frsbog_mim_v28_0425.pdf

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ADDRESS OFFICIAL CORRESPONDENCE T O

T H E

FEDERAL RESERVE BOARD

X-6031

FEDER L RESERVE BO RD

W SHINGTON

May 4 , 192 8.

T ' P -

'-£<04,

SUBJECT: Revision o f Member Bank Reserve Requirements.

Dear

S i r :

Under date

o f

Apr i l

1 2 , 1 9 2 8 , t h e

Board addressed

a

l e t t e r

t o a l l

Governors

o f

Federal reserve banks ,

a

copy

o f

which w as sent to each Agent, su bmi tt in g t h e fo l lowing topic

t o be

p l a c e d

o n t h e

program

f o r t h e

Governors' Conference.

D e s i r a b i l i t y

o f

recommending legislation amending

Sect ion

19 of

Federal Reserve

A c t

r e l a t i n g

t o r e -

qui red reserves

o f

member banks

a n d o f

wr i t ing in to

law a

comple te def in i t ion (a long l ines

o f t h e

Board 's

Regula t ion D) of what cons t i tu tes savings a n d other

t ime depos i t s .

This quest ion

w as

di scussed

a t t h e

Governors ' Confer-

ence a n d t h e Governor o f your bank w il l acq uain t y o u wi th t h e

act ion taken.

T he

Board would like

to

have

a t

your early convenience

your views with reference t o t h e p r opos a l s ou t l i ned i n t h e memo-

randum prepared

b y t h e

Chief

o f t h e

Board ' s Divi s ion

o f

Bank

Operat ions (St .5420)

a n d t h e

suggested b i l l prepared

b y t h e

Board's Counsel which would write into l a w t h e changes suggested

i n t h e memorandum.

The

proposed b i l l t hrough inadver tence f a i l e d

t o i n -

clude

t h e

provi s ion conta ined

i n

paragraph

one on

page thr ee

o f

t h e memorandum t o t h e e f f e c t t h a t ,

" ( d ) n o withdrawal i n excess o f $500 on any one day

s h a l l

b e

made unless

t h e

depos i t o r

h a s

given not ice

o f

such int en ded withd rawa l

n o t

less than

30

days

be f o r e t h e withdrawal i s made.

I t

w i l l

b e

appr ec i a t ed

i f y o u

w il l change

t h e

words

"m ay a t i t s

opt ion appear ing

in

sub-paragraph three

on

page

two o f th e

b i l l

t o

must ,

so

t h a t

t h e

sub-paragraph wi l l read

Af ter wr i t t en not i ce which t h e bank must require t o b e given—

11

.

F o r your information w e a r e enclos ing an a d d i t i o n a l

copy

o f t h e

memorandum

a n d t h e

p r opos ed b i l l .

Very truly yours,

1 0 A I L

M . A G M T S . A S A T L L E ^ T A R Y .

Enclosures :

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X-5090-c

•

A

BILL

To

amend Section

19 of the

Federal Reserve

A c t .

BE' IT

ENACTED

BY THE

SENATE

AND

HOUSE

OF

REPRESENTATIVES

OF THE

UNITED STATES

OF

AMERICA

IN

CONGRESS ASSEMBLED, That

t h e

f i r s t p a r a g r a p h o f Sect ion 19 of the Federal Reserve A c t , a s

amended, "be further amended a n d re -enac ted t o read a s fo l lows:

Bank Reserves.

"S e c . 1 9 . T h e

term

1

demand d e po s it s

1

wi th in

t h e

mean-

i n g o f t h i s a c t sha l l inc lude a l l depos i t s of publ ic

moneys o f t h e Uni ted S ta tes , a l l cer t i f i ed checks , cash-

i e r

1

s

checks , t reasure r

1

s checks, demand l e t t e r s

of

c r e d i t ,

a.nd

t r av e l le r s ' checks ou ts ta nding ,

a n d a l l

other deposits except

'

time d epo sit s

1

and

'' bank d e p o s i t s '

a s he re ina f t e r de f ined .

"The

term

t ime deposi ts ' wi thin

t h e

meaning

o f

this

a c t

sha l l inc lude

a l l

' s av ings acco un t s ' ,

1

time c e r t i f i -

ca tes

o f

d e p o s i t

1

, *posta l savings de po si ts '

a n d

'open

account t ime deposits ' a s hereinafter defined, exce-p.t

that whenever, Toy t h e l apse o f time o r t h e ^giving of

n o t i c e

of an

intended withdraw al, sa vings accoun ts, t ime

c e r t i f i c a t e s

o f

d e p o s i t ,

a n d

open account time deposits

become payable

i n

less than

30

days, such de po si ts sh al l

b e

considered demand deposits.

