
 
 Slip No. 2 — Debit to “Federal Reserve Notes in Circulation.” 
 
 Slip No. 3 — Debit “Re-Discounts to secure Federal Reserve 
 Notes.” 
 
 Slip No. 4 — Credit “Collateral received from Federal Reserve 
 Bank, Chicago.” 
 
 The advice to the Federal Reserve Board at Washington of 
 the issuance of the currency and its supporting collateral, having 
 already been obtained by means of the Continuous Record, as out- 
 lined in the Discount Section, it will not be necessary to provide 
 this form with a slip covering advice. It will, however, be noted 
 that all of the necessary bookkeeping entries have been w T ritten at 
 one operation. 
 
 FORM FRA - 4 
 
 This will be used to cover the depositing of Gold or other law- 
 ful money by the Federal Reserve Bank with the Federal Reserve 
 Agent to reduce the outstanding Federal Reserve Notes, its expla- 
 nation being: 
 
 Slip No. 1 — Credit to “Provision for Redemption of Federal 
 Reserve Notes.” 
 
 Slip No. 2 — Debit “Gold and Lawful Money to retire Federal 
 Reserve Notes.” 
 
 FORM FRA- 5 
 
 This is a sample loose-leaf ledger sheet to be used by the Fed- 
 eral Reserve Agent in maintaining such controlling accounts as 
 will be necessary. 
 
 It will be noted that a duplicate of the ledger sheet has been 
 provided, with the thought that this will serve the purpose of a 
 concentrated daily statement to the Federal Reserve Board, of the 
 condition of the Federal Reserve Agent’s accounts. 
 
 For the relations of the Federal Reserve Agent with the Sec- 
 retary of the Treasury, covering transactions in “Transit Account,” 
 see FORM B-5 of the Bookkeeping Department. 
 
 SECRETARY OF THE TREASURY 
 
 Under the proposed Transit plan, a certain portion of the gold 
 reserves of the Federal Reserve Banks wall be concentrated at 
 Washington with the Secretary of the Treasury, who will main- 
 
 168 
 
tain a record descriptive of the balance of the gold reserve of each 
 Federal Reserve Bank. 
 
 The entries in the different balances will be obtained from daily 
 statements received from the Federal Reserve Agents, who, as 
 previously outlined, will verify the entries and authenticate the 
 daily statements with their signature. 
 
 As it will be advisable for each Federal Reserve Bank to be 
 acquainted daily with the condition of their gold reserve at Wash- 
 ington, a form, in duplicate, has been provided which will enable 
 the Secretary to retain the top page as a ledger sheet, or perma- 
 nent record, while the duplicate will be forwarded to the Federal 
 Reserve Banks. 
 
 U)9 
 
APPENDIX III. 
 
 A STATISTICAL BUREAU FOR THE FEDERAL RESERVE 
 
 BOARD.* 
 
 One important duty of the Federal Reserve Board will be to 
 direct and to influence the money market for the benefit of the 
 country. To enable the Federal Reserve Board to fulfil this task, 
 it must thoroughly and carefully follow the developments of eco- 
 nomic life, and must be equipped with detailed data and informa- 
 tion bearing on the same. 
 
 With this end in view, it is recommended that a statistical 
 bureau (hereafter called “Bureau”) of unquestioned ability be es- 
 tablished. The duties of the Bureau should be not only to gather 
 figures, data, and statistics, and to compile statistical records, but 
 also to digest information collected and to put it in such shape that 
 it will serve as a basis for the Federal Reserve Board in directing 
 the Federal Reserve Banks. 
 
 The Federal Reserve Act provides for weekly statements to 
 be furnished by the various Federal Reserve Banks and in addi- 
 tion empowers the Board to require of each bank such statements 
 and reports as it may deem necessary. It is mainly informa- 
 tion of this nature which should enable the Bureau to supply the 
 Board with the material necessary to apply a “preventive” banking 
 policy. A number of explanatory forms for the compilation of such 
 statistics has been devised, and their various purposes will be dis- 
 cussed in the following pages.f 
 Form I. Cash on Hand : — (See page 187.) 
 
 As probably the largest part of the country's money reserve 
 will be centred at the Federal Reserve Banks, it goes without 
 saying that the amount of these reserves and their fluctuations 
 from week to week are of great significance. Figures collected 
 as suggested in Form I and brought into correlation with other 
 facts will after a time enable the Board to ascertain the laws un- 
 derlying and the causes affecting the rise and fall of the reserves. 
 For instance, once the average for reserve is established, the varia- 
 tions can be compared with this norm to judge w'hether the fluc- 
 tuations are normal or abnormal. 
 
 Form II. “Gold Supply on Hand ”: — (See page 188.) 
 
 In view of the great importance of gold in our monetary sys- 
 tem, statistics of the gold reserve should be reported in detail. 
 Form II proposes tw T o heads for classification: 
 
 (1.) Gold certificates and coins of the U. S. 
 
 (2.) Bullion and foreign coin. 
 
 This division is important, for under certain circumstances 
 
 *Prepared by Ludwig Bendix, Esq. See page 39 above. 
 
 tit is, of course, understood that each Federal Reserve Bank 
 must place at the Bureau’s disposal detailed information of the 
 kind indicated on the specimen sheets, and that the Bureau will 
 prepare consolidated statements of such data. 
 
 170 
 
an increase or decrease in bullion indicates financial operations, 
 such as the export of gold, which may call for action by the Board. 
 
 In addition to the statistics collected by the Bureau, the figures 
 on gold exports and imports are of great value and should, there- 
 fore, be given to the Bureau as soon as collected in the Depart- 
 ment of Commerce. 
 
 Form III and IV. Federal Reserve Notes. — (See pages 18 9 and 
 190.) 
 
 As this country has not yet any experience with modern bank- 
 notes, statistics on the new Federal Reserve notes should be made 
 as specific as possible. Form III is arranged in the same way as 
 Form I, and will reveal the various fluctuations in note issues. 
 
 Great stress should be laid on data on the different denomina- 
 tions of banknotes (Form IV). It has been argued that the 
 new system will secure quick expansion as well as quick con- 
 traction of banknotes. The underlying idea is that when credit 
 is needed notes will be issued against rediscounts of commercial 
 paper, and when this demand has been satisfied the notes will grad- 
 ually return to the various Federal Reserve Banks for redemption. 
 This supposition is doubtless correct so far as notes in denomina- 
 tions of $100.00 and $50.00 are concerned, but it is very likely that 
 notes in smaller denominations, i. e., $20.00, $10.00, and $5.00, will 
 not conform to this law. Once in circulation, it is likely that they 
 will return to the banks only occasionally, and these notes will lose 
 their character as a credit instrument and be used like all the othei' 
 forms of paper money. Thus it is evident that a large amount 
 of small notes in circulation might easily counteract the pur- 
 pose of the law. The Federal Reserve Banks or the Federal Reserve 
 Agents should therefore report from week to week on the various 
 denominations in circulation, and the Bureau should carefully fol- 
 low the relative proportion of each. In case the circulation of the 
 small notes should become too extensive the Federal Reserve Agents 
 should be advised to issue these denominations only in limited 
 quantities. 
 
 Form V A and V B. Analysis of Deposits : — (See pages 191 and 
 192.) 
 
 The deposits of the Federal Reserve Banks are divided into 
 three classes: 
 
 (1.) Compulsory deposits by member banks as prescribed by 
 the Act, 
 
 (2.) Voluntary deposits by member banks as provided in the 
 Act, 
 
 (3.) Government deposits. 
 
 The deposits of the first category may safely be assumed to be 
 relatively permanent, i. e., not liable to great change in amount. 
 Deposits of the second and third category, however, are subject to 
 more frequent and more extensive fluctuations. On the one hand, 
 it may occur that the Government and the Federal Reserve Banks 
 withdraw large amounts of their deposits simultaneously, and on 
 the other hand, withdrawal of Government funds may be coincident 
 
 171 
 
with increased deposits by member banks, or vice versa. In the 
 first-mentioned case, the Federal Reserve Banks would be deprived 
 of a large amount of their working- capital, while in the last-men- 
 tioned case there may be no cash movement to speak of. Further- 
 more, these various changes in the amounts of the different cate- 
 gories of deposits may follow each other at specific short intervals 
 during certain periods of the year. On the basis of the statistical 
 data relating to deposits, such as suggested in Form V A and V B, 
 the Bureau will in due course be able to predict the changes about 
 to take place in the amount of the deposits, and will thus tend to 
 facilitate the Board’s banking policy considerably. 
 
 Form VI and VII. Relation of deposits and Federal Reserve notes 
 to cash on hand: — (See pages 193 and 194.) 
 
 With a view to precluding inflation of the note circulation, the 
 Act very prudently prescribes comparatively high limits as to the 
 minimum cash reserve to be maintained against deposits and notes 
 in circulation. It could not, however, define any average amount 
 of cash reserves to be kept by the banks in ordinary times to secure 
 a permanent sound banking activity. This had to be left to the 
 management of the Federal Reserve Banks and to the wisdom of 
 the Federal Reserve Board. Thus, it is the duty of the Federal 
 Reserve Board to see to it that the reserve actually maintained 
 by the banks is at all times sufficiently in excess of the legal 
 minimum to insure the proper operation of the entire system in 
 times of emergency. Careful statistics as outlined in Form VI will 
 undoubtedly be a material help to the Federal Reserve Board in the 
 fulfilment of this part of its responsible task. The approximate 
 amount of deposits and notes not secured by cash on hand, in the 
 case of each Reserve Bank individually, as well as of the entire 
 chain of banks, will of course vary. When the supply of funds 
 is abundant only a very small part of deposits and notes will be 
 unsecured by cash; under normal monetary conditions there will 
 be an average rate of cash. When seasonal demands for credit 
 make themselves felt, a relatively high proportion of deposits and 
 notes will be without cash security. Information along these 
 lines, after a period of years, will place the Board in a position 
 1o recognize the approach of abnormal conditions at an early date 
 end to apply an equalizing and preventive discount policy. For 
 the same purpose, Form VII has been devised. A comparison of 
 the percentage of cash on hand with both deposits and Federal 
 Reserve notes during Ihe various periods mentioned above may 
 safely be considered as an index of impending deviations from 
 the rule. 
 
 Bills of Exchange : 
 
 It may safely be presumed that in the future, transactions in 
 drafts, notes, and bills of exchange will constitute a very consider- 
 able portion of the business of the member banks, for the simple 
 reason that such assets will be realizable at any time, by rediscount- 
 ing with Federal Reserve Banks. It is evident, therefore, that com- 
 mercial paper will hereafter play a much more important part in 
 
 172 
 
economic life than heretofore, and needs close surveillance and con- 
 trol from the beginning; for on this will depend whether the im- 
 pending change in our monetary and credit system will be beneficial 
 or detrimental to our economic condition. The Federal Reserve Board 
 will be called upon to pilot the course of this development, and its 
 task in so doing is one of grave responsibility. It is for this reason 
 that great stress has been laid on the preparation of forms which 
 will enable the Board to carefully follow the discounting operations 
 in all their details. 
 
 Form VIII. Analysis of all purchases of Mils of exchange : — (See 
 page 19 5.) 
 
 This form has been prepared in accordance with the various 
 sections of the Federal Reserve Act pertaining to bills of exchange. 
 There are three sources from which the Federal Reserve Banks 
 may acquire bills of exchange. Under certain conditions they may 
 rediscount the commercial paper bought by other Federal Reserve 
 Banks (Col. 2-4). Ordinarily, and in fact preferably, they will in- 
 vest their funds in commercial paper purchased either direct from 
 member banks (Col. 5-16) or in the open market (Col. 17-37). In 
 the open market again they may acquire the paper from member 
 banks (Col. 17-25) or from other than member banks (Col. 26-34). 
 Furthermore, as regards the purchases from member banks, the 
 law discriminates as to the nature of the business from which the 
 paper originates; whether it arises out of commercial transactions 
 or is issued for agricultural purposes or based on the importation or 
 exportation of goods. The open market operations are divided in 
 the act according to the form of paper; into purchases of cable 
 transfers, bankers’ acceptances, and bills of exchange. If detailed 
 information is collected along the lines of these classifications it 
 will be an easy matter for the Federal Reserve Board to exercise 
 a permanent control and particularly to investigate whether mem- 
 ber banks avail themselves of the Federal Reserve Banks regularly 
 or only in exceptional cases; such statistics will show to what ex- 
 tent, on account of spasmodic and insufficient rediscounts on the 
 part of member banks, the Federal Reserve Banks are obliged to in- 
 vest their funds in commercial paper purchased in the open market 
 from other than member banks. Furthermore, it is important to 
 know the proportion of the different classes of paper to the grand 
 total of transactions during each month, and, in addition, the 
 Federal Reserve Banks should be required to report the average 
 face amount and average maturity of each class of paper dis- 
 counted by them. With such statistical data on hand, the Bureau 
 should in due course be able to recognize whether or not the dis- 
 counts of any of these classes of paper exceed the limits pre- 
 scribed by a sound banking policy. With this object in view, Form 
 VIII has been made as specific as possible; a study of the 40 col- 
 umns of this table will make its various purposes clear. 
 
