INVESTIGATION OF THE CIRCUMSTANCES SUR- COMMITTEE ON BANKING AND CURRENCY HOUSE OF REPRESENTATIVES EIGHTY-EIGHTH CONGRESS FIRST SESSION HELD AT SAN FRANCISCO, CALIF. APRIL 22, 1963 Printed for the use of the Committee on Banking and Currency CONTENTS Barbonchielli, J. L., Vice President, Federal Reserve Bank, San Statement of— Bertram, Clarence, custodian, Federal Reserve Bank, San Francisco, Hanson, Thomas, special agent, U.S. Secret Service--- Montgomery, Edward, reporter, San Francisco Examiner. Page 86 19 68 47 117 116 Swan, Eliot J., President, Federal Reserve Bank, San Francisco, 3,86 Exhibits: A-Statement of Eliot J. Swan___ C-Board of Governors of the Federal Reserve System, letter with report of Wm. McChesney Martin, Jr., Washington, dated April 1, 1963_. 48 D-Federal Reserve Bank of San Francisco, notice to the staff_ 9 14 F-Document dated June 11, 1963. G-Document dated August 1, 1962. H-File to a member bank (2 illustrations). 48-49 I-Minutes of the Audit Review Committee, dated August 16, 1962_ J-Building department procedure-paper sorting and storage, dated September 6, 1962_. L-"S.F. Bank Missing Millions,' (exclusive) article from San K-Manual of miscellaneous instructions, dated May 21, 1956.. M-"Stolen or Destroyed?", article from Washington Evening Star, N-Procedure for handling safekeeping and collateral securities - P-Manual of miscellaneous instructions, custody of cash and securi- Facsimile of envelope with entries__. 84 88-106 141 138 44 55 63 67 INVESTIGATION OF THE CIRCUMSTANCES SURROUNDING THE DISAPPEARANCE OF $7.5 MILLION OF U.S. GOVERNMENT SECURITIES FROM THE VAULT OF THE FEDERAL RESERVE BANK AT SAN FRANCISCO, CALIF. MONDAY, APRIL 22, 1963 HOUSE OF REPRESENTATIVES, San Francisco, Calif. The subcommittee met, pursuant to call, at 10 a.m., in the assembly room, Federal Reserve Bank, San Francisco, Calif., Hon. Henry Reuss (chairman of the subcommittee) presiding. Present: Hon. Henry S. Reuss (presiding); Hon. Charles A. Vanik and Hon. Burt L. Talcott, subcommittee members. Also present: J. R. Stark, counsel to the subcommittee, Leo Schimel, and Kenneth Hunter, General Accounting Office. Mr. REUSS. The hearing of the special subcommittee of the House Committee on Banking and Currency is now in session. Let the record show that this special subcommittee has been appointed by the chairman of the Committee on Banking and Currency of the House of Representatives for the purpose of investigating the circumstances of the disappearance of $7.5 million in U.S. Government securities from the vault of the Federal Reserve Bank in San Francisco; that this hearing is being conducted in the assembly room of the Federal Reserve Bank in San Francisco, commencing at 10 o'clock in the morning, and that the members in attendance include myself, Henry S. Reuss, of Wisconsin, chairman of the subcommittee; Representative Burt L. Talcott, of California, on my right; and Representative Charles A. Vanik, of Ohio, on my left. Our concern in this investigation is with such questions as the adequacy of the safeguards against loss maintained by the Federal Reserve bank, and other affected Government agencies; the nature and thoroughness of the investigation made after the loss was discovered; and the question of whether or not sufficient consideration was given to protecting the public against financial loss. There is also a collateral issue concerning the details of how the news of the loss came to appear in the public press at a time when this committee, the banking community, and the public were unaware of the details. In my State of Wisconsin some years ago, there was a rather tragic accident in one of the freight switching yards, and one of the railroad employees who had been a witness to the accident was asked to describe |