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DAVID F. HOUlTON

W. P. G. HARDING, GOYIRNOI

ALBERT STRAUSS, VICI GOVIINOI

ADOLPH C. MILLER CHARLES S. HAMLIN SICRITAIY OP THE TREASURY

C:HAIRIIAM HENRY A. MOEHLINPAR

JOHN SKILTON WILLIAMS COIIPTIOUII OF THI CURIINCY

FEDERAL RESERVE BOARD W. T. CHAPMAN, SICRIETAIY

ADDRESS REPI.Y TO

R. G. EMERSON, ASSIST AliT SICRITAIY

W. M,IMLAY, FISCAL AGINT

FEDERAL. RESERVE IIIOARD WASHINGTON

. •

May 13,1920 X-1920

Subject: "Participation in Bank of Japan .Agreement.

Dear Sir:-

There is enclosed herewith, for your information, a copy of a latter received by the Board from Acting Governor Case of the Federal Reserve Baril: of New York, su-sgesting arrangerr:ents, -which were aT.)proved by the :Board at its meeting today, - whereby all Federal Reserve Banks will par­ticipate ratably in the agreerr:ent bet\veen the Federal Reserve Banl-:- of New Yark a.."l.d the Ba:nlr of Japan, as agreed at the last Conference of Gover~ors held in Washington, April 7-9, 1920.

The Federal Reserve Bank of New York has been requested to communicate with you. direct as to the execution of the arrangement.

Very truly yours,

Enclosure.

Governor •

To governors of all F.R. Banks.

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405

COPY EEDERAL RESERVE BANK

OF NE1V YORK X-1920 a

May 3,1920.

Dear Governor Harding:

You ,~ill recall that I explained to the Governors of the other Federal Reserve Banks, at our last Conference in Washington, the details of our Agreement with the Banl: of Japan, and that it was voted that the Federal R35erve Banl-s should participate ratably in the Agreement ..

We would recommend that this participation be accomplished in the following manner!

·1. With respect to the balance of the Bank of Japan in current account, apportion an even $4,000,000 among the other Federal Reserve B~s, retaining in our own account slightly less than our proportionate share of that sum since the balance of the Bank of Japan is at present only $3,996,635.18. Vl'hen bills mature and the ~roceeds are credited to the Banlr of Japan's account, and when new bills are purchased, the cost of "vhich is charged to the BAill< of Jiapan' s account, entries would be made only through our Bazik of Japan account and not throu~h the accounts of the other Federal Reserve Barurs. It should be noted that the proceeds of maturing bills after the discount earned has 1)een set aside for the Bani':' of Japan, will be im­mediately reinvested. A new account will be opened among our Resources under the caption 11Allotments to Other Federal Reserve BanP:s, Banl~ of Japan Account", which would include the total participations of the other Federal Reserve Bam:s in the current balance of the Banl> of Japan. In our press statement under 110ther De:oosits including Foreign Government Credits 11

we would include only our share of the Bank of Ja-oan balance as is now done with the Argentine Government.

2. As a matter of convenience, in order to simplify the h~dling of the account, we would propose using the same percentages for participation of the Bant of Japan balance as we now employ in the Bank of England Sterling Gold and Argentine Government accounts, i.e., capital, surplus and gross denosits as of June 13, 1919, these being

Boston Cleveland Atlanta St.Louis Kansas City SanFrancisco

7.3% 8.2% 3.6% 4.7% 4.8% 4.6%

Philadelphia 8% Richmond 4. 9% Chicago 11.9% Minneapolis 2. 7% Dallas 2. 6% New York 36.7%

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-2- X-1920 a

3. With respect to the purchase of bills for the Barik of Ja~an, we would apportion the bills among the Federal Reserve Banks on the basis of an even $16,000,000 representing the ap~rox­imate present and maximum amount of bills under the agree­n:ent, and retain in our own share any excess or deficiency from $16,000,000. In other words, ~.re :propose to handle the allotment of bills in the same manner as that proposed in :paragraph 1 for the distribution of the current account­Each of the other Federal Reserve Banks would show on its statement its own contingent liability for its 'T.')ro:portionate share of $16,000,000, and no changes would be made in those

. amounts unless the T,~resent basis of the agreement was altered. The other Federal Reserve Ban!-:-s wOUld make a contract with us assundng liability for their ~roportionate share of all bills held under the Bank of Ja,an agreement up to a maf(imum amount equal to their '1:)1'0 rata share of $16',000,0JO. On our own statement we would show as a contingent liability on bills purchased for foreign corresnondents, only our ~~ share of the bills.

Will you be good enou~ to advise me if the foregoing meets with the a-pproval of the Board, and if so, whether you wish me to submit it to the other Federal Reserve Banks for their a~~roval.

Very truly yours,

Honorable W.P.G. Harding, Governor, Federal Reserve Board, Washington, D.C.

J. H. CASE

Acting Governor.

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