 Form IX. Analysis of funds invested in Mils of exchange:— (See 
 page 196.) 
 
 While Form VIII is designed to show and analyze the total of 
 the discounting transactions of each bank during a certain period 
 
 173 
 
(month, year), Form IX purports to indicate the amount of funds 
 invested in bills of exchange at a fixed date ( end of the month, end 
 of the year) and specifies it according' to the different classes of 
 commercial paper. Information of this kind will be import- 
 ant, indicating to the Federal Reserve Board the amount 
 of each Federal Reserve Bank’s liquid assets. For instance, if 
 a bank invests its funds largely in bankers’ acceptances 
 and foreign bills of exchange bought in the open market, it will 
 be in a much stronger position financially than it would be with 
 investmenls consisting principally of rediscounted paper of the 
 kinds and maturities specified in Section 13 of the Federal Reserve 
 Act. 
 
 Form X. Purchases of foreign hills of exchange : — (See page 197.) 
 
 A number of Federal Reserve Banks probably will invest their 
 funds to ;t great extent in foreign bills of exchange, in the first 
 place on account of insufficient offerings of domestic paper and 
 in the second place on account of the fact that foreign bills of ex- 
 change are justly considered to be the most liquid of all invest- 
 ments. But, as our gold supply may be unfavorably affected by 
 such a policy it will be necessary for the Board to watch these 
 transactions very closely. Statistics concerning this subject should, 
 therefore, be prepared with great Care and should be made as 
 specific as possible, so as to provide the Federal Reserve Board 
 with the required information on this question. The data pro- 
 posed in Form X will show the proportion of purchases of foreign 
 bills of exchange as against total investments in bills of exchange 
 and, furthermore, indicate the fluctuations as well as the average 
 amount and the average maturity of foreign paper. It is also 
 hoped that the knowledge of the situation will facilitate discrimina- 
 tion between sound commercial, and speculative, or purely financial 
 foreign bills of exchange. 
 
 Form XI. Foreign hills of exchange on hand. — -(See page 198.) 
 
 It is of no less importance to know how the portfolio of each 
 Federal Reserve Bank is composed, particularly with reference to 
 tht countries where foreign bills of exchange are payable. It will 
 be readily comprehended that investments in English, German, or 
 French paper are of a much more liquid nature than bills drawn 
 on other countries. From another viewpoint, it will be useful to 
 know the composition and extent, for instance, of a Federal Re- 
 serve Bank’s South American portfolio, as reflecting the influence 
 of our new banking organization on the financing and developing 
 of our foreign trade. 
 
 Form XII and XIII. Fluctuations of rates of foreign hills of ex- 
 change as an index to our trade balance :— ( See pages 199 
 and 200.) 
 
 The fluctuations of the rates of foreign bills of exchange already 
 receive careful attention at the present time; in future they will 
 even be of still greater significance in connection with our economic 
 and financial system. The information to be gathered by the 
 Bureau on this subject, therefore, must be recorded with the mi- 
 
 174 
 
nutest care. Form XII gives the number of days on which ex- 
 change rates were higher or lower than parity. Great Britain, 
 Germany, and France are chosen, as with these countries we are 
 continually in extensive commercial and financial relation. The 
 rates of exchange for these countries, therefore, clearly indicate 
 the status of our international trade balance. If these rates are 
 above parity (parity meaning the value of our standard unit ex- 
 pressed by the standard unit of another country), it signifies that 
 our balance of trade is unfavorable, or vice versa.* It will be of 
 great importance to the Federal Reserve Board to know the number 
 of days of the month (or year), on which the rates of foreign ex- 
 change have been favorable or unfavorable. A decided tendency 
 towards unfavorable rates would probably induce the Board to 
 pursue an appropriate discount policy. 
 
 In order to ascertain the frequency of extreme fluctuations of 
 rates of exchange, Form XIII has been prepared indicating the 
 number of days on which exchange rates were higher or lower than 
 the gold points. The gold points signify that under normal condi- 
 tions gold can be either exported or imported, as the case may be. 
 The longer the period during which such statistics are collected, 
 and the more detailed the data, the easier it will be to recognise the 
 causes correlated to these phenomena. Information along these 
 lines will, therefore, constitute very valuable material for the Fed- 
 eral Reserve Board’s decisions. 
 
 Fcim XIV. Credit balances abroad: — (See page 201.) 
 
 Changes in foreign rates of exchange may be wholly or partly 
 caused or prevented by the Federal Reserve Banks themselves, 
 by enhancing or withdrawing their foreign credit balances. There- 
 fore, it will be necessary to consider these foreign credit balances if 
 fluctuations in the rates of foreign exchanges are to be correctly in- 
 terpreted. 
 
 Form XV. Funds invested in bills of exchange, classified accord- 
 ing to where bills are payable: — (See page 202.) 
 
 The classification of the discount portfolio of each Federal Re- 
 serve Bank according to various districts of the United States and 
 foreign countries where the bills are payable is advocated for the 
 following reasons: 
 
 If a Federal Reserve Bank’s supply of rediscounted paper is 
 exclusively composed of bills payable in the same district, it may 
 be safely presumed that the bank’s discount business is too narrow. 
 If, on the other hand, the supply consists of a fair proportion of 
 bills payable in the bank’s own district and of bills payable in other 
 districts or abroad, the portfolio would not only afford more se- 
 curity but could also be more readily liquidated in case of neces- 
 sity. 
 
 *BilIs of Exchange on Paris are quoted in Dollar units, i. e., 
 $1=5.1826 francs. An increase in the price of francs, therefore, 
 would express a higher valuation of the Dollar Unit or a favorable 
 trend of our trade balance with France. 
 
 175 
 
Form XVI. Analysis of all sales of WUs of exchange: — (See page 
 203.) 
 
 As a rule, the Federal Reserve Banks will buy only bills of ex- 
 change to be held in their portfolios until maturity and then present 
 them, or have them presented, to the drawees for payment. When, 
 however, one Federal Reserve Bank finds its cash reserves de- 
 pleted while another bank has a large surplus, the Federal Reserve 
 Board may permit — or even direct (see section lib of the Act) — the 
 bank in need of cash to rediscount a portion of its holdings of bills 
 of exchange with the Federal Reserve Bank having an abundance 
 of cash reserve. Furthermore, when a Federal Reserve Bank has 
 lost control of the open market, it will be necessary for the Bank to 
 regain control by sales of bills of exchange. 
 
 Discount operations between Federal Reserve Banks will prob- 
 ably occur only when one of these banks is facing an unforeseen 
 emergency. Sales in the open market, however, may happen quite 
 frequently, for the following reason: As soon as the open market 
 
 rate declines to such an extent that the difference between a Fed- 
 eral Reserve Bank’s official rate and the open market rate exceeds 
 a certain limit, the Federal Reserve Bank will have to choose 
 between two alternatives: In order to lessen the difference in the 
 
 rates, it will either have to reduce its own bank rate or, by selling 
 in the open market, endeavor to cause a rise of the open market 
 rate. Thus, in all cases where a reduction in the official rate seems 
 inadvisable, the Federal Reserve Bank will eventually have to sell in 
 the open market. Discount operations among Federal Reserve Banks 
 as well as sales by Federal Reserve Banks in the open market must 
 be considered of such fundamental importance that statistics on 
 these subjects should be collected in full detail. To illustrate: If 
 
 all the Federal Reserve banks should be obliged regularly to sell in 
 the open market, it would demonstrate that the official discount 
 rates are generally too high. If, however, one Federal Reserve 
 Bank should frequently sell, it would indicate that its policy is 
 not well adapted to local conditions. Statistics, as suggested in 
 Form XVI, would indicate the reasons for such policy. 
 
 Form XVII. Amount of domestic hills of exchange on hand ( classi- 
 fied according to lines of business of drawees, acceptors or 
 makers ): — (See page 204.) 
 
 The statistics collected according to Form XVII will reveal the 
 economic conditions underlying the discounting operations of the 
 Federal Reserve Banks. With this object in mind, bills of exchange 
 should be grouped in at least five classes, as follows: 
 
 (1.) Commerce, transportation and insurance. 
 
 (2.) Manufacturing industry. 
 
 (3.) Agriculture, forestry and fisheries. 
 
 (4.) Miscellaneous, including the mining industry. 
 
 (5.) Finance and banking (duplicate items). 
 
 Each item should be entered in the proper column, according to 
 the line of business of the party on whom the bill is drawn. Inas- 
 much as bills of exchange originating from stock, bond, or invest- 
 
 176 
 
ment transactions are not eligible for rediscount, the group finance 
 and banking contains only bankers’ acceptances issued in the inter- 
 est of one of the industrial classes. These bills should, therefore, be 
 placed accordingly. In order to show, however, the amount and per- 
 centage of bankers' acceptances in proportion to the other forms of 
 paper, finance and banking has been added as a special group. 
 (Compare columns 12 and 13 in Form XVII.) 
 
 If the bills of exchange are classified as indicated above, the 
 Board will at all times be in a position to ascertain the amount 
 and percentage up to which the various industries avail themselves 
 of the credit facilities granted by the Federal Reserve Banks. Each 
 of the groups mentioned above (excepting group 5) could, and 
 perhaps should, be subdivided in order to make the data as specific 
 as possible, as this would doubtless contribute to early recognize 
 the existence of overexpansion in one or the other industry. 
 
 Form XVIII. Face amounts of domestic hills of exchange : — ( See 
 page 205.) 
 
 The portfolio of each Federal Reserve Bank will be composed 
 of bills of exchange in all denominations, i. e., in small, medium and 
 large amounts. It is the general understanding that the face 
 amount of a bill reveals to a certain extent its character and 
 origin. To illustrate: A small draft indicates a small business 
 transaction, and a bankers’ acceptance for, say, $25,000 manifests 
 the adjustment of a debt originating in connection with a more 
 extensive industry. As it will be the duty of the new Federal 
 Reserve Banks to serve the trade and commerce in all stages — with 
 due security and safety — their portfolios should show a great variety 
 in the face amounts of the bills discounted. The Federal Reserve 
 Banks should pursue such a discounting policy in the inter- 
 est of the general welfare, and for their own benefit as well. 
 The denominations of the bills discounted should, therefore, be 
 classified with great care. In view of this, it is suggested (by Form 
 XVIII) to divide the bills discounted by each bank into seven cate- 
 gories. The first class should comprise all the bills in denominations 
 up to $250, the second from $251 to $500, and so on until the seventh 
 class, embracing bills over $10,000. The sample sheet submitted 
 contains an additional classification, i. e., bills payable in the Bank’s 
 district and bills payable in other districts. 
 
 These statistical records of the discounts of each Federal Reserve 
 Bank, when compared with one another, will provide the Board 
 with excellent means of checking up the discount policies pursued 
 by the various banks, and will unquestionably be an important 
 source of information for the Board in giving its directions to the 
 Banks. 
 
 Form XIX and XX. Maturities of hills of exchange: — (See pages 
 206 and 207.) 
 
 Another element for economic control is the maturity of a bill 
 of exchange. Small amounts and short maturities are con- 
 sidered the ideal form of investment for central note institutions. 
 As the functions and purpose of the Federal Reserve Banks are 
 
 177 
 
similar to those of the European central note banks, they should 
 apply analogous principles in the pursuance of their discount poli- 
 cies, i. e., it should be their aim to obtain commercial paper with 
 an average maturity of from thirty to forty days. As in connection 
 with the reserve requirements, the Federal Reserve Act stipulates 
 the maximum maturity limits for the various categories of discount- 
 able bills. It is evident, however, that this provision alone cannot in- 
 sure a sound banking policy, but that the Board should in addition 
 define limits of average maturities. With a view to ascertaining what 
 would constitute fair average maturities, Forms XIX and XX have 
 been prepared. 
 
