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llX-OPl'ICIO 11•11••118 •.•.•. HM54w..o.301 0 WILLIAM 8. MCADOO

•11e•nan OP TH , .. ASU9Y

PAUL •• WA•aun. YIC• ..,, •••• PRIDHIC A. DILARO ADOLPH C. MILLH

• CllAl•MU CHA•US S. HAMUH • JOHH HILTOH WILLIAMS

COMPr801.LH OP TH CUHHCT FEDERAL RESERVE SOARD H. PA•Kl•WILLIS, S•c .. THY SHIRMAH P. ALLIN, Mn ... C .. TAU

UDPllCALMHT

•

WASHINGTON ADD ..... llllPLYTO

•••RAL 11anv• 90AllD

Dece~ber 6, 1917.

Dear Sir: nava

Inclosed herewith is a table ahowing the discount rates which/ boen approved by the Fe.c!eral Re~erve Boari as oi Dacembe.r i·th. This table shows the changes which·were male by all the Fed~ral Reserve Banks at the SUl!&;;e'stion of the Boari, ex~ept in the case of thcp Fe~eral Reserv 3

Bank of New York, which, because of con~itions cf a local character, Las asked that acU.o:ri be .leferrel until Dacariber 15th; ·

The table will show groater uniformity in the rates establisha~ by the eleven banks which have.actei than ·h~s axisted heretoforeA It has been the ~esire ~f the Board to simp~if7 the rate schedule ~nl tno means of acting upon changes in rates.· Thare are now only two sche.iules for f·ifteen da;y pe.per., .one for c·o:a.mercial paper an.d collateral notes se­cured by corr.mercial Jiaper, (inclu.Ung comno.li ty pa1:·er a.nl . traJe aco~pt­ances) an~ tfis other .for collateral notGs anl cuetOII1~rs 1 paper securea by Government securities. Her9tofore thera were four ratas, as some ·banks charged a different rat~ for a note secureJ b7 commercial J?8.Fer . than for fifteen day comrBrcial paper liscounted, an~ some had a rate one-half per cent higher for member banks' custorr~rs• notes secured·b7 Government secur~.ties than· for a collateral note securei in the sarr.e iNS.7.

Some banks had a special quotation for . the fifteen iay traJ.e a.cce;.tancec.

In telegrau.s which were exchan£el tetwoen the Boara anl the banks so~a confusion has arisen because of iif ficulty in Jescribing the character or n.aturity of the pa~er to which the rate·referrcd. In or .A.er to avoi.l this in the future there has been insei·tea. in the table a code word at the head of each classif ic~tian of paper. and hereaft~_r in telegraphic ccrresnon~ence regarlin; rates the~e cod3 ~oris will t~ used. An aiditional· code word has been inserted fur bankars• acr.e~t-. ances,, and two aidi ti onal code. wor.is a~pear for· cocr.oii t~.. paper hr.vil'lG from 16 to 6J d~JS •an.i from 61 ·to 90 Ja.ys to run, for use by such 1:.auks as still uaintain a quotation for this kind of paper, althoug~ f or'the tin.a being the rates are the sa.rm as on or~iriary con.rr.ercial pa.i:>e.r .. Tho fifteen day rate for comto~ity ~aper shoula r~uain merged with tha fifteen da7 rate for c·omr~rcia.l i::,a:r-er, even though a special rt..".;e fo· .. longer ti~~ comnoiity paper be reestablished later on.

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It should be unJerstood that fifteen lay trade acceptances will be taken un~er whichever classification n:a.y oe the lower. To illustrate, one of the banks has a trade acceptc:.nca rate· of SMb for l to 60 clays and a fifteen day cOIIJrSrcial paper rate· of 4%. Fifteen day trade acceptances ....,ill according be taken by that bank at at%. At a~other bank the rate is ai% for trale acceptances from l to 60 d~ys an~ 3% for fifteen day c~ercial paper. In that case· the t~a~e acceptance wouli be taken at the commercial paper rate of 3%. The Board is of the opinion that ~hen comr.erc~al paper or trade acceptanues have run iaNn to fi.fteen days, the ~ifference in classification is not of suf fiCient importance to warrant a special quotation.

Var; truly 7ours,

Governor.

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