Counties in Wisconsin now in District No. 7. Adams. Jefferson. Portage. Brown. Juneau. Racine. Calumet. Kenosha. Richland. Clark. Kewaunee. Rock. Columbia. Lafayette. Sauk. Crawford. Langlade. Dane. Manitowoc. Shawano. Wood. Election of Class A and B Directors. The following memorandum was prepared by the Federal Reserve Board relative to the election of Federal Reserve Bank directors and issued to the several chairmen on October 13: In reference to the questions which have been raised at various times relating to the election of Federal Reserve Bank directors, it is the opinion of the Board (1) That though each member bank is obliged under the terms of section 4 to elect a district reserve elector, nevertheless, when such elector has once been elected he may con Transfers of member banks resulting from tinue to serve as such until the member bank Section 19 of the Federal Reserve Act requires each member bank not in a reserve or central reserve city to keep "in the Federal Reserve Bank of its district for a period of twelve months after said date two-twelfths, and for each succeeding six months an additional one-twelfth," of 12 per cent of the aggregate amount of its demand deposits, and of 5 per cent of its time deposits. Similar language is used with reference to the banks in reserve cities. The "said date" referred to is the date officially announced by the Secretary of the Treasury for the establishment of a Federal Reserve Bank in any district. That date was November 16, 1914. It therefore follows that on November 16, 1916, country banks and banks in reserve cities will be required to pay their Federal Reserve Bank an additional installment of reserves. The amount thus to be paid by them will be for country banks one-twelfth of 12 per cent of their demand deposits, as held on and after November 16, plus one-twelfth of 5 per cent of their time deposits; and for banks in reserve cities one-fifteenth of 15 per cent of their demand deposits, plus one-fifteenth of 5 per cent of their time deposits. It may also be desirable to call attention to the fact that under the amendment to section 11 of the Federal Reserve Act, approved September 7, 1916, the Federal Reserve Board is authorized to permit member banks to carry in the Federal Reserve Banks of their respective districts any portion of their reserves now required by section 19 to be held in their own vaults. The Board, under authority of this amendment, has already issued a ruling to the effect that such member banks may carry all or any part of such reserves in their respective Federal Reserve Banks. Operation of the Clearing Plan. The following table shows briefly the clearing operations of the Federal Reserve system for the monthly period ending October 15, 1916, with comparative figures for each of the two preceding months: Operations of the Federal Reserve interdistrict clearing system, Bank. New York. Boston. Cleveland. Atlanta (including New Aug. 16 to Sept. 15. 7,618 7,449 133, 113 59,301,695.94 St. Louis. Kansas City. Dallas.... 1 All State banks in district. It is suggested that each Federal Reserve Bank call the attention of each member bank to the date upon which the transfer of reserves above referred to is due, and that it arrange such additional details with member banks as may seem desirable. The Board recommends that the member banks be called upon to pay their own express charges, unless there is some Total, Sept. 16 to Oct. 15.. good reason why the Federal Reserve Bank of the district thinks it best to bear these express charges itself. The form in which payment is to be made may be suggested by the Federal Reserve Bank in such circular or notice as it may send out, and it will be well to make some reference to the provision of the Act that any Federal Reserve Bank may receive from its member banks as reserves not exceeding onehalf of each installment eligible paper as described in section 13, properly indorsed and acceptable to the said Federal Reserve Bank. 2 Does not include Government checks averaging 3,166. The Federal Reserve Bank of Richmond on October 11 issued a letter to its member banks as to clearing operations, the substance of which is reproduced, as follows: To members of the Federal Reserve Bank of Richmond: For the information of member banks we are sending a statement of operations of our collection department from the inauguration of the new collecting and clearing system on tance will become available, should enable July 15 up to September 30, a period of 66 members to determine the standing of their working days. During that period this bank handled 776,254 checks, amounting to $305,157,900. The cost per $1,000 in handling this business was 3.18 cents, which is astonishingly low. The service charge to members based upon actual cost of handling was 14 cents per item up to August 31. For the month of September the service charge was 1 cents per item, the reduction in cost being due to the larger number of checks handled without increase in force. The daily average number of items handled in September was 13,823, as against an average of 10,502 for the period up to August 31. The total cost of handling during September amounted to $4,112.88. The service charge at 1 cents amounted to $4,031.30. Our collection department is now well organized, and is capable of handling an increase of 50 per cent in number of items without additions to the force. If member banks will be good enough to follow the suggestions and directions which we send out from time to time in order to facilitate the working of the system, they will aid us greatly in rendering satisfactory service. Collections can now be made on more than 15,000 banks without an exchange charge. accounts on our books at any time, but to further aid members in testing their reserve balances by our books we shall begin in the near future to send weekly statements of accounts. If all members would keep "transit accounts," as suggested in our circular on that subject, then their entries and ours would be coincident, and their balances would agree with our books at all times. Of course, delays in the mails, either way, would create exceptions; but if members will adopt the practice of advising us when our remittances reach them too late to be handled according to the schedule time, we will make the date of our entries correspond, and thus avoid the impairment of reserve which such delay might otherwise cause. We think it fair to all concerned, and as equitable to one bank as another, and very greatly to the interest of the whole collection system, that remittances from us, containing only checks upon the bank to which they are sent, should when received before the close of banking hours be treated just as a deposit would be treated when made within the