 By a statistical arrangement, as suggested in Form XIX, the 
 various maturities of domestic paper are disclosed. For this 
 purpose the maturities are divided into different classes and the rel- 
 ative proportion of each class to the total compared. Such statis- 
 tics will also reveal the average maturity of all discounted paper. 
 The significance of the arrangement may be illustrated by the fol- 
 lowing table: 
 
 (EXAMPLE) 
 
 Domestic bills of exchange were bought with the following maturities: 
 
 Maturing 
 
 Within 
 
 In Per Cent 
 of Total 
 
 Maturing 
 Inside of 
 
 In Per Cent 
 of Total 
 
 Calculation of 
 Average Maturity 
 
 Days 
 
 Index 
 
 15 days 
 
 17 
 
 15 days 
 
 17 
 
 7.5 
 
 127.5 
 
 in additional 15 days 
 
 47 
 
 one month 
 
 64 
 
 22.5 
 
 1057.5 
 
 in an add. month 
 
 18 
 
 two months 
 
 82 
 
 45 
 
 810 
 
 in an add. month 
 
 8 
 
 three months 
 
 90 
 
 75 
 
 600 
 
 in an add. month 
 
 7 
 
 four months 
 
 97 
 
 105 
 
 735 
 
 in an add. two months 
 
 3 
 
 six months 
 
 100 
 
 150 
 
 450 
 
 
 
 
 
 i otai inaex 
 
 Total 
 
 100 
 
 
 Average Maturity 37.80 Days 
 
 If, as in the example above, the discounts consist of an average 
 maturity of 37.8 days, a Federal Reserve Bank will at all times 
 have a comparatively large quantity of bills in its portfolio with 
 short maturities. The results of each Federal Reserve Bank’s policy 
 with regard to the maturities will be clearly illustrated in a state- 
 ment of the amount of bills on hand at the end of each month, as 
 proposed in Form XX. The higher the amount and percentage of 
 short maturities, the stronger will be the bank’s condition. It will 
 be an easy matter for such a bank to meet its daily obligations 
 (growing out of withdrawals of deposits or redemption of bank- 
 notes against cash) with the funds paid to the bank for bills 
 maturing from day to day. The relative liquidity of the various 
 Federal Reserve Banks is especially revealed by statistics of 
 this kind. 
 
 Form XXI. Extent and limit of credit accommodation granted by 
 the Federal Reserve Banks (classified according to lines of 
 business): — (See page 208.) 
 
 This subject has been dealt with in detail by the Preliminary 
 Organization Committee under the heading “Examinations.” If local 
 credit departments are created, as suggested by said committee, the 
 Bureau would have at its disposal statistical material of the highest 
 
 178 
 
value. If, for instance, condensed statements are prepared by 
 each local credit department as expressed in Form XXI, the Board 
 would become thoroughly familiar with the characteristic features 
 of each Federal Reserve Bank on these points: 
 
 (1.) The proportion in which credit facilities are distributed 
 among - the various lines of business, 
 
 (2.) A classification of credit accommodation according- to 
 amounts in which it is granted. 
 
 With such data on hand, the Bureau could compile condensed tables 
 showing these facts for the entire country and also disclosing 
 whether the various industrial lines of business, small concerns and 
 large corporations, are treated alike in the new organization. 
 
 Form XXII and XXIII. Bills of exchange remaining unpaid at time 
 of maturity : — (See pages 209 and 210.) 
 
 The degree of precaution shown by a Federal Reserve Bank in 
 its discount operations is illustrated by the number of bills re- 
 maining unpaid at maturity. The statistical material regarding the 
 unpaid bills is, therefore, of paramount importance for the Board. 
 The information will have to be gathered along the following lines: 
 (1.) Form of unpaid drafts (Form XXII), whether single or 
 two-name paper; in the latter case bankers’ accept- 
 ances should be particularly marked, as it may be 
 presumed that this form of paper will hardly, if ever, 
 remain unpaid; should a bankers’ acceptance not be 
 taken up at maturity, however, this would be a very 
 serious occurrence and should be recorded separately. 
 In the course of a few years, this classification will 
 enable the Board to decide the question, now a matter 
 of intense discussion, as to whether or not single name 
 paper affords as much safety as two-name paper, and 
 is as well adapted for use as cover against bank notes. 
 (2.) Origin of paper (Form XXIII), whether arising out of 
 commercial, industrial, agricultural, or miscellaneous 
 transactions. If the number of unpaid drafts in any 
 one month or stated period increases proportionately 
 for all lines of business, it may be concluded that busi- 
 ness conditions on the whole are impaired. If the 
 number of unpaid drafts increases only for some par- 
 ticular line of business, an investigation should be 
 made as to the reasons underlying the increase. In the 
 same way, a decrease in the number of unpaid drafts 
 will be indicative of favorable conditions along the line 
 in question. 
 
 RATES OF DISCOUNT. 
 
 The Federal Reserve Act has empowered the Board to review 
 or to determine the rates of discount to be charged by the various 
 Federal Reserve Banks. The purpose of this provision is undoubt- 
 edly to insure a uniform discount policy (not a uniform discount 
 
 179 
 
rate]) for the entire country- The pursuance of a suitable discount 
 policy has always been regarded as one of the most difficult prob- 
 lems to be dealt with in banking. This doctrine certainly applies 
 particularly to a country with an area and with such varying 
 economic conditions as in the United States. It will require years 
 of experience to recognize the currents and undercurrents influ- 
 encing the fluctuations in the demand for money and credit in this 
 country. A number of forms has, therefore, been prepared dealing 
 primarily with the discount policy. 
 
 Form XXIV and XXV. Changes in discount rates: — (See pages 
 211 and 212.) 
 
 Form XXIV shows the discount rates and their fluctuations; the 
 sole purpose of this form is to enable the Board to keep posted at 
 a glance on this important subject. On Form XXV, however, each 
 change of a discount rate is to be recorded, together with the reason. 
 It is especially important to record whether the change was oc- 
 casioned by events in the international money market (reasons I, 
 II, III, IV) (for which purpose the statistics on rates of exchange 
 should be compared), or by economic developments in the United 
 States, by favorable or unfavorable business conditions as indicated 
 by a corresponding increase or decrease in the offerings of domestic 
 bills of exchange (reasons IV, VII, VIII). It is, furthermore, possi- 
 ble to determine which discount rates are lowered or raised on 
 account of developments in the international money market as well 
 as changes in economic conditions in the United States (reasons 
 IV and X). 
 
 Form XXVI and XXVII. The demand for credit facilities: — (See 
 pages 213 and 214.) 
 
 Form XXVI purports to disclose the influence of seasonal de- 
 mands for credit on the reserves of the various Federal Banks. In 
 column 2 should be recorded the kind of seasonal demands, i. e., 
 crop movements, quarterly dividends, and so forth. The difference 
 between the amount of deposits and notes not secured by cash 
 before and after the seasonal demand as shown by the Bank’s 
 statements (Col. 3-5) illustrates the increase in the demand for 
 credit from one week, or month, to the following. At the same 
 time, there should be a corresponding decrease of cash on hand 
 as against deposits and notes (Col. 6-8). These figures (Col. 5 
 and 8) must be brought into correlation with the various discount 
 rates. Statistics of this nature should, in due time, show the dis- 
 count rates best suited for any given percentage of cash reserve at 
 different periods. 
 
 Form XXVII is proposed as an indicator expressing the de- 
 mand for credit facilities in one figure. The underlying idea is 
 as follows: On the one hand, the deposits of the member banks 
 contain a considerable portion of their clients’ working capital, and 
 on the other hand, the paper rediscounted by Federal Reserve 
 Banks represents indebtedness of the business world. It follows 
 that when both are brought into correlation and the one is sub- 
 tracted from the other, the resultant difference must in some way 
 
 ISO 
 
express a credit balance of the business world (Col. 3). This 
 balance, it is evident, increases with a diminishing- demand for 
 credit or with slack business, and decreases with a larger demand 
 for credit or an expansion of business. The proportion of domestic 
 bills of exchange to deposits (Col. 5) would indicate these iden- 
 tical fluctuations, These figures could be used covering longer 
 periods, if due allowances are made for the normal gradual exten- 
 sion of the country’s business. With a view to ascertaining- whether 
 the fluctuations shown by this indicator are caused by increased 
 or decreased domestic or foreign trade, the domestic bills of ex- 
 change are to be recorded separately. Should, for instance, the 
 figure in column 5 fall and that in column 8 rise, this would signify 
 diminishing- domestic and expanding foreign trade, and vice versa. 
 
 The indicator above described is similar to a method employed 
 in Germany. The method proposed herein has, of course, been 
 adapted to economic and banking conditions in the United States. 
 It is not claimed that this indicator will prove to be an absolutely 
 accurate barometer of conditions. It should, however, receive a 
 thorough trial, be it only in order to suggest through practice an - 
 other method better suited to this purpose. 
 
 Form XXVIII. Fluctuations of the discount rates and statistics 
 regarding factors of the money market affecting the same: 
 — (See page 215.) 
 
 The purpose of this form is to demonstrate the use of the 
 weekly statements as a means of showing not only the causes 
 and reasons for changes in the discount rates, but also the ef- 
 fects brought about by such changes. This form will, in a way, 
 give a history of all changes and an exact analysis of the 
 factors in connection therewith. With this purpose in view, a 
 comparison should be made of various items contained in the 
 statement issued before the rate was changed and the statement 
 preceding the previous change. For instance: cash, gold, Federal 
 Reserve notes in circulation, amount of deposits, supply of bills of 
 exchange, proportion of cash reserves as against both deposits and 
 Federal Reserve notes issued, and so forth. Inasmuch as changes 
 in discount rates are frequently caused by conditions prevailing- in 
 the open money market and in the international money market, 
 all facts bearing thereon, such as rates of exchange, rates of the 
 open money market, and foreign discount rates, have been cor- 
 related in this form. 
 
 Form XXIX. — (See page 216.) 
 
 While it is impossible to predict whether Federal Reserve Banks 
 will avail themselves of the privilege of dealing in securities, it is, 
 nevertheless, necessary to collect in advance data on this subject. 
 History proves that financial operations of this character have 
 overburdened banknote institutions with assets that could not be 
 easily liquidated, and embarrassed them so seriously that they could 
 not meet their obligations. Thus the Bank of England found itself 
 in a most serious difficulty, being unable to redeem its banknotes in 
 cash for more than twenty years (1797-1819), primarily because of 
 
 181 
 
advances made to the English Government. Likewise the com- 
 plete failure of the Royal Prussian Bank in 1806 resulted from 
 mortgage loans granted to some Prussian provinces. On the other 
 hand, so long as the Federal Reserve Banks, like the European 
 Central Banks, are to be in a measure public banks to serve the 
 Government, one of their functions must necessarily be the lending 
 of credit to the various States and communities of this country in 
 cases of necessity. This is a principle generally conceded and is 
 fully exemplified in the history of European central banks. The 
 Bank of England has £18,175,000 invested in loans to the English 
 Government, or in its securities. The Bank of France has advanced 
 to the French Government Frs. 200,000,000; it has a permanent in- 
 vestment in French rentes of Frs. 100,000,000, and its last annual 
 report shows among the assets of the bank a temporary investment 
 of more than Frs. 100,000,000 in French obligations. The German 
 Government is not permanently indebted to the Reichsbank, but the 
 latter lends its credit from time to time to the Empire in discounting 
 short-time obligations in the form of Imperial Treasury Notes, so- 
 called “Reichsschatzscheine.” In May, 1909, the Reichsbank held 
 these to the amount of Marks 509,000,000. While this amount has 
 been considerably decreased, in 1913 it still averaged about 95,000,000 
 Marks. Moreover, the Imperial Budget Law of July 3rd, 1913, pro- 
 vides an issue of 600,000,000 Marks of these Reichsschatzscheine 
 which the Reichsbank may at any time be called upon to discount. 
 
 Government loans, or investment in government securities, 
 are, moreover, not always undesirable. At times when the Fed- 
 eral Reserve Banks are temporarily unable to utilize funds in dis- 
 counting commercial paper, advances to the government or invest- 
 ment in government securities will be very desirable outlets for 
 their idle money. 
 
