Federal Reserve Bulletin July 1917
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FEDERAL RESERVE BULLETIN ISSUED BY THE FEDERAL RESERVE BOARD AT WASHINGTON JULY, IS17 WASHINGTON GOVERNMENT PRINTING OFFICE 1917 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis FEDERAL RESERVE BOARD. EX OPFICIO MEMBEES. W. P. G. HARDING. Governor, PAUL M. WARBURG, Vice Governor. WILLIAM G. MCADOO, Secretary of the Treasury, FREDERIC A. DELANO. Ohairman. ADOLPH C. MILLER. CHARLES S. HAMLIN. JOHN SKELTON WILLIAMS, Comptroller of the Currency. H. PARKER WILLIS, Secretary. SHERMAN ALLBN, Assistant Secretary and Fiscal Agent. M. 0. ELLIOTT, Counsel. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis SUBSCRIPTION PRICE OF BULLETIN. The Federal Reserve Bulletin is distributed without charge to member banks of the system and to the officers and directors of Federal Reserve Banks. In sending the Bulletin to others the Board feels that a subscription should be required. It has accordingly fixed a subscription price of $2 per annum. Single copies wiil be sold at 20 cents. Foreign postage should be added when it will be required. Remittances should be made to the Federal Reserve Board. Member banks desiring to have the Bulletin supplied to their officers and directors may have it sent to not less than 10 names at a subscription price of $1 per annum. No complete sets of the Bulletin for 1915 are available. Bound copies of the Bulletin for 1916 may be had at $5 per copy. in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis TABLE OF CONTENTS. Page, Review of the month .. 497 Subscriptions to the Liberty Loan 505 New form of Federal Reserve Bank statement .. 506 State banks admitted to system 507 Dividends declared by Federal Reserve Banks 507 Reserve requirements under the new amendments 508 Rediscounting by nonmember banks 509 Amendments to the Federal Reserve Act as approved 509 "Our financial duty" (from the London Economist) 518 Charters issued to national banks 520 Commercial failures reported ,. 520 Gold settlement fund 521 Operation of the Federal Reserve clearing system 524 Assessment for expenses of Federal Reserve Board 525 Informal ruling of the Federal Reserve Board 527 Law department 528 Supreme Court decision in case brought to test constitutionality of section 11 (k) of Act 534 Reissue of regulations of the Board 539 , Business conditions throughout the Federal Reserve districts 551 Money in circulation, 1914-1917... 562 Chart showing 562 Discount operations of the Federal Reserve Banks 563 Acceptances 565 Resources and liabilities of the Federal Reserve Banks 570 Federal Reserve note accounts of Federal Reserve Banks and agents 572 Earnings on investments of Federal Reserve Banks 574 Discount rates in effect 575 Gold imports and exports 575 Foreign exchange rates 576 IV Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis FEDERAL RESERVE BULLETIN VOL. 8 JULY 1, 1917. No. 7 REVIEW OF THE MONTH. in which the latter are engaged in liquidating their installment pledges. While the opera- The month of June has been, perhaps, more tion is in progress, the relation of the banks important than any other similar period in the to the loan as supporters and carriers of the histor}^ of the Federal Reserve System. Three bonds will naturally be continued. Thus far epochal events have given it this unusual the efforts of the banks have manifestly been in position—the consummation of the Liberty direct line with the recommendation, placed Loan (with the added functions assigned to the before them by the Board in statements both Federal Reserve Banks as fiscal agents of the before and after the beginning of the war with Government of the United States); the adoption Germany, that they should act as distributors? of the amendments to the Federal Reserve Act and only to a moderate extent as actual inves- which became law on June 21; and the favorable tors in the new securities. The country is to be decision of the Supreme Court in Bank v. congratulated upon the smooth and efficient Fellows, the so-called trustee powers case. working of the plan for the distribution of the Completion of subscriptions to the Liberty new bonds, and so far as now can be foreseen, Loan was announced by the Sec- upon the readiness and success with which the retM7 of the TteBswi on June public has arranged to absorb them. 16 in a statement making It is worth while, by way of review, to known that the offering had been heavily over- enumerate the various steps subscribed. Subsequent figures show that the takan by the Federal Reserve aggregate subscriptions received amounted to Board in its effort to facilitate $3,035,226,850, and came from more than the distribution of the loan through the