time specified. The utmost promptness possible is in the interest of all. The following letter relating to the present collection system has been received by a Federal Reserve Bank from one of the country banks in its district: There is another clearing function being performed by the Federal Reserve system, and that so quietly and easily that it escapes the attention which it deserves. In the operation of the collection system and in other transactions between the Federal Reserve Banks of the several districts balances naturally are created for settlement. These settlements are now being made once a week and are effected As the Federal Reserve system receives through the medium of a gold settlement fund many hard blows from various sources, and in the custody of the Federal Reserve Board particularly the par system of check collecand stored in the vaults of the Treasury Depart-tions comes in for considerable criticism from ment. This fund, deposited by the Federal many bankers, it occurred to me that possibly Reserve Banks, and a part of their reserve, you might appreciate a word of commendation was on September 21, $121,230,000. The from a small country bank in your district. clearing between the Federal Reserve Banks Before the Clearing House opened on that day amounted to $158,558,000, and the collection department for country check was settled by the transfer of ownership of only collections, and you put into execution your $9,539,000 in gold, and this transfer was plan of par check collections, we had a numeffected by bookkeeping entries. ber of reciprocal collection accounts with our neighbors and with banks in the larger and important banking cities in our State. All these accounts caused extra work, stationery and postage, besides tying up items from three days to a week. Now, we have discontinued these accounts, and do all our check The economical working of this system is apparent, and its potential usefulness to the country is manifest. Our daily advices of remittances received, showing what part is placed to credit and the exact dates on which the balance of any remit 66559°-163 collecting through your bank and our correspondents in New York and Philadelphia. We find it saves money, labor, and time, and expect to use your system more and more as time goes on. It seems the correct and scientific method to pay our own checks by sending you checks on other banks which we receive from our customers for deposit. It is only fair to say we never made any great sum of money annually from the item of exchange. Our idea was, and is, to make this an easy point to collect, rather than the reverse. The writer could never understand the reason for excessive rate of exchange on checks. A bank is not doing a favor to the holder or payee when it pays its own check; rather is the favor done to the maker of the check, and he, if anyone, should pay the charge. Your idea of a service charge is an eminently proper one, in my opinion. I trust you may soon have the collection system completed by arranging for notes, drafts, and coupons. When this is accomplished it should be a great success. The National Association of Credit Men, in a letter to members, has the following review and summary of the check collection system: The recent regulation of the Federal Reserve Board providing for a check clearance system at exact cost (not a free system, as many seem to think) is one of the most interesting subjects to-day in business finance. It is not possible to introduce great changes or to unseat established customs without some wrenching and rasping, and the bringing into play of a change so far-reaching as that provided for by the check clearing regulations of the Federal Reserve Board must of necessity arouse some antagonism. It has been customary for many banks to charge exchange that produces a good income, even though the charges might be imposed upon the payment of the checks of the bank's customers. That this income is to be affected has occasioned some alarm. The bigness of the question suggests careful consideration, and we venture to lay before our members the following advantages and disadvantages of the system as they have been summarized by a close student and experienced practitioner in banking matters. The advantages, as summarized, are: 1. Direct and prompt presentation of checks. 2. The elimination of exchange charges, which in some cases have not been equitable, in other cases quite excessive. 3. Reduction of the expense of collection to as near absolute cost as possible. 4. The release and more equitable distribution of the large balances at present maintained by the smaller banks in the banks in larger centers for the purpose of receiving par collection of out-of-town miscellaneous items. The disadvantages, as summarized, are: 1. The loss of exchange on the part of the smaller banks, which exchange they have deducted in remitting checks on themselves. 2. The revision and, in many cases, termination of the reciprocal relations which have under the old system been maintained for many years between the smaller banks and their correspondents in larger cities, as the Federal Reserve Banks will to a great extent render the same service. Balancing advantages against disadvantages, the unprejudiced must recognize what is to be gained under the system as of greater value to business than what would be lost to the banks. It is to be hoped that this important matter is to be fairly treated by all interested and that there will prevail a unanimity of sentiment in favor of a system that will remove from the channels of business another burden and tax on country-wide distribution. Commercial Failures in September. Commercial suspensions in September show improvement not only as compared with the same months for several preceding years, but as contrasted with every previous month this year. The total number, as reported by R. G. Dun & Co., is 1,154, with liabilities of $11,569,078, as against 1,414, for $16,208,070, in September last year, 1,615 two years ago for $23,018,027, and 1,235 with indebtedness of $22,662,694 in 1913. The comparisons with earlier months show contraction from the August returns, when defaults numbered 1,207 and the amount involved was $20,128,709, while as compared with the 1,207 suspensions for $11,647,499 in July, which was the most favorable month up to September, the showing is even more favorable. Suspensions in January were 2,009 in number and $25,863,286 in amount. DISTRICT No. 1. Trustee, executor, administrator, and registrar of stocks and bonds: First National Bank, Gardner, Mass. DISTRICT No. 2. First National Bank, Batesville, Ind. Detailed figures by Federal Reserve districts Trustee, executor, and administrator: follow: First National Bank, Greencastle, Ind. |