 The fortunate financial situation of the United States makes it 
 very unlikely that under normal conditions the Federal Govern- 
 ment will ever be obliged to have recourse to credit from the Fed- 
 eral Reserve Banks. It is not improbable, however, that smaller 
 communities may apply to the Federal Reserve Banks. If such 
 financial relations become customary, such credits, though formally 
 for a short term, may in the end become permanent investments. 
 Steps should early be taken to prevent such an outcome, for it 
 may result in loading up a Federal Reserve Bank with assets that 
 cannot be liquidated. The Board has it in its power to forestall 
 this, for purchases of securities under Section 14 (b) must be made 
 In accordance with its rules and regulations. Danger to a Federal 
 Reserve Bank through such investments can be averted, if said 
 banks are compelled to furnish regularly to the Board statements 
 as outlined in form XXIX. This form provides that the different 
 classes of purchasable securities be reported separately; United 
 States bonds and notes are set apart as a special class and distin- 
 guished from short time obligations of States, municipalities, etc. 
 One of the rules that should be prescribed by the Board is that 
 investments in securities may be made only with funds permanently 
 at the disposal of the Federal Reserve Banks, as, for example, com- 
 
 1S2 
 
pulsory deposits. The form proposed provides columns indicating 
 for each Federal Reserve Bank the relation between the various 
 classes of investment securities and the amount of compulsory de- 
 posits on hand (Cols. 4 and 22). The form furthermore con- 
 tains columns for reporting holdings of short-time obligations 
 (Col. 6, 9, 12, 15 and 18). Finally, classified according to their 
 maturity, the relation of the amount invested in each class of 
 investments to the total amount tied up in securities (Cols. 3, 
 7, 10, 16 and 19) is revealed. If the Federal Reserve Banks are 
 required to furnish regularly, statements giving the data classified 
 to show these details, the Board will find it easy to ascertain whe- 
 ther its rules and regulations are strictly complied with. 
 
 The forms herewith submitted for consideration represent, of 
 course, but a small part of the statistical work to be performed 
 by the Bureau; they have been separately discussed in order to 
 explain the special purpose for which they are devised. Aside 
 from all material covering finances, money and credit, great stress 
 should be laid on the gathering of statistics concerning all the 
 various phases of economic life. The Bureau should, for instance, 
 possess the most detailed information on commerce, manufacturing 
 industries, agriculture, mining, transportation, the situation of the 
 labor market, and foreign trade. Valuable material on these sub- 
 jects may be obtained from official sources. This would, however, 
 chiefly serve for purposes of comparison. The current information 
 should be partly furnished by the various Federal Reserve Banks 
 and partly by material gathered and collected by the Bureau itself. 
 If the Federal Reserve Banks are organized as suggested by the 
 Preliminary Organization Committee, the Bureau should receive 
 from them reports on all these subjects. Moreover, the Federal 
 Reserve Agent should regularly prepare for, and furnish to, the 
 Board special reports concerning the economic conditions in their 
 districts. Tn addition to the data procured through these channels, 
 the Board should establish connections with experts in the various 
 lines of business in order to get direct reports by which there may 
 also be obtained material of fundamental importance. Finally, the 
 Bureau itself should collect all statistics available on these subjects 
 from newspapers, magazines, journals, financial and trade papers. 
 If all these records are properly filed and prepared, the Bureau will 
 be able to appreciate the significance of all events and occurrences 
 in business life and to give at any time a correct interpretation of 
 a given situation. As everything depends on the quality and 
 thoroughness of this work, it is evident that it would constitute 
 the principal activity of the Bureau. Upon this assumption the 
 Board would be equipped with information of a thoroughness never 
 obtained by any European Central Bank. Expansion or contrac- 
 tion of business in each part of the country would be quickly noted, 
 -and the Board could, if necessary, advise the Federal Reserve Bank 
 in question to apply such a discount policy as may in time turn 
 the tide or prevent an overexpansion in one part of the country 
 or one line of business from spreading to other parts of the country 
 
 183 
 
or other lines of business. The recording of events occurring in 
 the United States would, however, not suffice to protect the country 
 from possible injuries arising out of the new banking system. 
 While the new tariff tends to open the United States more than 
 heretofore to foreign competition, one of the results of the Federal 
 Reserve Act will doubtless be to make the American money market 
 more international in its scope. In other words: the gold reserve 
 of this country will be considered as belonging to the international 
 money market, and will be disposed of whenever there is an ad- 
 vantageous opportunity to do so, just as we shall rely to a great 
 extent on the foreign gold reserves. Under these circumstances 
 it will be necessary to follow a policy of precaution in order 
 that this close financial connection with foreign countries may not 
 turn out to be a disadvantage to this country. It will, therefore, 
 be indispensable that the Bureau collect similar statistics as those 
 suggested for the United States — in more condensed form, of course 
 — on conditions prevailing abroad. Such records and statistics 
 should embrace: 
 
 A. In regard to finance and banking — • 
 
 (1.) General monetary and financial conditions in all coun- 
 tries: 
 
 (2.) Weekly statements of the great European central banks, 
 regularly prepared in retrospective form in order to 
 show the situation prevailing in former periods. 
 
 (3.) Fluctuations in bank and money rates abroad, 
 
 (4.) Fluctuations in foreign exchange rates abroad. 
 
 (5.) Gold movements in the international money market. 
 
 (6.) Status of the great European Private banks.* 
 
 B. In regard to economic conditions: 
 
 (1.) Trend of business in European countries. 
 
 (2.) General market conditions. 
 
 (3.) Development of foreign trade abroad. 
 
 Moreover, the political situation in these important countries 
 should likewise receive close attention, for it may also exert an 
 influence on the American money market. A disturbing turn in 
 the relations between the great European powers, the hoarding of 
 gold by one or the other of the Central Banks (as was recently 
 the case with the Bank of France and the German Reichsbank) 
 would have to be brought immediately to the knowledge of the 
 Board, for it could possibly cause a considerable decrease of the 
 gold supply of the United States. A financial crisis, overexpansion 
 in business, or even a temporary money stringency in only one of 
 these countries would affect our money market and might lead to 
 
 *As in Europe an increased demand for credit is, while yet in 
 its first stage, satisfied by the private banks without the assistance 
 of the Central Banks, the monthly reports of the former frequently 
 reflect a corresponding change in economic conditions earlier than 
 the weekly statements of the latter. 
 
 1S4 
 
a more or less extended exporting of gold from this country to 
 Europe. To secure such complete information on foreign condi- 
 tions, it does not suffice that the Bureau collect its figures from 
 foreign publications. It would be indispensable to establish con- 
 nections through which exhaustive reports could be secured. The 
 correspondents and agencies of the various Federal Reserve Banks, 
 as well as the foreign branches of the member banks, should be 
 required to perform this service. But it would be of no less im- 
 portance to have also reports from American consuls who should be 
 able to furnish in time valuable material on such economic con- 
 ditions in foreign countries which might affect the American money 
 market. It may also be advisable to include American Ambassadors 
 and Envoys in this service. Finally, it is suggested to establish 
 with the great European Central Banks (Bank of England, Bank 
 of France, German Reichsbank) a regular individual exchange of 
 opinions in regard to financial and economic conditions in their 
 respective countries. It is believed that such a suggestion coming 
 from the Federal Reserve Board as representative of the new 
 American sister banking system would be very favorably accepted 
 by those banks. 
 
 CONCLUSION. 
 
 The foregoing pages have outlined the various functions of the 
 Bureau. Some remarks on its organization may well be added. In 
 view of the comprehensive and far-reaching' task of such Bureau, 
 it should be equipped from the outset with an adequate staff of 
 well-trained men. The chief of the Bureau should be a man who 
 is not only a first-class statistician, but also an economist of ability 
 and thoroughly familiar, in theory and practice, with problems of 
 money and credit, who is able to give opinions on matters of 
 finance in the broadest sense of the word. It should be the duty of 
 the chief of the Bureau to furnish the Board with detailed and 
 up-to-date information, based on data collected by the Bureau, on 
 all important subjects relating to banking here and abroad. Under 
 his supervision daily reports should be prepared giving such data 
 as may be useful or necessary to the Board in arriving at its 
 decisions. Furthermore, it should be his duty to make monthly, 
 or, if necessary, weekly reports on economic and financial conditions 
 in the United States and foreign countries, and he should prepare 
 each week a summary, giving the result of an analysis of the weekly 
 statements and other reports of the Federal Reserve Banks. 
 
 The Bureau should perform its various duties with the greatest 
 secrecy. All material collected and all information prepared should 
 be for the exclusive use of the Board. Neither the chief of the 
 Bureau nor any of the employees should be allowed to write 
 for publication on questions relating to banking without the ap- 
 proval of the Board. Finally, there should be established in con- 
 nection with the Bureau, for reference purposes, a well-equipped 
 working library of books on modern banking, keeping on file all 
 documents published by European central banks. 
 
 185 
 
In conclusion, the fact must not be lost sight of that the great 
 European central banks came into existence when modern com- 
 merce and finance were in their first stage of development. This 
 is true even of the German Reichsbank, established as late as 1876. 
 for the latter rested on the well-founded traditions of its parent 
 institution, the Bank of Prussia, created in 1845. On the other; 
 hand, the Federal Reserve Board commences its activities when 
 commerce and finance are dealing in billions, when the money and 
 credit system of the United States, as well as of the great European 
 countries, has attained a complexity and breadth undreamed of. 
 Moreover, the scope of the Federal Reserve Board’s activity is 
 from the beginning infinitely larger than that of any of the great 
 European central banks. 
 
 It is obvious that a well-organized and capably managed statis- 
 tical department would be of greatest service and facilitate the 
 difficult task before the Federal Reserve Board. 
 
 186 
 
FEDERAL RESERVE BANK OF FORM 
 
 Cash on Hand. 
 
 <3 
 
 w><6 
 
 a g 
 
 <d a 
 0 > .. 
 
 ® O 
 
 0 ) 
 
 be a 
 
 << 
 
 187 
 
FEDERAL RESERVE BANK OF FORM II 
 
 Gold Supply on Hand. 
 
 aJ'O 
 O O 
 
 HO 
 
 * Col. 16-22 similar to 
 Col. 2-8 
 
 SI jg 
 
 ® a- 1 
 a 2 • 
 
 u tc O 
 o-S'q 
 
 SK- 
 
 a too 
 O «JC5 
 O 
 
 U t> o 
 c o 
 
 ® c 
 > c 
 
 c~ . 
 
 £ w So 
 
 5 
 
 s ® 
 
 S 
 
 o £_. 
 
 S > o 
 e .*0 
 a o w 
 
 £e 
 
 <«! 
 
 18S 
 
FEDERAL, RESERVE BANK OF FORM III 
 
 Federal Reserve Notes In Circulation. 
 
 
 Difference between high anti low 
 (Col. 4 and 0.) 
 
 in per cent, of average 
 (Col. 2.) 
 
 CO 
 
 
 
 Amount 
 
 
 
 
 Low 
 
 Amount 
 
 «© 
 
 
 
 Date 
 
 U5 
 
 
 
 High 
 
 Amount 
 
 
 
 
 Date 
 
 
 
 
 Average 
 | Amount 
 
 * 
 
 
 # 
 
 Month 
 
 fN 
 
 C 
 
 ci 
 
 >- 
 
 £ 
 
 C 
 
 
 c 
 
 t- 
 
 - 
 
 a 
 
 > 
 
 
 189 
 
> 
 
 K 
 
 O 
 
 0 
 
 3 
 
 y 
 
 t- 
 
 u 
 
 C 
 
 (A 
 
 <U 
 
 4-i 
 
 o 
 
 Z 
 
 ca a 
 <u 
 
 * § 
 
 2 £ 
 «5 W 
 
 "0 w 
 
 <u ta 
 
 [JU H 
 
 >4- Eh 
 
 0 <! 
 
 r W 
 
 C 
 
 c O 
 
 £ # 5 
 
 £ cd 
 C 
 
 e •-* 
 
 0 s 
 
 > o 
 - c 
 
 0 « 
 
 (A Q 
 
 0 
 
 0 
 
 noi^inojiQ 
 uis^ou iB'jox 
 
 N 
 
 
 
 lO 
 C f) 
 
 In per cent, 
 of Total 
 (Col. 12 ) 
 
 
 
 
 Amount 
 
 © 
 
 
 
 $10 
 
 In per cent, 
 of Total 
 (Col. 12) 
 
 © 
 
 
 
 Amount 
 
 ao 
 
 
 
 O 
 
 <N 
 
 </> 
 
 In percent, 
 of Total 
 (Col. 12) 
 
 
 
 
 Amount 
 
 © 
 
 
 
 $50 
 
 In per cent, 
 of Total 
 (Col. 12) 
 
 
 
 
 Amount 
 
 
 
 
 O 
 
 o 
 
 c# 
 
 In per cent, 
 of Total 
 (Col. 12) 
 
 
 
 
 Amount 
 
 
 
 
 Month 
 
 
 Jan. 
 