assist- 4,000,000 individual subscribers. The large ance of the banks. These various steps have percentage of subscriptions received in sums been as follows: of less than $10,000, estimated as it is at 99 per 1. Establishment of a rate of 3 per cent per cent, shows to how great a degree the small annum for the discount at Federal Reserve subscriber has actually taken up the bonds. Banks of the direct 15-day obligations of mem- It can not as yet be stated how far subscrip- ber banks, secured by Treasury certificates of tions to the bonds have been paid for outright indebtedness. These certificates were issued either by checks upon accumulated funds in I at 3 and 3| per cent per annum. banks, or by transfer of cash, and in what j 2. The establishment of a rate of discount measure the subscribers have taken advantage at Federal Reserve Banks of 3J per cent per of the various plans for liquidation by install- annum for customers7 90-day notes redis- ments which have been offered to them by the counted with the indorsement of member banks various banks and trust companies of the when such notes had been originally given for country. In so far as subscriptions have been the purpose of securing funds for the purchase made on a partial payment basis, however, of bonds. they will imply the necessity of continuous 3. The general grant of permission to member saving by all such subscribers during the period banks to act as agents of nonmember banks 497 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis 498 FEDERAL RESERVE BULLETIN. JULY 1, 1917, in rediscounting until further notice the notes i Federal Reserve Banks to the banking com- of the latter at Federal Reserve Banks in ; munity in the flotation of the Liberty Loan. order to obtain funds to facilitate the opera- ! This aid was given by discounting, at the rates tions of such non-member banks in Government | of 3 and 3i per cent already described, member bonds. | banks' notes secured by commercial paper or 4. The establishment of a "one-day rate" ; United States certificates of indebtedness and of from 2 to 4 per cent for use in financial ; interim, receipts of subscriptions to the Liberty centers, chiefly New York, for the purpose I Loan. Between May 18 and June 22 the of restoring to the market funds temporarily I amounts of these notes held by the Federal withdrawn through Government loan opera- i Reserve Banks increased from $14,883,000 to tions. I $169,789,000. In the meantime the Federal 5. Provision that nonmember bank notes I Reserve Banks increased their holdings of ac- might be discounted at Federal Reserve Banks | ceptances purchased in the open market from with the indorsement of a member bank on j 1100,177,000 to $194,303,000, the increase for the same basis as customers' notes (that is; I the last two weeks only, being about $60,- running up to 90 days' maturity) on condition ! 000,000. It is likely that by far the larger that such notes should be rediscounted only ! portion of American bank acceptances " afloat" up to July 15, provided that the notes were are, at present in the portfolios of the Federal •accompanied by an affidavit that the proceeds \ Reserve Banks. The Federal Reserve Bank thereof had been used for the purchase or j of New York was especially active during the carrying of bonds. ! past month, increasing its holdings of discounted 6. General assurances to savings banks and \ and purchased paper by about 121.2 millions trust companies that the Board desired in ! and 67.9 millions, respectively. every way to cooperate with them in avoiding | Practically no change is shown in the total shock or disturbance to existing conditions; j of United States securities held, but there and that the system stood ready further to I was a large reduction in the amount of munici- extend through member banks reasonable ac- i pal warrants carried by the Federal Reserve commodation at Federal Reserve Banks for ; Banks. the purpose of protecting the interests of such I In the following table are shown the changes savings banks and trust companies in the event I between the two dates in the amounts of bills of necessity resulting from withdrawals made | held by each bank, as well as the aggregate by depositors in order to purchase or invest in | investments held by all the banks: Government bonds. I Lin thousancjfafis of dollars.] It will be observed that the action taken by the Board has been limited to specified periods Federal Reserve Bank. I May 18. June 22. Net Net increase. decrease. of time and specified maturities in the belief that as early as possible the member banks Boston 15,734 41,795 26,061 New York 30,968 220,032 189,064 ought to endeavor to close their operations by Philadelphia..