w

/

FEB 2 1 9 3 5

(LDLBAL

My dear Mr* Presidentt " "V / / / . - T

The second paragraph of section 16 of the Federal Reserve

Aot empowers the Federal Reserve Board, until March 3, 1935 or until

the expiration of such additional period not exoeeding two years as

the President may prescribe, should it deem it in the public interest,

upon the affirmative vote of not less than a majority of its members,

to authorise the Federal Reserve banks to offer and the Federal Re*

serve agents to aocept direct obligations of the United States as

collateral security for Federal Reserve notes issued to the Federal

Reserve banks by the Federal Reserve agents* This provision of para-

graph 2 of section 16 was added to the Federal Reserve Act by the Aot

of February 27, 1932, and as originally enaoted authorised the pledg-

ing of direot obligations of the United States as collateral security

for Federal Reserve notes only until March 3, 1933* The authorization

was extended to March 3, 1934 by the Aot of February 3, 1933, and the

paragraph was amended by the Aot of March 6, 1934 so as to extend suoh

time until March 3, 1935, or until the expiration of suoh additional

period not exceeding two years as the President may prescribe*

The extension of the authority conferred by the second

paragraph of section 16 of the Federal Reserve Aet for the pledging

of direot obligations of the United States as collateral security for

FederalpRaaar?? rx̂ tes }|&s enabled the Federal Reserve banks to meet

/

/Jjjt

L

O P T . Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

The President, The White House — 2

the demands upea theae for currency by paying out Federal Reserve notes

in exoess of the anount that oould otherwise have been supplied*

Direot obligations of the United States have been pledged by the Fed*

eral Reserve banks with the Federal Reserve agents since May 1932 and

on January 16, 1955, the aisount of direot obligations of the United

States so pledged was $193,000,000*

In the opinion of the Federal Reserve Board the authority

to use direot obligations of the United States as oollateral for Fed*

eral Reserve notes has been of material assistance to the Federal

Reserve banks in supplying the currency needs of the country and it is

recoraziended that you extend the period during which the Federal Reserve

Board may authorise the Federal Reserve banks to offer and the Federal

Reserve agents to sncept suoh security as oollateral for Federal Reserve

notes until March 3, 1937*

For consideration in the event that you should determine to

take suoh action, a draft of a proclamation extending the authority to

the Federal Reserve Board and to the Federal Reserve banks in this

respeot for the period recoraaended has been prepared and transmitted

to the director of the Budget, accompanied by this letter, in accordanoe

with the terms of the Exeoutive Order of August 10, 1933. ^

Faithfully yours,

(ill/ m* S. :coles, vt5 v Governor •

The President.

The uhit* • . .

VFJJTOS Hro /OTTV sei

jL lA 0Ci

V

-to JOT?V SF?7LT T<

>.fctLv D ' h ^ e c o f is ion

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

C O A P v j r

7 q t i r - ^

EXTENDING FOR T W O YEARS THE PERIOD WITHIN W H I C H THE FEDERAL RESERVE BOARD M A Y AUTHORIZE THE FEDERAL RESERVE BANKS TO OFFER, AND THE FEDERAL RESERVE AGENTS TO ACCEPT, DIRECT OBLIGATIONS OF THE UNITED STATES AS COLLATERAL SECURITY FOR FEDERAL RESERVE NOTES

, i t

BY THE PRESIDENT OF THE UNITED STATES OF AMERICA

g $ r o c l a m a t t o n

WHEREAS the second paragraph of section 16 of the Federal Reserve Act (38 Stat. 265), as amended by the act of March 6, 1934 (48 Stat. 398), provides:

"Any Federal Reserve bank may make application to the local Federal Reserve agent for such amount of the Federal Reserve notes hereinbefore provided for as it may require. Such application shall be accompanied with a tender to the local Federal Reserve agent of collateral in amount equal to the sum of the Federal Reserve notes thus applied for and issued pursuant to such application. The collateral security thus offered shall be notes, drafts, bills of exchange, or acceptances acquired under the provisions of section 13 of this Act, or bills of exchange indorsed by a member bank of any Federal Reserve district and purchased under the provisions of section 14 of this Act, or bankers' acceptances purchased under the provisions of said section 14, or gold certificates: Provided, however, That until March 3, 1935, or until the expiration of such additional period not exceeding two years as the President may prescribe, the Federal Reserve Board may, should it deem it in the public interest, upon the affirmative vote of not less than a majority of its members, authorize the Federal Reserve banks to offer, and the Federal Reserve agents to accept, as such collateral security, direct obligations of the United States * * *."

