FEDERAL RESERVE BOARD 345 WASHINGTON

A D D R E S S OFFICIAL C O R R E S P O N D E N C E T O T H E FEDERAL R E S E R V E B O A R D

X-7635

October 12, 1933.

Dear S i r :

There are inc losed , f o r your in format ion , copies

of the Board 's l e t t e r of June 21 t o t h e Sec re t a ry of t h e

Treasury and of the r e p l y of the A s s i s t a n t Sec re t a ry of

t h e Treasury under date of September 18, wi th regard t o

abras ion on gold coin, the holding of gold coin and gold

c e r t i f i c a t e s i n j o i n t custody f o r the account of the

Treasurer of t h e United S t a t e s , the cance la t ion of and

shipment t o the Treasury of new and f i t gold c e r t i f i c a t e s

i n denominations of $500 or over, and the shipment t o t h e

Treasury of gold coin and standard s i l v e r d o l l a r s .

Very t r u l y yours

Chester Mor r i l l Sec re t a ry .

I r . c losures .

TO GOVERNORS OF ALL FEDERAL RESERVE BANKS. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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TREASURY DEPARTMENT

WASHINGTON

September 18, 1933.

Mr. Chester Morrill , Secretary, The Federal Reserve Board, Washington, D. C.

S i r :

Reference i s made to your l e t t e r of June 21, 1933, advising

that the Federal Reserve Batiks have on hand large amounts of gold

coin and gold c e r t i f i c a t e s . You request to he advised as to

( l ) whether the Treasury w i l l permit the Federal Reserve Banks to ship

United States gold coin to the Treasury or to the mints or assay

o f f i c e s at the Treasury's expense; (2) whether the Treasury w i l l

reimburse the Federal Reserve Banks for abrasion on gold coin deposited

since March 7; (3) whether the Federal Reserve Banks w i l l he required

to determine the amount of such abrasion before shipment to the Treasury

or Treasury o f f i c e s ; (4) whether the Treasury w i l l permit the Federal

Reserve Banks to hold a portion of their gold coin or gold c e r t i f i c a t e s ,

or both, i n jo int custody by the banks and agents for account of the

Treasurer of the United States; (5) whether the Federal Reserve Banks

wi l l be permitted to cancel and ship to the Treasury new and f i t gold

c e r t i f i c a t e s of denominations of $500 and over; and (6) as to what

pol icy the Treasury w i l l fo l low i n connection with the disposal of

standard s i lver dollars held by the Federal Reserve Banks i n excess of

their requirements and whether these dollars may be shipped to Treasury

o f f i c e s at Treasury expense. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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Mr. Chester Morrill - 3

Your questions are answered in the order presented,

(1) The Treasury i s not in a pos i t ion to pay the expenses

of shipping f i t gold coin from the Federal Reserve Banks to the Treasury

the mints, or the assay o f f i c e s . Moreover, Section 16 of the Federal

Reserve Act, as amended, provides that a l l expenses incident to the

handling of deposits of gold coin or of gold c e r t i f i c a t e s for credit

in the Gold Settlement Fund shall he paid "by the Federal Reserve Banks.

(2) The Treasury has authority to assume the abrasion loss

on gold coin only when the weight thereof i s not below the l imit allowed

"by statute , and furthermore, there are no funds avai lable with which

the Treasury can reimburse the Federal Reserve Banks for the abrasion

loss on lightweight gold coin. I t i s my understanding that the Federal

Reserve Board authorized the various Federal Reserve Banks to assume

this l o s s .

(3) I t w i l l be necessary for the Federal Reserve Banks to

c l a s s i f y the gold coin as to current, uncurrent, and l ightweight. In

view of the circumstances, however, and in order to avoid the necess i ty

of determining the lo s s on each piece separately, the banks, upon appli -

cation to the Treasurer of the United States i n the usual manner, w i l l

be permitted in th i s instance to ship the lightweight coin at a bulk-

weight value subject to adjustment to the mint's value when v e r i f i c a t i o n

has been made.

(4) The Treasury w i l l not object to the establishment of

jo int custody accounts for a portion of the stock of gold c e r t i f i c a t e s

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Mr. Chester Morrill - 3

and current gold, coin of these hanks. It should he understood, however,

that i f these jo int custody accounts are established, the expenses

involved in the subsequent shipping of the gold coin to the Treasury

o f f i c e s w i l l be borne by the Federal Reserve Banks.

(5) There has been no permanent pol icy established with

respect to the further paying out of gold c e r t i f i c a t e s . The Treasury,

however, has no objection to the redemption, cancel lat ion and shipment

to the Treasury in the usual manner of the gold c e r t i f i c a t e s i n denomina-

tions of $500 and over.

(6) The Treasury i s not in possession of funds with which to

pay the expenses of shipping standard s i lver dollars to Treasury o f f i c e s ,

and the available storage space at the mints i s exceedingly l imited.

However, the s i tuat ion with respect to the standard s i l v e r dol lars i s

somewhat di f ferent from the accumulation of gold. Several years ago

the Treasury made an attempt to place the s i l ver dollar i n c irculat ion,

and because of th is attempt large accumulation of s i l v e r dol lars in

the various Federal Reserve Banks resul ted . I f e e l , therefore, that in

due course the Treasury should pay the expenses of shipping these s i l ver

dollars to Treasury o f f i c e s . To re l i eve the Federal Reserve Banks of

dead assets in their cash holdings, jo int custody accounts for s i l ver

dol lars were established some time ago, and 13,470,000 s i l ver dollars

axe now held i n jo in t custody accounts at two-thirds of the parent banks.

The to ta l amount held in the cash of a l l Federal Reserve Banks and

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Mr. Chester Morrill - 4

"branches i s l e s s than $5,000,000, and any surplus therein could a l so

"be placed in the jo int custody of the tanks and the agents u n t i l such

time as funds are available to pay the expense of shipping the dol lars

to Treasury o f f i c e s .

Respectfully,

(Signed) Thomas Hewes

Thomas Hewes Assistant Secretary of the Treasury

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C O P Y , X-7635~b

June 21, 1933.

Honorable Wil l iam H» Woo din , S e c r e t a r y of t h e Treasury, Washington, D. C.

Dear S i r :

As a r e s u l t of r ecen t gold movements, a l l of t h e Federa l r e -

serve banks have on hand very l a r g e amounts of gold co in and gold

c e r t i f i c a t e s . At s e v e r a l of the banks, however, t he p r o p o r t i o n of

t o t a l gold hold ings now maintained i n the form of gold s e t t l emen t

fund ba lances i s r e l a t i v e l y low, and t h e y a r e des i rous of i n c r e a s i n g

these ba lances i n order to f a c i l i t a t e payments t o o the r Federa l r e -

serve banks and t r a n s f e r s t o the Federa l r e se rve agents and t h e United

S ta t e s Treasury . In order t o accomplish t h i s , t he banks are cons id -

e r ing shipments of gold coin and c e r t i f i c a t e s t o t h e Treasury . Sev-

e r a l ques t ions have been r a i s e d i n t h i s connect ion, as summarized

below, and rega rd ing which the Board w i l l a p p r e c i a t e advice as t o

the p o s i t i o n of the Treasury .

1 . Wi l l the Treasury permit the Federa l r e s e r v e banks t o

ship United S t a t e s gold co in t o the Treasury, or t o the mints or a s -

say o f f i c e s , a t t h e Treasury 1 s expense?

2 . Wil l the Treasury reimburse Federa l r e s e r v e banks f o r

ab ras ion on gold coin depos i ted with the Federa l r e se rve banks s ince

March 7?

3 . Wi l l i t be necessa ry f o r t h e Federa l r e s e r v e banks, e s -

p e c i a l l y those not equipped with e l e c t r i c weighing machines, t o de-

termine t h e amount of a b r a s i o n on gold coin be fo re shipment t o the

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Honorable William II# Woo din -2~ X-7635-b

Treasury, a mint , or assay o f f i c e ?

4» Wil l t h e Treasury au thor ize such Federa l r e s e r v e banks

as f i n d i t d e s i r a b l e t o do so, t o segrega te a p o r t i o n of t h e i r s tock

of gold co in , or gold c e r t i f i c a t e s , or bo th , to be held i n j o i n t

custody by the banks and agents fo r account of t h e United S t a t e s

Treasure r?

5« Wil l t h e Federa l r e se rve banks be pe rmi t t ed t o cancel

and sh ip t o t he Treasury new and f i t gold c e r t i f i c a t e s i n denomina-

t i o n s of $500 and over?

Inqu i ry has a l s o been made of the Board as t o t h e p o l i c y

which t h e Treasury w i l l f o l l o w i n connect ion wi th t h e d i s p o s a l of

s tandard s i l v e r d o l l a r s held by Federa l r e se rve banks i n excess of

t h e i r r equ i rements , and advice i s r eques ted as to whether the Fed-

e r a l r e se rve banks w i l l be pe rmi t t ed t o ship excess hold ings of

s tandard s i l v e r d o l l a r s t o the Treasury, a mint , or assay o f f i c e ,

a t the T reasu ry ' s expense•

R e s p e c t f u l l y yours ,

(Signed) Chester M o r r i l l

Chester M o r r i l l , S e c r e t a r y .

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