Branches and Agencies

[310]The question of branches of federal reserve banks has received careful attention during the past year. There has been intimation from several quarters that the establishment of a branch at a given point would be acceptable to the banks of that place. Only in one instance—that of New Orleans—did the Board receive a definite request from a Federal Reserve Bank to establish a branch. Believing that New Orleans and the adjacent territory could make advantageous use of this additional banking machinery, the Board authorized the establishment of a branch of the Federal Reserve Bank of Atlanta to be located in New Orleans, and this branch was opened for business on September 10. Operations at the New Orleans branch have proceeded satisfactorily, and the institution has been of considerable use to the local banks. The branch is already more than self-supporting.

Investigation and experience have seemed to show that, at least for some years to come, the organization of branches with completely equipped offices, vaults, and the like, and with a full staff of salaried officials, will be too heavy an expense for most of the reserve banks, yet, that valuable service could be performed by local offices of the several banks in not a few places. The Board has, therefore, had under consideration the question whether establishing local agencies might not meet the requirements of the case better than the more fully organized branch office. Competent legal opinion is to the effect that the creation of such local offices is permissible under the terms of the law, and the Board believes that it may prove practicable to meet banking necessities in many sections of the country by this means.

Proposed Amendments to Federal Reserve Act[311]

A year's experience in the operation of the Federal Reserve Act has confirmed the Board in its profound conviction that the act has been one of the most beneficial pieces of legislation ever adopted by Congress. Not only have its fundamental principles been fully vindicated but in most details the working of the measure has been successful. The act, however, is a progressive piece of legislation and creates new conditions as the result of its own operation. Modification in its terms growing in part out of these new conditions will subsequently be required from time to time.

For the present the Board presents the following suggestions for amendments to the act:

(1) In addition to powers now possessed in this connection by Federal Reserve Banks and national banks, the latter should be permitted to subscribe for and hold stock in banks organized for the special purpose of doing a banking business in foreign countries.

(2) With the approval of the Federal Reserve Board the issue of Federal Reserve notes to Federal Reserve Banks should be permitted either against the deposit of an equal amount, face value, of notes, drafts, bills of exchange, and bankers' acceptances acquired by Federal Reserve Banks under sections 13 and 14 of the Act, or of gold, or of both, provided, however, that gold so deposited with a Federal Reserve Agent shall count as part of the reserve required by the Act to be maintained by the bank against such notes outstanding.

(3) The acceptance system, provision for which is made in foreign trade operations by the Federal Reserve Act, should be extended to the domestic trade in so far as relates to documentary acceptances secured by shipping documents or warehouse receipts, covering readily marketable commodities or against the pledge of goods actually sold.

There can be but little question of the safety of such acceptances, and their use will tend to equalize interest rates the country over and help to broaden the discount market.

(4) Permission should be granted to national banks to establish branch offices within the city, or within the county, in which they are located.

(5) In order to enable member banks to obtain prompt and economical accommodations for periods not to exceed fifteen days, the Federal Reserve Banks should be permitted to make advances to member banks against their promissory notes secured by such notes, drafts, bills of exchange, and bankers' acceptances as the law at present permits to be rediscounted or purchased; or against the deposit or pledge of United States Government bonds, the purchase of which is now permitted under the law.

(6) The Board furthermore recommends that the power of national banks to make loans on farm lands as provided in section 24 be extended so as to permit any national bank not situated in a central reserve city to make loans secured by improved and unencumbered farm land situated within its Federal Reserve district, or within a radius of 100 miles from the place in which such bank is located, irrespective of district lines. It also recommends that the powers of national banks be further extended to permit any such bank to make loans on any improved and unencumbered real estate located within 100 miles of the place in which such bank is located, irrespective of district lines; provided, however, that the aggregate of farm land loans and other real estate loans made by any national bank shall not exceed 25 per centum of its capital and surplus or one-third of its time deposits; and provided further, that no such real estate loan, as distinguished from a farm land loan, shall exceed a period of one year nor exceed 50 per centum of the actual value of the property offered as security.

It is believed that the enactment of these amendments will, besides enlarging the usefulness of the national banks, result in greatly strengthening the operation of the Federal Reserve Act, and more completely realize the purposes of its framers. The text of the amendments designed to carry out these recommendations will be submitted by the Board at an early date. The Board has under consideration other suggestions for amendments to the Federal Reserve Act concerning which no conclusions have yet been reached, and regarding which the Board will take occasion to submit its views to the Congress at an appropriate time in the future.