 Dec. 
 
 
 190 
 
DEPOSITS OF MEMBER BANKS 
 
 < 
 
 > 
 
 «K 
 
 x 
 
 o 
 
 a 
 
 a 
 
 o 
 
 a 
 
 & 
 
 a 
 
 a 
 
 > 
 
 a 
 
 a 
 
 V) 
 
 B 
 
 j 
 
 <! 
 
 X 
 
 a 
 
 a 
 
 a 
 
 a 
 
 TOTAL 
 
 Low 
 
 Amount 
 
 r- 
 
 tN 
 
 
 
 Date 
 
 to 
 
 tH 
 
 
 
 High 
 
 43 
 
 a 
 
 3 
 
 O 
 
 s 
 
 < 
 
 !h 
 
 
 
 © 
 
 43 
 
 c3 
 
 a 
 
 
 
 
 (SS loo) 
 spsodap 
 
 JO 
 
 -juao J8d ni 
 
 eo 
 
 
 
 i 
 
 Average 
 
 Amount 
 
 ! 
 
 N 
 
 
 
 OTHER DEPOSITS 
 
 LOW 
 
 Amount 
 
 iH 
 
 
 
 Date 
 
 © 
 
 
 
 HIGH 
 
 Amount 
 
 © 
 
 
 
 Date 
 
 CO 
 
 
 
 Average 
 
 Amount 
 
 r» 
 
 
 
 LEGAL RESERVES 
 
 LOW 
 
 Amount ‘ 
 
 © 
 
 
 
 Date 
 
 
 
 
 HOIH 
 
 Amount 
 
 
 
 
 Date 
 
 W 
 
 
 
 Average 
 
 Amount 
 
 N 
 
 
 
 Month 
 
 
 Jan. 
 
 Dec. 
 
 Year 
 191.. . . 
 
 191 
 
FEDERAL RESERVE BANK OF FORM V.B 
 
 Analysis of Deposits. 
 
 
 
 
 
 
 o 
 
 i 
 
 | Amount 
 
 
 
 
 DEPOSITS 
 
 t-1 
 
 © 
 
 c3 
 
 Q 
 
 CO 
 
 w 
 
 
 
 
 +3 
 
 
 
 
 
 
 
 ALL 
 
 A 
 
 ftp 
 
 O 
 
 g 
 
 < 
 
 
 
 
 
 
 
 TOTAL 
 
 X 
 
 Date 
 
 ss 
 
 N 
 
 
 
 Average 
 
 Amount 
 
 us 
 
 N 
 
 
 
 
 
 +3 
 
 S3 
 
 3 
 
 O 
 
 s 
 
 C* 
 
 
 
 
 
 
 
 6 
 
 < 
 
 
 
 
 
 
 
 
 
 © 
 
 M 
 
 W 
 
 
 
 
 
 
 m 
 
 
 c$ 
 
 Q 
 
 
 
 
 
 
 o 
 
 Cl, 
 
 65 
 
 Q 
 
 .3 
 
 bp 
 
 Amount 
 
 C* 
 
 ** 
 
 
 
 65 
 
 § 
 
 £ 
 
 
 Date 
 
 
 
 
 a 
 
 65 
 
 > 
 
 O 
 
 0 
 
 © 
 
 bO 
 
 c3 
 
 Li 
 
 In percent, 
 of total 
 deposits 
 (Col. 25) 
 
 e 
 
 N 
 
 
 
 
 
 
 > 
 
 •P 
 
 fl 
 
 3 
 
 Ci 
 
 
 
 
 
 
 
 
 1 
 
 •5 
 
 
 
 
 
 
 
 Month 
 
 CO 
 
 Jan. 
 
 Dec. 
 
 Year 
 191.. . . 
 
 192 
 
FEDERAL RESERVE RAIVK OF. •••••• FORM VI 
 
 Amount of Deposits and Federal Reserve Notes not Secured by Cash on Hand. 
 
 GOLD 
 
 Difference between 
 High and Low 
 (Col. 11 and 13) 
 
 In per cent, 
 of average 
 
 H5 
 
 
 
 Amount 
 
 
 
 
 Low 
 
 Amount 
 
 13 
 
 
 
 Date 
 
 
 
 
 High 
 
 Amount 
 
 
 
 
 Date 
 
 10 
 
 
 
 Average 
 
 Amount 
 
 Ct 
 
 
 
 ALL FORMS OF MONEY 
 
 Difference between 
 High and Low 
 (Col. 4 and 6) 
 
 In per cent, 
 of average 
 
 CO 
 
 
 
 Amount 
 
 
 
 
 Low 
 
 Amount 
 
 Cfi 
 
 
 
 Date 
 
 
 
 
 High 
 
 Amount 
 
 
 
 
 Date 
 
 n 
 
 
 
 Average 
 
 Amount 
 
 N 
 
 
 
 Month 
 
 
 Jan. 
 
 Dec. 
 
 Year 
 
 101 
 
 
 193 
 
Percentage of cash on hand against both Federal Reserve Notes and Deposits. 
 
 
 
 
 
 Gold 
 
 Low 
 
 
 
 
 
 j Date 
 
 O 
 
 
 
 High 
 
 
 a 
 
 
 
 Date 
 
 co 
 
 
 
 Average 
 
 
 
 
 
 All forms of money 
 
 & 
 
 o 
 
 J 
 
 L5. 
 
 o 
 
 
 
 Date 
 
 i© 
 
 
 
 High 
 
 
 
 
 
 Date 
 
 CO 
 
 
 
 Average J 
 
 
 N 
 
 
 
 Month 
 
 - 
 
 Jan 
 
 Dec 
 
 Year 
 191 . . .. 
 
 194 
 
FEDERAL RESERVE BANK OF FORM IX 
 
 Analysis of Funds Invested in Bills of Exchange at the End of each Month. 
 
 Grand 
 
 Total 
 
 N 
 
 
 1 
 
 Purchased in the open market 
 
 Total 
 
 
 
 
 From other than member banks| 
 
 Bills 
 of ex- 
 change 
 
 © 
 
 
 
 Bankers’ 
 
 accept- 
 
 ances 
 
 a 
 
 
 
 Cable 
 
 transfers 
 
 CD 
 
 
 
 
 From 
 
 member 
 
 banks 
 
 r» 
 
 
 
 Purchased from member banks 1 
 
 Total 
 
 © 
 
 
 
 snoij'ejaodxo jo 
 suojq^jjodtni no 
 pgsisq S99u , e)d999y 
 
 1C 
 
 
 
 •sasodond 
 VBjminojjSv 
 joj panssi 
 
 * 
 
 
 
 suopo^sn'BJi 
 
 l-BiojonimoD 
 
 jo jno Su]sijv 
 
 « 
 
 
 
 9AJ9S9H I'BJapa * 
 jaq!}o 
 
 uiojj posBqojnj 
 
 
 
 
 Month 
 
 Jan 
 
 Dec 
 
 
 196 
 
FEDERAL RESERVE RANK OF FORM 
 
 Purchases of Foreign Bills of Exchange. 
 
 K 
 
 ^jijruBtn o2bjoav 
 
 l ^ 
 
 
 
 (junouiB ^ 
 
 9D12J 82«JaAV 
 
 « 
 
 
 
 Total amount of purchases 
 
 aStreqoxa 
 jo sum jo 
 sasnqajnd 
 Itnoj jo 
 •juaa jad uj 
 
 N 
 
 
 
 Amount 
 
 S 
 
 s 
 
 
 
 sraaji 
 jo jaqum^; 
 
 © 
 
 
 
 On hand at the end 
 of the month 
 
 om aqj jo 
 paa aqj 
 
 SUTlI'BAQJd 
 
 aSueqoxa w 
 jo sis^q uo 
 panpsA 
 
 © 
 
 
 1 
 
 smaji 
 
 jo jdquirif£ 
 
 ao 
 
 
 
 Amount Invested 
 
 Low 
 
 Amt. 
 
 $ 
 
 
 
 Date 
 
 © 
 
 i 
 
 High 
 
 s 
 
 <1 
 
 U5 
 
 
 
 Date 
 
 
 
 
 aSu'eqoxa 
 jo sqiq ui 
 sjuamjsaA 
 -ui I'ejoj jo 
 
 •JU9D J9d UJ 
 
 « 
 
 
 
 Monthly 
 
 Average 
 
 $ 
 
 N 
 
 
 
 Month 
 
 - 
 
 Jan. 
 
 Dec. 
 
 Year 
 191 
 
 197 
 
Foreign Bills of Exchange on Hand 
 
 (AT THE END OF EACH MONTH) 
 
 H 
 
 k! 
 
 ss 
 
 o 
 
 b 
 
 b 
 
 O 
 
 a 
 
 * 
 
 < 
 
 s: 
 
 B 
 
 b 
 
 e 
 
 B 
 
 » 
 
 B 
 
 SS 
 
 b 
 
 ft 
 
 § 
 
 c 
 
 B 
 
 b 
 
 Miscellaneous 
 
 
 
 
 
 
 1G 
 
 
 
 South America 
 
 
 «5 
 
 
 
 
 
 
 
 Mexico 
 
 W 
 
 eo 
 
 
 
 Mex. $ 
 
 N 
 
 
 
 Canada 
 
 <V> 
 
 
 
 
 Can. S 
 
 10 
 
 
 
 Other European 
 countries 
 
 GQ 
 
 05 
 
 
 
 
 00 
 
 
 
 France 
 
 ffi 
 
 
 
 
 OT 
 
 S* 
 
 50 
 
 
 
 Germany 
 
 «y> 
 
 l© 
 
 
 
 Mark 
 
 
 
 
 England 
 
 m 
 
 eo 
 
 
 
 
 
 
 
 Month 
 
 - 
 
 g §1 
 
 SS Q 
 
 
 198 
 
Ctf 
 
 bn 
 
 G 
 
 (8 
 
 JS 
 
 y 
 
 x 
 
 W 
 
 £Q 
 
 C 
 
 bn 
 
 S 1 Z 
 <u o 
 
 s» 
 
 tfl 
 
 y 
 
 +j 
 
 «s 
 
 C6 
 
 H 
 
 « 
 
 69 
 
 £ 
 
 CD 
 
 0 
 
 H 
 
 <! 
 
 « > 
 
 a a 
 1 S 
 a 
 
 o % 
 x < 
 a a 
 - h 
 a 
 
 o a 
 a w 
 
 fe £ 
 > o 
 
 Z J 
 o a 
 
 CD° 
 
 < a 
 Qa 
 a 2 
 
 £§s 
 
 a3o 
 
 M (M 
 
 © 
 
 a^3 
 
 hSO 
 
 •SfjqS 
 
 © C tj 
 
 > «e g 
 
 O’® ^ 
 
 2 c <+* 
 
 ^ cj _ , 
 fcfix] ^ 
 
 5^o 
 
 Sc2 
 
 > d a 
 
 J 5 J 
 
 
 199 
 
<U 
 
 bn 
 
 C 
 
 _C 
 
 u a 
 x o 
 uj 5 
 
 «*« a 
 
 H 
 
 ‘ 0 
 <1 
 K 
 H 
 
 CD 
 
 ►H 
 
 H 
 Pi 
 
 o 
 
 fa 
 
 Pi 
 fa 
 o 
 
 o 
 
 H 
 
 X 
 
 fa 
 
 Q 
 
 g 
 
 < 
 
 CQ 
 
 C 
 
 bn 
 
 '3 
 
 fa 
 
 o 
 
 Us 
 
 cn 
 
 <u 
 
 ■M 
 
 (5 
 
 0 £ 
 
 || II 2 
 
 ilih i 
 
 I|fi 5 -s 
 
 O 03*0 ©-g'J 
 
 25 0-2 0 « 
 
 c 3 c 3 
 
 ^ O 
 
 o.££ 
 
 s 
 
 3 fa- 55 •_, 
 
 ;poo 
 ? c &&«*-< 
 an *?«* 
 
 o yi 
 
 55 oS o« 
 
 < ^ fc£ «t afe 
 
 c 
 
 H 03 
 ■“? <• , 
 
 n n ° 
 O Ov. 
 
 fa — 
 
 o 5 i 
 
 < 
 
 2 5 §fa 
 
 - 
 
 2 “to 
 
 05 Co 
 t£ ct a** 
 
 icfl<i 
 
 > 
 
 03 fa 
 
 > o 
 
 °l 
 
 O QJ 
 -fa 50 
 
 3 bfi°? 
 
 ; fa^o 
 
 J, OOi_h 
 
 irr^S 
 — — ■So 
 05 c 00 
 
 fcJD d P,tJ< 
 
 rt— 5 s X 
 £ ce o a) 
 2 o> 
 
 
 g oco 
 
 ■goc“®. 
 
 •CS 2 S- 
 
 fa 
 
 o <u- 53 *; 
 
 _, O 
 2 « 
 
 CO 
 >» 
 
 m 
 
 1 73 o£ w 
 
 5.2 
 
 , -fa/^ ^ CD 
 
 Sg^o^ 
 fe 0 a &o“ 
 
 3 SoS^ 
 
 200 
 
Credit Balances Abroad 
 
 > 
 
 M 
 
 X 
 
 s 
 
 a 
 
 o 
 
 b 
 
 b 
 
 o 
 
 a 
 
 < 
 
 s 
 
 B 
 
 i> 
 
 PS 
 
 B 
 
 t»i 
 
 B 
 
 cs 
 
 B 
 
 <D 
 
 .0 
 
 §§• 
 £ S 
 
 £3 
 
 U5 
 
 K 
 
 B 
 
 0 
 
 B 
 
 ©OJ 
 
 201 
 
4> W 
 bfl J 
 
 S3 
 
 o 
 
 C z 
 
 • Zn 1—1 
 
 0) 
 
 -M 
 
 C/5 
 
 <y 
 
 > 
 
 C 
 
 fe 
 
 C/5 HH 
 
 T1 0,3 
 
 U cn 
 
 c < 
 
 3 ^ 
 
 iZ ° 
 
 Payable Abroad 
 
 qjuoni jo 
 pua aqj jy 
 
 © 
 
 
 
 Low 
 
 tint 
 
 GO 
 
 
 
 Date 
 
 r» 
 
 
 
 High 
 
 tmt 
 
 © 
 
 
 
 ! Date 
 
 i 
 
 '■5 
 
 
 
 oSnaSAV 
 
 Amino jv 
 
 
 
 
 Payable in Other Districts 
 
 qjuoin jo 
 pua aqj jy 
 
 n 
 
 
 
 Low 
 
 Amt. 
 
 N 
 
 
 
 Date 
 
 3 
 
 
 
 xi 
 
 60 
 
 Amt. 
 
 © 
 
 
 
 Date 
 
 a 
 
 
 
 sSn-raAV 
 Annuo IV 
 
 CO 
 
 
 
 Payable in the Bank’s own 
 Federal Reserve District 
 
 qjaoai jo 
 pua aqj JV 
 
 
 
 
 Low 
 
 Amt. 
 
 © 
 
 
 
 © 
 
 d 
 
 Q 
 
 L<5 
 
 
 
 £2 
 
 60 
 
 Amt. 
 
 
 
 
 Date 
 
 W 
 
 
 
 03VJ3AV 
 
 Apnuojv 
 
 
 
 
 Mo. 
 
 - 
 
 •Jan 
 
 Dec 
 
 Year 
 191 
 
 202 
 
FEDERAL, RESERVE BANK OF FORM XVI 
 
 Analysis of all Sales of Bills of Exchange. 
 
 (DURING EACH MONTH.) 
 
 Grand total 
 
 Average 
 
 maturity 
 
 CO 
 
 
 
 Average 
 
 face 
 
 amount 
 
 15 
 
 
 
 Amount 
 
 
 
 
 Sold in the open market 
 
 Total 
 
 Average 
 
 maturity 
 
 
 
 
 Average 
 
 face 
 
 amount 
 
 KI 
 
 
 
 Amount 
 
 11 
 
 
 
 To other than Member Banks 
 
 Average 
 
 maturity 
 
 10 
 
 
 
 Average 
 
 face 
 
 amount 
 
 05 
 
 
 
 Amount 
 
 GO 
 
 
 
 To Member Banks 
 
 Average 
 
 maturity 
 
 
 
 
 Average 
 
 face 
 
 amount 
 
 CO 
 
 
 
 Amount 
 
 •O 
 
 
 
 Sold to other 
 Federal Reserve Banks 
 
 Average 
 
 maturity 
 
 
 
 
 Average 
 
 face 
 
 amount 
 
 eo 
 
 
 
 Amount 
 
 N 
 
 
 
 Month 
 
 - 
 
 Jan. 
 
 Dec. 
 
 Year 
 191.. . . 
 
 203 
 
FEDEBAL RESERVE BANK OF FORM XVII 
 
 Amount of Domestic Bills of Exchange on Hand. 
 
 (Classified according to lines of business of drawee, acceptor, or maker at the end of each month.) 
 
 Finance and 
 banking 
 
 S % 
 
 13 
 
 
 
 N 
 
 
 
 Total 
 S % 
 
 11 
 
 
 
 10 
 
 
 
 Miscellaneous | 
 (including mining 
 industry) 
 
 S % 
 
 OS 
 
 
 
 ao 
 
 
 
 Agriculture 
 Forestry 
 Fisheries 
 $ % 
 
 r» 
 
 
 
 CO 
 
 
 
 Manufacturing 
 
 industry 
 
 $ % 
 
 
 
 
 
 
 
 Commerce trans- 
 portation insur- 
 ance 
 
 $ % 
 
 
 
 
 N 
 
 
 
 Month 
 
 - 
 
 Jan j 
 
 Dec 
 
 Year 
 
 191 
 
 204 
 
Face Amount of Domestic Bills of Exchange. 
 
 n 
 
 3 
 
 - 
 
 o 
 
 fa 
 
 fa 
 
 fa 
 
 ID 
 
 fa 
 
 fa 
 
 fa 
 
 - 
 
 fa 
 
 c 
 
 fa 
 
 fa 
 
 
 
 
 
 
 
 Total 
 
 V5. 
 
 
 
 
 
 Amount 
 
 © 
 
 
 
 
 Items 
 
 a 
 
 
 
 
 Payable in other 
 districts 
 
 
 ao 
 
 
 
 
 Amount 
 
 
 
 
 
 Items 
 
 © 
 
 
 
 
 Payable in banks’ own 
 i Federal Reserve District 
 
 Vi. 
 
 
 
 
 
 Amount 
 
 
 
 
 
 Items 
 
 M 
 
 
 
 
 Face amount 
 
 
 N 
 
 Up to $250 
 $ 251 — $ 500 
 501 — 1,000 
 
 1.001 — 2,500 
 2,501 — 5.000 
 
 5.001 — 10,000 
 
 above 10,000 
 
 TOTAL 
 
 
 Month 
 
 
 - 
 
 
 
 Year 
 191 
 
 205 
 
H 
 
 K 
 
 P5 
 
 O 
 
 fa 
 
 <w 
 
 to 
 
 £ 
 
 ts 
 
 -e 
 
 o 
 
 X 
 
 UJ 
 
 ca 
 
 u 
 
 o 
 
 Q 
 
 >> <3 
 
 <1 
 
 o 
 
 H 
 
 > 
 
 Cfl 
 
 a 
 
 w 
 
 a 
 
 PS 
 
 a 
 
 sX*ep ui passaad 
 -xa ^(pjn^'Bra aS'eaaAy 
 
 PS 
 
 
 
 DOMESTIC BILLS OP EXCHANGE MATURED WITHIN 
 
 IT 2? 01 *100 
 sqquotu 9 
 
 (In percentage of total amount purchased) 
 
 N 
 
 tH 
 
 
 
 sqiaora g 
 X'Bnoiqipp'B ay 
 
 - 
 
 
 
 6 2? 8 ’IOO 
 sqquoui & 
 
 © 
 
 
 
 qquoiu 
 I'euoiqippB uy 
 
 © 
 
 
 
 L ^ 9 lOQ 
 sqquoui g 
 
 GC 
 
 
 
 qquoiu 
 X^aoiqipp^ uy 
 
 r» 
 
 
 
 9 19 * 'loo 
 sqquotu z 
 
 © 
 
 
 
 qquotu 
 p2aoiqippT2 uy 
 
 us 
 
 
 
 £ ^ z *ioo 
 qquora 9 UO 
 
 
 
 
 sX'ep 9 1 
 I'Buoiqipp^ uy 
 
 PS 
 
 
 
 s£ep et 
 
 M 
 
 
 
 Month 
 
 - 
 
 Jan. 
 
 Dec. 
 
 Year 
 191 .. . 
 
BILLS OF EXCHANGE ON HAND MATURED WITHIN 
 
 w 
 
 w 
 
 S 
 
 cs 
 
 o 
 
 h 
 
 c IS 
 
 gs 
 
 o 
 
 0 
 
 > 
 
 0 
 
 0 
 
 tn 
 
 0 
 
 0 
 
 J 
 
 <! 
 
 207 
 
k 
 
 k. 
 
 - 
 
 o 
 
 t- 
 
 DISTRIBUTION OF CREDIT, CLASSIFIED ACCORDING TO LIMITS 
 
 1 More than 
 $500,000 
 
 z ioo jo , 
 
 •JU90 J9Cl UJ 
 
 
 
 sj^npiAipui 
 pue siuig 
 jo aaqum^; 
 
 
 
 
 1 $100,001 
 $500,000 
 
 Z ioo jo 
 'JU99 J9d UJ 
 
 M 
 
 
 
 spmpiAipui 
 pue siuig 
 jo jaqumjsi 
 
 N 
 
 
 
 $50,001 
 S1C0 0 
 
 z qoo jo 
 
 •JU90 J9d UJ 
 
 a 
 
 
 
 sienpiAipui 
 pue siuig 
 jo jgqum^; 
 
 o 
 
 
 
 $25,001 
 
 $50,000 
 
 Z ioo jo 
 
 •JU90 J9d UJ 
 
 Ci 
 
 
 
 si-enpiAipui 
 pue siuig 
 jo jgqumj^; 
 
 GO 
 
 
 $10,001 
 
 $25,000 
 
 Z 'IOO jo 
 •juao jad nj 
 
 
 
 
 Sl^npiAipUT 
 pu"e siuig 
 jo J9qran^[ 
 
 o 
 
 
 
 $1,000 
 $10,000 | 
 
 Z IOO JO 
 •juao jo cl uj 
 
 
 
 
 spenpiAipai 
 pu^ siuig 
 jo aaqum^ 
 
 
 
 
 Firms and indi- 
 viduals who are 
 eligible for 
 credit facilities 
 
 pnoj 
 
 JO 'JU90 J9d UJ 
 
 « 
 
 
 
 j9qumM 
 
 N 
 
 
 
 Lines of business 
 
 
 Commerce, Trans- 
 portation and In- 
 surance 
 
 Finance and Bank- 
 ing 
 
 Manufacturing 
 
 Industries 
 
 Agriculture, Forest- 
 ry and Fisheries 
 
 Miscellaneous (in- 
 cluding Mining 
 Industry) 
 
 TOTAL 
 
 208 
 
FEDERAL RESERVE BANK OF 
 
 Bills of Exchange Remaining Unpaid at Time of Maturity. 
 
 Total 
 
 juamX'ed joj pa 
 -juasajd sqiq q'e 
 jo anaa jad uj 
 
 
 
 
 junoaiy 
 
 © 
 
 
 
 jnaunted joj pa 
 -jnasajd spiq pn 
 jo juao jad uj 
 
 «o 
 
 
 
 sinaji jo jaqum^ 
 
 
 
 
 Other Two Name Paper 
 
 jnamJnd joj pa 
 -jnasajd spiq pn 
 jo ■ juaa jad uj 
 
 w 
 
 
 
 junouiy 
 
 N 
 
 
 
 juain^'ed joj pa 
 -juasajd sqiq 
 jo ‘juaa aad uj 
 
 5 
 
 
 
 suiajj jo jaquinjsj 
 
 © 
 
 
 
 Banker’s Acceptances 
 
 juain^'Bd joj pa 
 -juasajd sqiq q'e 
 jo *jnaa jad uj 
 
 a 
 
 
 
 junoury 
 
 GO 
 
 
 
 juara^'Bd joj pa 
 -jnasajd sqiq q*e 
 jo ’juaaj jad uj 
 
 r» 
 
 
 
 suiaji jo jaquinjsj 
 
 © 
 
 
 
 Single Name Paper 
 
 q ii.Hii a i.'( j joj pa 
 -jnasajd spiq pe 
 jo -juaa jail uj 
 
 
 
 
 jnnoray 
 
 
 
 
 jnamX'Bd joj pa 
 -jnasajd sqiq q'e 
 jo -juaa jad uj 
 
 n 
 
 
 
 suiajx jo jaqinnjsj; 
 
 N 
 
 
 
 Mo. 
 
 * 
 
 Jan 
 
 Dec .... 
 
 Year 
 191.. . . 
 
 209 
 
M 
 
 k 
 
 k 
 
 s 
 
 - 
 
 o 
 
 th 
 
 "O 
 
 • ^4 
 
 rt 
 
 a 
 
 c 
 
 3 
 
 a) o 
 
 fa 
 
 o 
 
 H 
 
 OT 
 
 O 
 
 fa 
 
 « 
 
 fa 
 
 fa 
 
 fa 
 
 K 
 
 « 
 
 o 
 
 fa 
 
 £ 
 
 <* 
 
 « 
 
 a 
 
 « 
 
 o 
 
 Q 
 
 fa 
 
 fa 
 
 ai 
 
 GO 
 
 Miscellaneous (including 
 Mining Industry) 
 
 ■juguijf'Ed joj 
 pajuasajd spiq 
 [|i: jo juaa jad uj 
 
 
 
 
 junoray 
 
 CD 
 
 
 
 juatuXud joj 
 pajuasajd s||iq 
 Ijejo ■ juoo jaduj 
 
 »5 
 
 
 
 sraaji jo jdqamM 
 
 
 
 
 Agriculture, Forestry, 
 Fisheries 
 
 juoraA'Bd joj 
 pajuasajd s’lnq 
 H'BJO -juoo JOCl UJ 
 
 M 
 
 
 
 junouiy 
 
 
 
 
 juaunfcd joj 
 pajuasajd spiq 
 ucjo -juaa jad'uj 
 
 
 
 
 smaji jo J3qran^[ 
 
 e 
 
 
 
 Manufacturing Industry 
 
 juaunfud joj 
 pajuasajd spiq 
 ICE jo juao Jad'ui 
 
 a 
 
 
 
 junoray 
 
 GO 
 
 
 
 juatuJicd joj 
 pajuasajd spiq 
 pc jo juao jad uj 
 
 
 
 
 suiaji jo jaqum^ 
 
 o 
 
 
 
 Commerce, Transportation 
 Insurance 
 
 juaunCud joj 
 pajuasajd sniq 
 ip; jo • juao jad uj 
 
 
 
 
 junoray 
 
 *s< 
 
 
 
 juotnXud joj 
 pajuasajd sipq 
 II^jo -juao jad uj 
 
 « 
 
 
 
 stn9jj jo jaquinM 
 
 
 
 
 
 Month 
 
 «N 
 
 Jan. 
 
 Dec. 
 
 c3~ 
 
 oa 
 
 210 
 
Rates of Discount. 
 
 (Classified according to the number of changes and time of existence of each rate.) 
 
 > 
 
 M 
 
 K 
 
 « 
 
 M 
 
 a 
 
 o 
 
 - 
 
 a 
 
 * 
 
 B 
 
 - 
 
 NUMBER OF DAYS ON WHICH THE FOLLOWING RATES WERE IN FORCE 
 
 00 
 
 13 
 
 
 
 X 
 
 N 
 
 
 
 b- 
 
 = 
 
 
 
 X 
 
 o 
 
 o 
 
 
 
 to 
 
 9 » 
 
 
 
 tS. 
 
 £ 
 
 LO 
 
 CO 
 
 
 
 ■US. 
 
 UO 
 
 r» 
 
 
 
 VI 
 
 ■<* 
 
 to 
 
 
 
 Vi. 
 
 *o 
 
 
 
 Vi. 
 
 £ 
 
 CO 
 
 
 
 
 ts. 
 
 CO 
 
 CO 
 
 
 
 Number 
 
 of 
 
 changes 
 
 0? 
 
 
 
 Month 
 
 - 
 
 Jan 
 
 Dec 
 
 Year 
 191.. . . 
 
 211 
 
fa 
 
 X 
 
 X 
 
 a 
 
 o 
 
 fa 
 
 fa 
 
 O 
 
 v 
 
 X 
 
 <■ 
 
 c 
 
 fa 
 
 fa 
 
 a 
 
 fa 
 
 in 
 
 fa 
 
 - 
 
 fa 
 
 0 
 
 fa 
 
 fa 
 
 Cfl 
 
 <U 
 
 ■u 
 
 O 
 
 OS 
 
 c 
 
 3 
 
 O 
 
 u 
 
 w 
 
 Q 
 
 C 
 
 Cfl 
 
 4> 
 
 W) 
 
 C 
 
 ca 
 
 JC 
 
 u 
 
 k. 
 
 o 
 
 <4-i 
 
 Cfl 
 
 £ 
 
 O 
 
 cfl 
 
 eg 
 
 v 
 
 a 
 
 REASONS FOR DECREASE 
 
 * 
 
 pamq 
 -UIOD iiia 
 pu « IIA ‘IA 
 suosboh 
 
 
 
 ■ 
 
 IIIA 
 
 ^aqjBtn uado 
 itfiM jobj 
 - uoo ni jaS 
 oj jap jo a i 
 
 o 
 
 
 VII 
 
 aSn-eqa 
 -xg jo sqm 
 ai^saniOQ 
 jo "sSnijayo 
 pasTsajoaQ 
 
 cs 
 
 
 > 
 
 SJJOdUIJ 
 
 pi°o pa 
 
 -srvea pu^H 
 uo qs^o 
 jo as^ajoui 
 
 CO 
 
 
 REASONS FOR INCREASE 
 
 > 
 
 pauiqtnoa 
 A I P U>B 
 ‘III *11 I 
 
 suos^an 
 
 
 
 > 
 
 aSu'eqa 
 -xg jo sma 
 aijsainop 
 jo sSuijajjo 
 pas^ajaui 
 
 to 
 
 
 a 
 
 jjodun ppo 
 aj'cinuiijsoj. 
 
 » fi 
 
 
 M 
 
 IJOdxo p[or) 
 
 ■JU8A3.ICI OX 
 
 
 
 « 
 
 5-lOClXO PJOO 
 
 n 
 
 
 astjajaaQ 
 JO OS^OJDUJ 
 
 N 
 
 
 Date 
 
 - 
 
 
 212 
 
a 
 
 o 
 
 b 
 
 ■3 
 
 J- 
 
 u 
 
 u 
 
 O 
 
 <41 
 
 T3 
 
 C 
 
 <8 
 
 £ 
 
 V 
 
 Q 
 
 (8 
 
 c 
 
 o 
 
 to 
 
 (8 
 
 <D 
 
 CO 
 
 4) 
 
 0 
 
 a 
 
 & 
 
 Q 
 
 Z 
 
 <5 
 
 m 
 
 £ 
 
 m 
 
 O 
 
 0. 
 
 H 
 
 Q 
 
 Z 
 
 OH 
 
 to 
 
 Q« 
 
 Z" 
 
 WfH 
 
 %P 
 
 oZ 
 
 Bg 
 
 m> 
 
 <« 
 
 OH 
 
 03 
 
 &a 
 
 oa 
 
 aj 
 
 Rate of Discount 
 
 Open 
 market 
 3ol. 1 
 1 * 
 
 © 
 
 
 Federal Re- 
 serve Bank 1 
 At date C 
 
 % 
 
 a 
 
 
 Percentage of cash on hand 
 against Deposits and Notes 
 
 Decrease 
 
 % 
 
 CO 
 
 
 Preceding 
 
 week 
 
 (or month) 
 
 % 
 
 
 
 On date of 
 Col. 1 
 
 © 
 
 
 Amount of Deposits and Notes 
 issued not secured by cash on hand 
 
 Increase 
 
 l 
 
 
 
 Preceding 
 
 week 
 
 (or month) 
 
 
 
 On date of 
 Col. 1 
 
 
 
 Season (crop, 
 quarterly 
 dividend, 
 taxes, etc.) 
 
 
 
 Date ' 
 
 - 
 
 
 213 
 
> 
 
 k 
 
 k 
 
 s 
 
 « 
 
 o 
 
 fa 
 
 fa 
 
 o 
 
 k 
 
 «■< 
 
 n 
 
 fa 
 
 k 
 
 BS 
 
 B 
 
 !*) 
 
 - 
 
 x 
 
 IX 
 
 a 
 
 Q 
 
 a 
 
 a 
 
 ax 
 
 c 
 
 rt 
 
 OQ 
 
 O) 
 
 X 
 
 c 
 
 o _ 
 ft s 
 3 
 
 H 
 
 -o 
 
 <D 
 
 s- 
 
 U 
 
 u 
 
 O 
 
 M- 
 
 T3 
 
 C 
 
 (8 
 
 <U 
 
 Q 
 
 0) 
 
 X 
 
 H 
 
 Percentage of 
 all bills of ex- 
 change to 
 deposits 
 
 
 GO 
 
 
 
 Surplus of de- 
 posits over all 
 bills of ex- 
 change 
 
 Amount 
 
 r- 
 
 
 
 All bills of ex- 
 change. on 
 hand 
 
 Amount 
 
 CD 
 
 
 
 Percentage of 
 domestic bills 
 of exchange 
 to deposits 
 
 
 
 
 
 Surplus of de- 
 posits over 
 domestic bills 
 of exchange 
 
 Amount 
 
 
 
 
 Domestic bills 
 of exchange 
 on hand 
 
 Amount 
 
 n 
 
 
 
 Deposits of 
 member banks 
 
 Amount 
 
 N 
 
 
 
 Week ending 
 
 
 Jan. 7. 
 “ 14. 
 
 “ 21. 
 
 Dec. 30. 
 
 Average 
 Year 191 — 
 
 214 
 
Fluctuations of The Discount Rates and Statistics Regarding Factors of The Money Market Affecting The Same. 
 
Classification of Investments in Securities (Sec. 14 b.) 
 
 K 
 
 M 
 
 k! 
 
 K 
 
 r; 
 
 IS 
 
 O 
 
 fa 
 
 w 
 
 a 
 
 fa 
 
 0 
 
 fa 
 
 fa 
 
 g 
 
 fa 
 
 «i 
 
 fa 
 
 « 
 
 fa 
 
 fa 
 
 1 
 
 Q 
 
 fa 
 
 fa 
 
 Grand Total 
 
 SJISOdOQ jfjos 
 -induioo jo % 
 
 1 ** 
 
 1 
 
 | 
 
 junouiy 
 
 M 
 
 W 
 
 
 
 BILLS, NOTES, REVENUES, BONDS AND WARRANTS OF 
 
 O 
 
 sjisodOd jCjos 
 - induioo jo % 
 
 N 
 
 N 
 
 
 
 I^OX pu-BJO 
 jo -juaa jOjj 
 
 W 
 
 
 1 
 
 ] 
 
 junoray 
 
 O 
 
 N 
 
 
 
 Municipality 
 
 I'ejox pu^jo 
 
 JO -JU0O J8X 
 
 a 
 
 
 | 
 
 SitUp UI 9UQ 
 
 CO 
 
 
 
 junoray 
 
 r» 
 
 
 
 Political 
 
 Subdivision 
 
 l^jox puujo 
 
 JO ’JU90 J9J 
 
 w 
 
 1 
 
 | 
 
 sX'ep ui onQ 
 
 - 
 
 
 
 junouiy 
 
 s 
 
 
 
 District 
 
 I'BJOX PU'BJO 
 JO ‘JU09 JOJ 
 
 M 
 
 
 
 SiCup ui 9n<j 
 
 N 
 
 
 
 junouiy 
 
 s 
 
 
 
 County 
 
 l^ox pu-ejo 
 JO -JU80 J9J 
 
 © 
 
 
 
 sAup uiana 
 
 a 
 
 
 
 (junoury 
 
 X 
 
 
 
 State 
 
 IBjox pu^jo 
 
 JO JU90 J9X 
 
 r» 
 
 
 
 S^up UI 911(1 
 
 © 
 
 
 
 innoray 
 
 
 
 
 U. S. Bonds 
 or Notes 
 
 sjisodap iIjos 
 - puluioo jo % 
 
 
 
 
 I'BQOX pnnj0 
 JO -JU9D J9c[ 
 
 W 
 
 
 
 (junouiy | 
 
 w 
 
 
 
 Week 
 
 ending 
 
 
 - 
 
 Jan 7 
 “ 14 
 
 “ 21 
 
 Dec. 31 
 
 Average 
 
 Year 
 
 216 
 
Index 
 
 Page 
 
 Accounting, 
 
 place of 2 9 
 
 in branches 41 
 
 for Foreign Exchange department 92ff. 
 
 two systems presented 100 
 
 scope and problems of 100 
 
 general plan of 102ff. 
 
 alternative general plan of 129ff. 
 