"The

term

'

savings. accounts s ha l l mean dep osi ts

o f

i n d i v i d u a l s

a n d

r e l i g i o u s , c h a r i t a b l e

o r

similar corpora-

t i o n s , i n r e spec t t o wi ich-

> , '

1

'' ' •

(1 ) A

pas s book, c e r t i f i c a t e

o r

other similar form

o f

r e c e i p t , d e l i v e r e d

to and

r e t a i n e d

by the

depos i to r

o r h i s

ass ignee , mas t ac tua l ly

be

p re sen t ed

to the

bank whenever a withdrawal i s made;

(2) The

depos i to r

o r h i s

ass ignee

may a t a ny

time

b e

r equ i r ed

by the

bank

to

give not ice

of an

i n t e n d -

ed

withdrawal

n o t

les s tnan t h i r t y days be fo re

a

withdrawal

i s

made;

and

(3 ) The bank ' s p r in t ed reg ula t io ns , accep ted by the

depos i to r inc lude

t h e

above requirements.

Deposits which

a r e

permi t ted

t o b e

withdrawn

b y

check

o r otherwise , wi thout t h e ac tua l p r e sen t a t i on o f t h e pass

b o o k , c e r t i f i c a t e , o r other similar form o f receipt whenever

a

withdrawal

i s

made, shall

n o t b e

considered ' s avings

a c -

counts ' wi th in

t h e

meaning

o f

t h i s

a c t . The

r e t e n t i o n

o f

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$

X-5090c .

-UBRW

(§ .

t h e pas s book, ce r t i f i c a t e o r oth er i /a i la r form o f

r e c e i p t

o r a

dup l i ca t e

of

same,

by the

bank

or by an

o f f i c e r , a g e n t

o r

employee thereof,

a n d t h e

p r es en-

t a t i o n o f same b y t h e bank, or by an o f f i ce r , agen t

o r

employee thereof, shall

n o t b e

cons idered

an

ac t ua l

p r es en t a t i on wi t h i n

t h e

meaning

of

t h i s

a c t . A d e -

posit made

by one

bank

i n

another

o r a

depos i t

of a

e

bus iness corpora t ion or f i rm sh al l no t in any case b e

cons idered a

1

savings accoun t

1

wi th in t h e meaning of

t h i s

a c t .

11

The term

1

time c e r t i f i c a t e of depos i t ' s ha l l

mean a deposi t evidenced b y wr i t t en ins t rument de l i ve r -

ed to and r e t a i n e d by the deposi tor evidencing t h e d e -

pos i t w i t h

a

bank, ei th er wi th

or

w i t h o u t i n t e r e s t ,

of

a

c e r t a i n

sum

s p e c i f i e d

on the

face

o f the

c e r t i f i c a t e ,

payable i n whole o r in p a r t t o t h e depos i t o r or on h i s

or de r -

(1 ) On a ce r t a i n da t e , s pec i f i ed on the c e r t i f i c a t e ,

more than thir ty days after

t h e

date

o f t h e d e -

p o s i t ; o r

( 2 ) A f t e r th e lapse o f a certain t ime subsequent t o

t h e

date

o f the

c e r t i f i c a t e ,

in no

case less

than thi r ty days ;

o r

( 3 )

After wr i t ten not ice which

t h e

bank

may a t i t s

op t i on r equ i r e to be given a c e r t a i n s p e c i f i e d

number of days , n o t l es s than th i r t y days be io re

the

date

of

repayment;

and

( 4 ) In a l l cas es onl y upon t h e ac t ua l p r e s en t a t i on

of the c e r t i f i c a t e a t each withdrawal f o r proper

endorsement

o r

sur render .

"The r e t e n t i o n of the c e r t i f i c a t e , o r a d u p l i c a t e of same,

b y t h e bank or by an o f f i c e r , a g e n t o r employee thereof, and

th e p r e s e n t a t i o n of same b y t h e bank or by an o f f i ce r , agen t

o r

employee thereof shall

n o t b e

considered

a n

a c t u a l p r e s e n t a -

t ion wi th in

t h e

meaning

o f

t h i s

a c t . A

de po si t made

by one

bank

i n another sha l l n o t i n a n y case be cons idered a

1

time c e r t i f i c a t e

of depos i t

1

wi t h i n t h e meaning of t h i s a c t .

"The

term

1

po s t a l s avings dep os i t s

1 a s

^~iv. a c t

shal l mean deposi ts of po s t al savings funds i n banks under the

terms o f the pos tal savings act ,approved June 2 5 , 1 9 1 9 , a s amended.

^ *

"The

term

1

open account t ime d ep os it s '

a s

used

i n

t h i s

a c t

shal l mean deposi ts

n o t

evidenced

by

c e r t i f i c a t e s

of

depos i t s

o r

savings pass books,

i n

r e s p e c t

t o

r h i ch

a

wr i t t en con t r ac t

i s e n -

t e red in to wi th t h e depos i t o r a t the time t h e depos i t i s made p r o -

viding tha t ne i ther t h e whole o r any p a r t o f such deposi t may be

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I /

•3 -

X-5090-c

withdrawn, by check o r otherwise, except on a given date, more than

t h i r t y days a f t e r t h e date o f th e de^o i t , o r on wr i t t e n not i ce

which mast "be given b y t h e depos i tor a ce r t ai n spe ci f i ed number of

days

i n

advance,

in no

case le ss than t h i r ty days .

I n

order

f o r

depos i t s to be c l a s s i f i e d a s *ope;i account t in e de co sit s* t h e bank

i n which such deposits a r e made mast a ct ua ll y req ui re such wr it te n

not ice before permit t ing wi thdrawals to be made.

" T h e term

1

bank deposits

1

shal l include a l l deposit balances

due to other banks, bankers, a n d trust companies i n t h e United

S t a t e s

a n d

f o r e i gn coun t r i e s .

Every bank, banking associat ion, a n d t r u s t company which i s

o r which becomes a member o f any Federal reserve bank shall

e s t a b l i s h

a n d

mainta in

a

reserve cons i s t ing

of an

a c t u a l

n e t

balance wi th t h e Federal reserve bank of i t s d i s t r i c t equa l

t o n o t l e s s t han t h i r t ee n p e r centum o f t he aggregate amount

o f i t s bank dep osi ts , three p e r centum of th e aggregate amount

o f i t s t ime deposi ts , a n d t h e fo l lowing p e r centum o f t h e a g -

gregate amount of i t s n e t demand de p o si t s:

Banks i n cen t r a l r e s e r ve c i t i e s , 1 3 p e r centum;

Banks i n r e s e r v e c i t i e s , S p e r centum; a n d

Other banks,

7 p e r

centum;

PROVIDED, HOWEVER, That, upon

t h e

a f f i r ma t i ve vo t e

o f

f ive

members

o f t h e

Federal Reserve Board,

a n y

bank located

i n a n o u t -

l y i n g d i s t r i c t

o f a

cent ra l r eserve c i ty

may be

pe r mi t t ed

t o

main-

t a i n

a

reserve balance equal

t o n o t

less than seven

o r

nine

p e r •

centum

o f i t s n e t

demand deposits,

and any

bank located

i n a n o u t -

l y i n g d i s t r i c t

o f a

reserve c i ty

may be

pe r mi t t ed

t o

mainta in

a

reserve balance equal

t o n o t

less than seven

p e r

centum

o f i t s

n e t

demand deposits;

AHD

PROVIDED FURTHER, That,

i n

computing

t h e

amounts

o f n e t

demand deposits against which reserves must

b e

maintained,

a l l

member banks

may

deduct from

t h e

amount

of

t he i r

gross demand deposits,

a l l

balances

due to

thorn from other banks

(except Federal reserve banks

a n d

foreign banks) ,

a l l

cash items

depos i t ed

by

them wit h Fed era l re se rv e banks

a n d

other banks

i n

pr oces s

o f

c o l l e c t i o n ,

a l l

exchanges

f o r t h e

clear ing house,

a n d a l l

checks

i n

other banks

i n t h e

same p l a c e .

"The

Federal Reserve Board shall have authori ty

t o

p r es c r i be

regula t ions governing

t h e

maintenance

o f t h e

reserves r equi red

by

t h i s s ec t i on

a n d

f u r t he r de f i n i ng th u var ious c l as ses

o f d e -

posi ts herein ment ioned.

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L

4 3 < J

"No

member bank shall keep

on

deposit with

an y

State bank

o r

t r u s t company which

i s n o t a

member bank

a sum in

excess

o f

t e n p e r

centum

of i t s own

paid-up cap i ta l

an a

su rp lus .

Ho mem-

b e r

bank shall

a c t a s t h e

medium

o r

agent

o f a

nonmember bank

i n

applying

f o r o r

receiving discounts from

a

Federal reserve

bank under

t h e

provis ions

of

t h i s

A c t ,

except

by

permission

o f t h e

Federal Reserve Board.

"The required balance carr ied by a member bank with a

Federal reserve bank may, under t h e r e g u l a t i o n s and subject

t o such pe na l t i e s as may be p re sc r ibed by the Federal Reserve

Board, b e checked against and wi thdrawn by such member bank

f o r t h e purpose of meeting existing liabilities: PROVIDED*

HOWEVER. That no bank shall a t a n y time make n«w loans o r

s h a l l p a y a n y dividends unless and u n t i l t h e tota l balance

requ i r ed

by law is

fu l l y r e s to r ed .

National b&nks, or banks organised under l oc al la ws,

l oca t ed i n Alaska or in a dependency o r insu la r possess ion

o r a n y p a r t o f t h e United States outside t h e cont inen ta l

United States

may

remain nonmember banks,

a n d

s h a l l

i n

that

event maintain reserves

and

comply with

a l l t h e

conditions

now

provided

by law

regulating them;

or

said banks

may,

-vith

t h e

consent

o f t he

Reserve Board, become member banks

of

any one of the

r e s e r v e d i s t r i c t s ,

and

s h a l l

i n

that event

take s tock, maintain reserves ,

and be

sub j ec t

t o a l l t h e

other p rovis ions

of

t h i s

A c t . "

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frsbog_mim_v28_0425.pdf