STATEMENT OF CONDITION OF FEDERAL RESERVE BANKS.[312]

Combined resources and liabilities of all Federal Reserve Banks as at close of business on the last Friday of each month during 1915.

RESOURCES.
[In thousands of dollars.]
Dec. 31. 1914.Jan. 29.Feb. 26.Mar. 26.Apr. 30.
Gold coins and certificates in vault228,641235,417248,256241,344237,278
Gold settlement fund
Gold redemption fund428488653824950
Total gold reserve229,069235,905248,909242,168238,228
Legal tender notes, silver, etc.26,57820,88229,08523,09826,518
Total reserve255,647256,787277,994265,266264,746
Commercial paper9,90913,95518,57722,00122,774
Bankers' acceptances1,8929,68213,812
United States Bonds2052,0155,4066,6396,813
Municipal warrants73411,16512,01114,94018,656
Federal Reserve notes, net assets5,4183,1793,2156,0916,909
Due from other Federal Reserve Banks, net7,9307,4218,0885,5739,468
All other resources5,9317,7124,5503,0194,425
Total resources285,774302,234331,733333,211347,603
LIABILITIES.
Dec. 31. 1914.Jan. 29.Feb. 26.Mar. 26.Apr. 30.
Capital paid in18,05120,44036,06936,10539,669
Government deposits
Reserve deposits, net263,948279,516290,336288,217294,832
Federal Reserve notes, net liability3,7752,2785,3288,88911,038
All other liabilities2,064
Total liabilities285,774302,234331,733333,211347,603
RESOURCES. (continued)
[In thousands of dollars.]
May 28.June 25.July 30.Aug. 27.Sept. 24.
Gold coins and certificates in vault219,187222,746212,988211,145229,972
Gold settlement fund23,42631,36052,14055,93059,050
Gold redemption fund1,0271,0811,0641,1041,202
Total gold reserve243,640255,187266,192268,179290,224
Legal tender notes, silver, etc.31,98947,84822,09219,87822,920
Total reserve275,629303,035288,284288,057313,144
Commercial paper24,74725,99629,10229,27531,373
Bankers' acceptances9,20410,37911,62513,56413,058
United States Bonds6,9477,6017,9238,8369,328
Municipal warrants23,09411,50916,10725,80824,945
Federal Reserve notes, net assets7,7659,12411,02912,49114,866
Due from other Federal Reserve Banks, net7,4358,3117,0786,9907,409
All other resources5,4265,5015,9044,9623,577
Total resources360,247381,456377,052389,983417,700
LIABILITIES.
May 28.June 25.July 30.Aug. 27.Sept. 24.
Capital paid in54,15854,20054,18154,68954,748
Government deposits15,000
Reserve deposits, net292,050311,349306,183316,989329,941
Federal Reserve notes, net liability10,92112,61714,96516,73815,348
All other liabilities3,1183,2901,7231,5672,663
Total liabilities360,247381,456377,052389,983417,700
RESOURCES. (continued)
[In thousands of dollars.]
Oct. 29.Nov. 26.Dec. 30.
Gold coins and certificates in vault218,224245,986266,546
Gold settlement fund61,96073,83077,293
Gold redemption fund1,2221,2521,124
Total gold reserve281,406321,068344,963
Legal tender notes, silver, etc.37,05837,21213,525
Total reserve318,464358,280358,488
Commercial paper30,44832,79432,368
Bankers' acceptances13,61916,17923,013
United States Bonds10,50512,91915,797
Municipal warrants25,01427,30812,220
Federal Reserve notes, net assets19,72319,17621,910
Due from other Federal Reserve Banks, net8,53314,05320,767
All other resources3,6454,6336,547
Total resources429,951485,342491,110
LIABILITIES.
Oct. 29.Nov. 26.Dec. 30.
Capital paid in54,83854,84654,915
Government deposits15,00015,00015,000
Reserve deposits, net343,554397,952400,012
Federal Reserve notes, net liability13,91813,38513,486
All other liabilities2,6414,1597,697
Total liabilities429,951485,342491,110