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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