 Accounting Department, 
 
 of reserve banks 151 
 
 Advisory Council, 
 
 work of 98 
 
 Application (membership) 
 
 blank 4 
 
 Auditor, 
 
 of reserve bank 25 
 
 Ballots, 
 
 regulations for 4 
 
 Bendix, Ludwig, 
 
 on statistics 170 
 
 Benton, A. A., 
 
 member of sub-Committee on Accounting- 101 
 
 signs report 101 
 
 co-operates in accounting system 102 
 
 Bills of Exchange, 
 
 how bought 88 
 
 statistics of 172ff. 
 
 Bookkeeping Department, 
 
 of reserve banks 120, 148 
 
 Bonds, 
 
 of reserve agents 5 
 
 of officers of reserve bank 25 
 
 of agents, how controlled 40 
 
 Borrowing, 
 
 habits of, in relation to districting 9 
 
 Branches, 
 
 rules for 4 
 
 foreign 5 
 
 of reserve banks, how established 25 
 
 modes of establishing 41 
 
 capital of 42 
 
 by-laws of 43ff. 
 
 directors of 4 3 
 
 discount committee of 44 
 
 officers of 44 
 
 foreign, establishment of 45 
 
 217 
 
Page 
 
 foreign, how managed 47 
 
 clearing methods of 8, 62 
 
 Broderick, J. A., 
 
 signs report 101 
 
 member subcommittee on accounting 102 
 
 By-Laws, 
 
 general 4 
 
 for reserve banks 43 
 
 for reserve board 95ff. 
 
 of federal advisory council 99 
 
 Cable Transfers, 
 
 how bought 89 
 
 Capital, 
 
 reduction of 4 
 
 Capitalization, 
 
 of reserve banks 7 
 
 average of 11 
 
 Cash, 
 
 statistics of 170 
 
 Certificates of Stock, 
 
 how signed 26 
 
 Chairman of Reserve Board, 
 
 his duties 95 
 
 Checks, see items. 
 
 Chief Clerk, 
 
 duties of 104 
 
 Cities, 
 
 for reserve banks 15 
 
 designation of, omitted 17 
 
 Clearing, 
 
 plan 5 
 
 relation to districting 7 
 
 first system explained 4Sff. 
 
 stamp for * 53 
 
 alternative system 64 
 
 between reserve banks 55 
 
 views of expert on 68 
 
 accounting for 115, 131 
 
 Code Book, 
 
 requirements of 100 
 
 Collection, 
 
 detail of charges for 5S 
 
 mode of conducting 66 
 
 items originating with non-member banks 67 
 
 time used in 67 
 
 accounting for 137 
 
 Collection Department, 
 
 accounting for 115 
 
 Commercial Paper, 
 
 discussion of 73f£. 
 
 single name 7 6 
 
 recommendations regarding 79 
 
 218 
 
Tage 
 
 Compensation, 
 
 schedule of 4 
 
 Conversion, 
 
 rules for 4 
 
 Correspondence, 
 
 how managed 27 
 
 Correspondents, 
 
 of reserve banks, how chosen 90 
 
 Credit, 
 
 statistics of 170 
 
 Credit Bureau, 
 
 organization of 36 
 
 records of 37 
 
 use of 38 
 
 Counsel, 
 
 of reserve bank 25 
 
 Dawson, Ralph, 
 
 member of sub-Committee on Accounting 101 
 
 signs report 101 
 
 Deposits, 
 
 statistics of 171 
 
 Designation of Cities, 
 
 mentioned 4 
 
 Differential rate on paper suggested 77 
 
 Directors, 
 
 lists of 4 
 
 choice of 17 
 
 of reserve banks, powers and meetings of 22 
 
 of branches 42 
 
 discount committee of branches 44 
 
 Discount Committee, 
 
 at branches 44 
 
 Distributing Desk, 
 
 accounting of 131 
 
 District, 
 
 certificate of limits 4 
 
 Districting, 
 
 method 6 
 
 principles of 12 
 
 problems of 13 
 
 District Map, 
 
 enumerated 4 
 
 Dividends, 
 
 record of 4 
 
 Domestic Business, 
 
 of reserve banks 73 
 
 Domestic Exchange, see Clearing. 
 
 Electors, 
 
 Certificate of election 4 
 
 lists of 4 
 
 219 
 
Page 
 
 Examination, 
 
 reserve banks 4 , 34 
 
 of member banks, plan of 32, 35 
 
 of other banks 34 
 
 of agent 35 
 
 Executive Committee, 
 
 of reserve banks 23 
 
 Expenses, 
 
 levy for 4 
 
 Farnham, S. H., 
 
 member sub-Committee on Accounting 101 
 
 signs report 101 
 
 co-operates on accounting system 129 
 
 Federal Clearing House, 
 
 explained 57 
 
 Fisher, E. D., 
 
 member sub-Committee on Accounting 101 
 
 signs report 101 
 
 Foreign Branches, 
 
 how far to be established 85 
 
 how organized and managed 91 
 
 Foreign Exchange, • 
 
 provisions of reserve act 83 
 
 control of by reserve board 84 
 
 scope of operations in 85 
 
 methods of dealing in 86 
 
 manager of 87 
 
 funds for use in SS 
 
 accounting for 92, 117ff., 155ff. 
 
 Forms, 
 
 for statistical bureau 187ff. 
 
 for accounting, see Portfolios I, II, and III, referred 
 
 to on pp 102, 129 
 
 General Books, 
 
 of reserve banks 150 
 
 Gold, 
 
 how imported 89 
 
 statistics of 170 
 
 Governor, 
 
 of Reserve Board, his duties 95 
 
 Installation, 
 
 of reserve system, date for 101 
 
 Investment Securities, 
 
 accounting for 110 
 
 Items, 
 
 how cleared 54, 55 
 
 Key Letters, 
 
 how used 122 
 
 Letter of Transmittal 3 
 
 Loans, 
 
 Accounting for 104, 139 
 
 220 
 
Page 
 
 Mail Teller, 
 
 accounting for 130 
 
 Management, 
 
 internal, of reserve banks 26 
 
 Manager, 
 
 of foreign exchange business, functions of 87 
 
 Marwick, Mitchell, Peat & Co., 
 
 relation to accounting work 101 
 
 report of 102ff. 
 
 Maturity, 
 
 of paper 81 
 
 May, Max, 
 
 aids committee 3 
 
 Member Banks, 
 
 examination of 32 
 
 clearing functions 49 
 
 outside city 52 
 
 must endorse paper 80 
 
 Municipal securities, 
 
 discussed 81 
 
 Nominees (Directors), 
 
 lists of 4 
 
 Non-member Banks, 
 
 how related to clearing 64 
 
 prohibition on items of 67 
 
 Note Brokers, 
 
 to endorse paper 78 
 
 Notes, 
 
 rules for issue 5 
 
 form of 5 
 
 application for 31 
 
 identification of 33 
 
 accounting for 146 
 
 Note Teller, 
 
 accounting for 112, 134 
 
 Oath of Office, 
 
 of reserve board 4 
 
 Open Market Operations, 
 
 discussed 8 Iff. 
 
 Organization, 
 
 Certificate 4 
 
 chief features of 20 
 
 departments of 21 
 
 of reserve banks 22ff. 
 
 of reserve board 95ff. 
 
 Organization Committee, 
 
 functions of 18 
 
 Paying Teller, 
 
 accounting for Ill, 132 
 
 Protest, 
 
 in relation to clearing 62 
 
 221 
 
Page 
 
 Purchases, 
 
 of paper 5 
 
 Railway Time, 
 
 in relation to districting 7 
 
 Rates of Discount, 
 
 statistics of 179ff. 
 
 Receiving Teller, 
 
 accounting for Ill, 134 
 
 Rediscounts, 
 
 accounting for 105 
 
 Remittance, 
 
 method of 52 
 
 Report, 
 
 Genesis of 3 
 
 Reports, 
 
 annual 4 
 
 by reserve agent 32 
 
 Reserve Act, 
 
 principles of, in relation to districting 12 
 
 on choice of directors 17 
 
 on agents 30 
 
 on clearings 48 
 
 on commercial paper 73 
 
 on open market operations 81 
 
 on foreign exchange 83 
 
 on advisory council 98 
 
 Reserve Agent, 
 
 books for 4 
 
 duties of 24, 30 
 
 records of 31 
 
 plan of work 32 
 
 examinations by 34 
 
 accounts of 126, 167 
 
 Reserve Banks, 
 
 elements of organization 20 
 
 departments of 21 
 
 by-laws of 22 
 
 officers 24 
 
 clearing functions 4Sff. 
 
 relation to member banks 52 
 
 to one another 55 
 
 to federal clearing house 57 
 
 relation to banks in other districts 65 
 
 Reserve Board, 
 
 relations with agents 32 
 
 on open market transactions 81 
 
 organization of 95 
 
 by-laws for 95ff. 
 
 meetings 96 
 
 budget of 97 
 
 business 97 
 
 222 
 
Page 
 
 Reserves, 
 
 in relation to districting 14 
 
 Robinson, C. C., 
 
 aids committee 3 
 
 co-operates in accounting system 101 
 
 Seal, 
 
 of reserve board 9G 
 
 Secretary, 
 
 of reserve board, his duties 96 
 
 Secretary of the Treasury, 
 
 accounts of 169 
 
 Secretary-Treasurer, 
 
 of reserve bank, his duties 24 
 
 Securities Department, 
 
 of reserve bank 153 
 
 Shareholders, 
 
 records 4 
 
 Single Name Paper, 
 
 how far used 75 
 
 provided for 76 
 
 restriction of 7 8 
 
 Speculation, 
 
 how viewed by reserve act 7 4 
 
 Statistical Bureau, 
 
 use of 39 
 
 plan for 170ff. 
 
 Stock, 
 
 transfer 4 
 
 subscription ledger 19 
 
 Subscriptions, 
 
 rules for 4 
 
 Tellers’ Departments, 
 
 accounting for llOff., 132ff. 
 
 Time Schedules, 
 
 use in clearing 68 
 
 Transfer, 
 
 of funds 5 
 
 of stock in reserve banks 26 
 
 agent for 28 
 
 accounting for 113 
 
 Transfer Agent, 
 
 work of 2 8 
 
 Transfer of Stock, see Stock. 
 
 Transit, 
 
 accounting for 135 
 
 Transit Expert, 
 
 views of, on clearing problem 68 
 
 Transit Problem, 
 
 difficulty of 64 
 
 Two Name Paper, 
 
 how used 75 
 
 preferred 77 
 
 223 
 
Page 
 
 Unpaid Items, 
 
 accounting for 113 
 
 Vault, 
 
 management 27 
 
 Vice-Governor, 
 
 of reserve board, his duties 96 
 
 Vice-President, 
 
 of reserve bank, duties 25 
 
 Ward, Harry E., 
 
 aids committee 3 
 
 co-operates in accounting system 101 
 
 Williams, Hon. John Skelton, 
 
 instructions of 3 
 
 Wolfe, O. H., 
 
 member of sub-Committee on Accounting 101 
 
 signs report 101 
 
 Willis, H. P„ 
 
 member sub-Committee on Accounting 101 
 
 signs report 101 
 
 Van Vechten, Ralph, 
 
 aids committee 3 
 
 224 
 
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