AND WHEREAS it is deemed advisable that the authority of the Federal Reserve Board to authorize the Federal Reserve banks to offer, and the Federal Reserve agents to accept, direct obligations of the United States as collateral security for Federal Reserve notes issued to the Federal Reserve banks be continued for an additional period after March 3, 1935:

NOW, THEREFORE, I, FRANKLIN D. ROOSEVELT, President of the United States of America, acting under and by virtue of the authority conferred upon me by the aforesaid section 16 of the Federal Reserve Act, as amended, do hereby proclaim, declare, and prescribe an additional period of two years from and after March 3, 1935, during which the Federal Reserve Board may, should it deem it in the public interest, upon the affirmative vote of not less than a majority of its mem-bers, authorize the Federal Reserve banks to offer, and the Federal Reserve agents to

1 u Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

2

accept, direct obligations of the United States as collateral security for Federal Reserve notes issued to the Federal Reserve banks under the provisions of the aforesaid section.

IN WITNESS WHEREOF, I have hereunto set my hand and caused the seal of the United States to be affixed.

DONE at the City of Washington this 14th day of February, in the year of our Lord nineteen hundred and thirty-five, and of the Independence

|SEALJ of the United States of America the one hundred and fifty-ninth.

FRANKLIN D ROOSEVELT By the President:

C O R D E L L H U L L

Secretary of State.

[No. 2117]

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

FEDERAL RESERVE BOARD WASHINGTON

X-"135 L L U J l ^

A D D R E S S O F F I C I A L C O R R E S P O N D E N C E T O T H E F E D E R A L R E S E R V E B O A R D

February 2C, 1935 It

SUBJECT: Extension of Period during which Direct Obligations of the United States may be Cffered and Accepted as Collateral Security for Federal Reserve Note s.

Subjcct fndox

Dear Sir:

As you knew, the second paragraph of section 16 of the Federal

Reserve Act provides that until '.larch o, 1935, or until the expiration

of such additional period not exceeding t^o years as the President may

prescribe, the Federal Reserve Board may, should it deem it in the

public interest, upon the affirmative vote of not less thm a majority

of its members, authorize the Federal reserve banks to offer, and the

Federal reserve agents to accept, direct obligations of the United Sto.tes

as collateral security for Federal reserve notes. The Federal Reserve

Board has heretofore granted such authority r-nd, accordingly, direct ob-

ligations of the United States may now be offered and accepted as col-

lateral security fo^ Federal reserve notes.

a Proclamation extending for two years from iarc}- 3, 1935, -che period

within which the Federal Reserve Board may authorize the offer and ac-

ceptance of direct obligations of the United Stater as collateral security

for Federal Reserve notes ;~nd, consequently, the authority heretofore

You -are advised that on Feorua. y 1' , 13"5 the President sign»xl

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

X-J135 - 2 -

granted by the Board to each Federal reserve bank to offer, and to

the Federal reserve agent at each such bank to accept, direct ob-

ligations of the United States as collateral security for Federal re-

serve notes will not terminate on March 3, 1935, but will continue

under the same conditions and limitations as now exist.

A copy of the President's Proclamation extending the period

is inclosed herewith

Very truly yours,

Chester Morrill, Secretary.

'.Enclosure.

TO THE CHAIRMEN AND GOVERNORS OF ALL FEDERAL RESERVE BANKS.

•••• ••••••• wmmmmmmmI Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

February Q, 1957,

Honorable R o b e r t Wagner, United ^ t a t e e S e n a t e , B&shittgton, B* C*

By d e a r Senator*

I n a c co rdance w i t h t e l e p h o n e c o n v e r s a t i o n t h i s a f t e r n o o n , I em enclosing herewi th my f i l e c opy o f a b i l l t o extend the p e r i o d dur ing which d i r e c t o b l i g a t i o n s o f t h e United ^ t a t e e m y b e used a s c o l l a t e r a l s e c u r i t y f o r f e d e r a l Reserve n o t e s , a s tatement e x p l a i n i n g the n e c e s s i t y f o r t h e e x t e n s i o n o f t h i s a u t h o r i t y , t o g e t h e r w i t h c o p y o f a l e t t e r t o S e n a t o r Sobinscm t o whoa the e n c l o s e d b i l l and s tatement wore s e n t o n January 7 t h , 1957*

I hope you w i l l be a b l e t o g e t prompt a c t i o n i n s e c u r i n g t h e passage o f t h e proposed amendment v.s t h e e x i s t i n g law e x p i r e e <m Starch. 3 r d , 1S37* I t r u s t you w i l l c a l l upon me i f £ can f u r n i s h you w i t h any f u r t h e r i n f o r m a t i o n o r b e o f any a s s i s t a n c e t o you*

B e s p e c t f u l l y y o u r s ,

3* S* E c c l e s , Chairman

MSE:VE Erics*

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis