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t 3 8 3

FEDERAL RESERVE BOARD

WASHINGTON

T O

T H E FEDERAL RESERVE BOARD

X-7169

June 6 , 1932.

Dear

S i r :

This refers to my l e t t e r s of May 7 and August 14, 1931,

with thei r respect ive inclosures , on the subjec t o f cashing

Government checks

and

warrants

"by

Fe de ra l re se rv e banks.

As you will remember, I addressed a memorandum to the

Federal Reserve Board under date o f Apri l 17, 1931, discussing

this subject i n d e t a i l an d recommending that i t b e r e f e r r e d to the

Governors' Conference; t h e Governors' Conference i n Apr i l , 1931,

r e f e r r ed t h e subjec t t o t h e Standing Committee on Col lect ions f o r

study a n d repor t t o t h e Fall Conference o f Governors; t h e Standing

Committee

on

Collections rendered

a

report under date

o f

August

10,

1931; and the

Governors' Conference

i n

December,

1 9 3 1 ,

r e f e r r e d

the

subjec t

t o t h e

Conference

o f

Counsel

o f

Federal reserve banks

f o r

considerat ion an d consul ta t ion wi th th e Standing Committee on

Collect ions a n d o f f i c i a l s o f the Treasury Department, with a view

to obta in ing a c l a r i f i c a t i o n of the appl icable provis ions of Treasury

Department Circular Ho. 176 .

F o r your further information i n this connection, I inclose

copies o f t h e following:

1 .

Le t t e r

o f

August

19 , 1931 ,

from

M r,

Robert

S .

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X-7169

t

3 8

Parker, Counsel

t o t h e

Federal

He

serve Bank

o f A t -

lanta , d iscuss ing my l e t t e r o f August 14 , 1931,

above referred t o ;

2 . Le t te r o f September 11 , 1931 , from Mr. A, 0 .

Agnew, Counsel

t o t h e

Federal Reserve Bank

of San

Francisco, a lso discussing

my

l e t t e r

o f

August

14 ,

1931;

3 . L e t t e r o f November 28 , 1931 , from M r, James 6 ,

McConkey, Counsel t o t h e Federal Reserve Bank of

S t . Louis, inclosing a memorandum which h e h a d p r e -

pared discussing

t h e

report rendered

by the

Standing

Committee

on

Collect ions

and my

l e t t e r

o f

August

14 , 1931;

4 .

Le t te r

o f

December

14 , 19 31 ,

which

I

addressed

t o

M r.

McConkey

i n

response

t o h i s

l e t t e r

o f

November

28 , 1931;

5 . L e t t e r o f January 6 , 1932 , from M r . J . P . Dreibelbis

o f t h e f i rm o f Locke, Locke, Stroud and Randolph, Counsel

t o t h e


o f

Dallas , inclosing

a

f i l e

o f

correspondence concerning Treasury checks which were

i n -

volved

i n t h e

f a i l u r e

o f a

national bank

i n

Texas;

6 .

Le t te r

of

Juno

1 , 1932,

from

M r . J . S .

Walden,

J r . ,

Chairman of th e Standing Committee on Col lec t ions , d i s -

cussing t h e p o s s i b i l i t y o f holding a conference on th is

sub jec t ;

a nd

7. My

reply

o f

June

2 , 1932,

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I 385

X-7169

The

pressure

of

more urgent matters

h a s

rendered

i t

impossible

f o r me to

give considerat ion heretofore

t o t h e

question

of arranging a conference on th i s sub jec t , and I bel ieve i t w i l l be

impossible

f o r

t h i s o f f i c e

o r t he

o f f i c i a l s

o f t he

Treasury Depart-

ment

t o

p a r t i c i p a t e

i n

such

a

conference until sometime after

Congress adjourns; b u t I th ink we ought to have i t a t t h e e a r l i e s t

date convenient

t o a l l

concerned.

We

cannot make

a n y

d e f i n i t e

p lans un t i l

we

know when Congress will adjourn,

b u t I

shall appre-

c ia te

an

expression

o f

your views

a s t o t h e

time most suitable

a nd

convenient f o r such a conference.

Cordially yours,

Walter Wyatt,

General Counsel.

Enclosures*

TO

COUNSEL

OF ALL

FEDERAL OBSERVE BANKS.

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C O P Y

3 8 6

X-7169-a

COLQUITT, PARKER, TROUT MM & AEKWRIGHT

Attorneys a t Law

Sui te

1607

William-Oliver Bldg.

A t l an ta ,

Ga.

August 19 , 1931 .

PERSOML.

M r. Walter % a t t , General Counsel,

Federal Reserve Board,

Washington, D. C.

Dear Walter:

I have received your letter of August 1 4 t h , sent f o r

my personal and conf ident ia l informat ion and enclos ing a copy

of a le t ter which you have wri t ten t o t h e Chairman of the

Standing Committee on Collections concerning t h e Committee's

r epor t on t h e sub jec t of ca sh in g Government checks arid

warrants by Fe de ra l re se rv e banks.

I

approve most heartily

t h e

views

s e t o u t i n

your

l e t t e r , I have always felt that i f t h e matter were pu t up

t o t h e

Treasury Department

i n a

vigorous

way by the

Federal

reserve banks act ing

i n

concert ,

t h e

present conflusion would

b e

e l iminated.

As the

s i t u a t i o n

now i s , no

Federal reserve

bank knows whether a Government item i s act ual ly cashed or

paid when presented t o t h e bank f o r that purpose and charged

t o t h e Treasury account, a n d , i n f a c t , i t seems to me t h a t t h e

Treasury ha s no fixed policy about t h e ma t t e r . Sometimes

t h e p o s i t i o n i s taken that a check i s paid when cashed by

i t s f i sc a l agent and charged to i t s ac co un t. Sometimes

t h e opposi te pos i t ion i s assumed.

I b e l i e v e t h e matter i s o f suff ic ient impor tance t o

j u s t i f y a conference of counsel , par t icular ly s ince there

a r e doubtless other questions which could b e p r o f i t a b l y c o n -

s idered a t such a conference.

As

regards

t h e

payment

o r

cashing

of

Government

checks or war ran t s , t h e p o s i t i o n o f t he Federal reserve banks

i s rendere d even more un ce rt ai n by t he doubt which exists

a s t o whether o r no t such warrants a r e negotiable instruments.

There a r e many other interesting angles which ought t o have

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t 3 8 7 .

X-7169-a

COLQUITT, PARKER, TROUTMA2T

&

AEKWRIGHT

Continuation Sheet

M r. Walter Wyatt - #2 . 8-19-31.

cons idera t ion. My own view i s that when a Federal reserve

bank takes one of these warrants i n regular course of bus iness ,

pays o r cashes t h e same and charges t h e item t o tfce Treasury

account, t h e payment ought t o be regarded a s f i n a l u n l e s s , of

course, t h e instrument, upon receipt a t t h e Treasury, should

b e

found

t o be

forged

o r to

have been paid upon

a

gorged

endorsement o r unl es s the re ex is ts some othe r reas on why the

warrant

was not

properly payable upon presentation

a t t h e

o f f i c e o f the Federal reserve bank;

I t ru s t t h a t y ou will have a pleasant vacation and

know that yo u have earned very much more r e s t than you can

obta in in two or three weeks. I have n o t been away this

summer

and do no t

expect

t o g e t

away. That f a c t does

n o t ,

however, prevent

me

from preaching

t o

others

t h e

necess i ty

f o r vaca t ions .

With sincere personal regards, I am

Cordially yours,

(S ) Robt. S . Parker.

RSP/w.

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r 3 8 8

C O P Y X-7169-b

FEDERAL RESERVE

MM OF SAN

FRANCISCO

September

11 , 1931.

(CONFIDENTIAL)

Walter Wyatt,

E s q . ,

General Counsel,


Washington, D. C.

Dear M r. Hfy-att:

Reference

i s

made

t o

your letter dated August

14 ,

t r ansmi t t ing

f o r m y

personal

and

confident ia l informat ion

copy of your le t te r wri t ten t o t h e Chairman o f t he Standing

Committee

on

Collections with regard

t o t h e

Committee's

repor t on th e subjec t of Cashing Government checks and

warrants

by

Federal Reserve Banks.

I

have only recently

ha d the

opportunity

of

examining t h e Committee's r ep or t. This I have done i n c o n -

ference with

t h e

o f f i c e r s

of

this bank.

I

agree with

t h e

major port ion of what you have to sa y in your le t te r of

August

1 3

(X-6944).

Cer ta in ly ,

t h e

Treasury circular should contain

a clear statement with regard t o t h e r e s p o n s i b i l i t y of

Federal Reserve Banks

i n

cases where payment

i s

stopped

on

checks f o r which immediate credit h a s been given. I believe

tha t

t h e

Treasurer should

n o t

recognize

any

stop-payment

order u n t i l f i r s t communicating with t h e Federal Reserve

Bank affected

t o

ascertain whether

o r n o t

c red i t

h a s

been

passed a n d i f s o , whether reimbursement c a n be obtained.

I also believe that a great deal o f t he d i f f i -

culty heretofore encountered could

b e

obviated

by

e l imina t -

i n g en ti re ly from paragraph 32 o f t he Treasury circular

a l l

re fe rence

t o

what

t h e

Federal Reserve Banks will

do

under given circumstances. I t seems to me t ha t such

reference merely confuses

t h e

s i t u a t i o n

a nd

leaves

i n

doubt

t h e capacity i n which such banks a r e ac t ing . I also

bel ieve tha t

t h e

Treasury Department should incorporate

i n i t s c i r c u l a r a clear statement t o t h e e f fec t tha t F e d -

eral Reserve Banks,

i n

handling Government checks

and

warrants , a r e ac t ing sole ly a s agents o f t he banks from

which such checks

a r e

rece ived,

and I

cannot

see why the

Treasurer should have

a n y

objec t ion

t o

making such

a

s t a t e -

ment.

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/ 3 8 9

X-7169-b

Walter %ratt, E s q . - 2 - September 11 , 1931.

M r. Clerk, t h e Deputy Governor of this bank, who

i s probably a s conversant with operating procedure as any

man i n t h e

system

and

whose ideas

on

subjects

of

this char-

a c t e r a r e extremely clear c u t , i s o f t h e opinion that a l l

r e fe rence t o payment of Government checks through clearing

houses should

b e

el iminated,

i n

order that

i t may be

ad di ti ona ll y cl ea r that such items wi ll

no t be

handled

f o r n o n -

member banks, directly o r i n d i r e c t l y . I think that t h e word

Cashing Government checks and warrants should b e eliminated

en ti re ly . Such items a r e n o t cashed i n fact except i n

t h e

case

of

items drawn

by

d isburs ing of f icers

of the

Govern-

ment . I do no t bel ieve that i t i s necessary o r advisable

that i n t h e Treasury circular Federal Reserve Banks b e

denominated either a s f i sca l agen t s o r depos i t a r i es of the

United States,

an d

that this dilemma, which

h a s

previously

existed, could b e obviated by making i t clear that i n hand-

ling Government checks and warrants Federal Reserve Banks

a c t only a s agents of thei r deposi to rs and not in any agent

capaci ty f o r t h e Government.

Cer t a in ly ,

t h e

circular should

b e

c l a r i f i e d

and

can be c l a r i f i e d , b ut I do no t bel ieve that th is wil l b e

accomplished until we have a n ab so lu te show-down wi th the

Treasury Department, i n which we make i t p la in that thei r

circular must b e prepared i n such form a s to offer adequate

p ro tec t ion

t o t h e

Federal Reserve Banks

and

that unless

t h i s i s done t h e banks will accept Government items only f o r

defe rred cr ed i t . This can be best accomplished, in my

opinion, through a conference with t h e Treasury of f ic ia l s

a t

which counsel

f o r t h e

Reserve Banks

a nd the

operating

o f f i c e r s

of

such banks

a r e

p resen t .

Of

course,

no

such

conference should b e held un t i l a preliminary conference

between Federal Reserve Bank officers and counsel h a s been

held i n order that when we meet ' n t h th e Treasury Department

we may be

agreed

a s to

what

we

want.

Please understand that t h e foregoing a r e only my

personal views. I fee l ce r t a in tha t i f determined action i s

taken, something definite

and

s a t i s f a c t o r y

can be

accom-

pl i shed .

Very truly yours ,

(S ) Albert C. Agnew

Counsel.

ACA:MA

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C O P Y X-7169-c

3 9 0

FEDERAL RESERVE BAH

OF

ST. LOUIS

November 28, 1931

M r. Walter Wyatt, General Counsel,


Washington, D. C.

Dear M r. Ifyatt

Enclosed you wi ll f in d copy of a memorandum I handed

Governor Martin on the subject o f t he repor t o f t he Standing

Committee on_Col1ec tions_on Cashing Government Checks and

Warrants . I am no t i n a pos i t i on t o know t h e d i f f i c u l t i e s the

operating Committee

had to

contend with

i n

meeting

t h e

legal

requirements suggested

by the

Counsel's Committee, nevertheless,

I do not

believe

t h e

Governors' Conference should

a c t on th e

report until these differences have been ironed out - and I so

advised Governor Martin.

I reg re t t ed tha t I could no t be here when t h e Committee

m e t in S t . Lo ui s. Upon Mr, Walden 's invi tat ion, I had made my

arrangements to be here , but was suddenly called upon to go with

one of the National Bank Examiners t o Corinth, Miss, t o pass on

t h e l e g a l i t y of an arrangement whereby t h e City of Corinth was

loaning one of the member banks i n t h e town certain bonds owned

b y t h e c i t y to be used a s c o l l a t e r a l t o t h e bank's borrowings from

t h e Federal Reserve Bank.

When

we

a r r ived

a t 9 : 0 0 a . m . , t h e

City Council were

a l l

assembled ready

t o

pass

any

ordinance

I

found necessary

f o r

them

t o

p a s s ,

i n

order

t o

give

t h e

bank

t h e

r igh t

t o u s e t h e

bonds

a s

c o l l a t e r a l w i t h t h e Reserve Bank. They signe d on the dot ted l ine.

I then prepared and had the Board of Directors of the

bank sign t h e necessary Resolut ion authorizing t h e pledging of

t h e bonds t o t h e Reserve Bank. We f in i shed i n time f o r t h e member

bank t o take these bonds 150 miles b y automobile t o Memphis, arrange

f o r t h e loan, a n d secure t h e necessary funds t o continue business the

next day as u s u a l , - oth erw ise , t hey would n o t have been able t o

remain open.

With kin de st r eg ard s,

Very truly yours,

(S) J a s . G. Mc

Conkey,

Counsel.

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3 9 1

C O P T ' X-7169-c-l

Itovember 27, 1931

M r. to. Mc C. Martin, Governor,


o f S t .

Louis,

S t . Louis, Mo.

Dear i t r . Martin:

Refer r ing

t o t h e

l e t t e r subje ct Cashing

of

Government

Checks and Warrants by Fed era l Reserve Banks signe d by Mr. Walden,

Chairman

o f t he

Standing Committee

on

Collections, dated August

12 , 1931 , a nd the suggestions contained therein that, i f i n the

opinion

of the

several Counsel,

no

serious legal object ions

b e

found therein t h e report submitted b y t h e Committee under date of

t h e 1 0 t h , i t

would

be

submitted

t o t h e

next Governors' Conference.

The sub jec t of Cashing Government' Checks and Warrants has

been t h e source o f a great deal of correspondence passing between

t h e Reserve Banks of Richmond, Atlanta and Hew York, t h e Federal

Reserve Board

a nd the

Treasury Department, since

1922.

The

subject

was

discussed

a t a

Conference

of

Counsel

f o r

t h e Federal Reserve Banks with representative from t h e Treasury

Department, under date

of

June

10 , 1930, a t

which time

a l l t h e

members of the Standing Committee on Collect ions (except M r. At t e -

bery) were present. Ho definite agreement was reached a t th is

Conference, b u t t h e following Resolution was adopted:

RESOLVED, That t h e Chairman o f t he Governor's

Conference b e requested t o i n s t r u c t t h e Standing Committee

on Collect ions t o prepare a t e n t a t i v e d r a f t of a uniform

check co ll ec ti on ci rc ul ar embodying th er ei n

t h e

suggested

amendments t o Regulation J , t h e p repara t ion of such

t e n t a t i v e d r a f t

to be

made

i n

col laborat ion with

a

sub-committee of Counsel t o t h e Federal reserve banks

(such sub-committee t o b e appointed by Counsel to the

Federal Reserve Board

and of

which sub-committee Counsel

t o t h e Federal Reserve Board shall b e a member ex o f f i c i o ) ,

with

t h e

understanding that such tentative draft , when

prepared , shal l b e submitted t o t h e Federal reserve banks

f o r crit icism and/or approval pending t h e adoption by the

Federal Reserve Board o f t he suggested amendments t o

Regulation J . "

Under date of Apr i l 17 , 1931, Mr . Hyatt advised th e Federal

Reserve Board that since this subject

was so

closely iden t i f ied wi th

both t h e pract ica l opera t ions o f t he Reserve banks and their legal

l i a b i l i t i e s t h a t i t would b e advisable f o r t h e Conference of Governors,

which was to convene on Apr i l 27 , 1931, to r e f e r t h e matter back to a

special Committee of Counsel and operat ing o f f c i a l s f o r study and

r epo r t .

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3 9 2

X-7169-c-l

2

Governor Ma rt in .

M r.

Wyatt advised

me

under da te

of

Ju ly

22, 1930

that ,

a f t e r

a

talk with Governor Calkins, Chairman

o f t h e

Governor's

Conference, and Mr. Walden, he had named t h e Counsel f o r t h e

Atlanta, Richmond

and Hew

York banks sinc e they

had

developed

the

most

o f the

d i spu te between

t h e

banks

an d t h e

Treasury Department

o n t h e sub jec t . M r. Wyatt was an ex officio member o f the

committee.

The

Standing Committee

on

Collect ions

me t i n S t .

Louis

i n June 1931 . Hone o f t h e members o f the Counsel's Committee were

here .

I had

intended at tending

t h e

Conference,

h u t h ad

been ca ll ed

out o f the

City

on

legal matters

and was not

here when

t h e

Committee

m e t .

Under date

of

August

14, 1931, Mr.

Iftratt forwarded

to me

copy

of

l e t t e r

h e h ad

wr i t t en

M r.

Walden,

i n

which strenuous objec-

tions were interposed t o cer ta in par t s of the r e p o r t . Some of th e

object ions

I

th ink

a r e

well taken.

I t

would, therefore, appear

t o

me

tha t

t h e

quest ions

i s n o t

ready

t o b e

acted upon

b y t h e

Governor's

Conference i n t h e face o f the object ions offered by Mr. Htyatt - but

ra ther that

t h e

matter

b e

referred back

t o t h e

joint Committee

of

Counsel

and

o p e r a t i n g o f f i c i a l s ,

so

that these d i f f icu l t ies cou ld

b e

ironed

o u t

before

an y

f ina l ac t ion

i s

taken

b y t h e

Governor's Confer-

ence

.

Respectfully submitted

J a s . G . Mc

Conkey,

General Counsel.

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, 393

C O P T X-7169-4

December 14, 1931.

M r. James G. McConkey,


o f S t .

Louis,

S t .

Louis, Missouri.

My

dear

M r.

McConkey:

I

have read with much interest your letter

o f

November

28 , 1931 ,

inc lo s ing

fo r my

information

a

copy

o f t h e

memorandum

which y o u h ad given t o Governor Martin on November 27 , 1931 , with

re fe rence

t o t h e

repor t

o f t h e

Standing Committee

on

Collect ions

on

cashing Government checks

and

warrants .

I am

ver y glad th at

y ou

think that some

of my

object ions

t o t h e

repor t

o f t h e

Standing Committee

on

Collect ions

a r e

well

taken,

and I am

very gra tefu l

f o r

your suggestion that

t h e

matter

should b e r e f e r r e d t o a joint committee of counsel an d operative

o f f i c i a l s ,

so

that these d i f f icu l t ies cou ld

be

ironed

ou t

before

an y

f i n a l a c t i o n

i s

taken

b y t h e

Governors' Conference.

I am

a f r a i d , however, tha t

y o u a r e

under

t h e

impression

tha t t h e Sub-committee of Counsel appointed pursuant t o t h e reso -

lution adopted

b y t h e

Conference

of

Counsel

f o r t h e

Federal reserve

banks

on

June

10, 1930, was

expected

t o

a s s i s t

t h e

Standing

Com-

mit tee on Collect ions i n dealin g with thi s su bje ct a n d that

t h e

f a i l u r e

o f t h e

Sub-committee

of

Counsel

t o

a t t end

t h e

meet-

i n g o f t h e

Standing Committee

on

Collections which

was

held

i n S t . Louis on June 23 , 1931 , and the consequent failure of the

repor t

o f the

Standing Committee

on

Collections

t o

conform

t o

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X-7169-a

r 2 -

my views and those of Counsel f o r some o f t h e Federal reserve

banks,

may

have resulted from some neglect

or

omission

on my

part, which i s n o t t h e case.

The resolut ion adopted by the Conference of Counsel

of the

Federal reserve tanks

on

June

10 , 1930,

which

i s

quoted

i n your memorandum t o Governor Martin, pertained solely t o t h e

r ev i s ion

of the

uniform provisions

of the

check col lect ion

c i r -

cu la r s o f t he Fed era l re se rv e banks so as to conform to the

amendments t o Regulation J which ha d been recommended "by the

Conference

of

Counsel.

I t had

nothing whatever

to do

with

t h e cashing of government checks and warran ts . The Committee

of Counsel which I appointed pursuant t o that reso lu t ion fu l ly

discharged

i t s

fu nc ti on s when

i t m e t

with

t h e

Standing Committee

on Collect ions in New York on or about August 1 , 1930, and ass i s t ed

i n t h e rev i s ion of the uniform provisions o f t he check collection

c i r c u l a r s

o f t he

Federal reserve banks which were adopted

and

promulgated b y t h e Federal reserve banks, on September 1 , 1930,

t h e date on which t h e Board's amendment t o Regulation J became

e f fe c t i ve . Having f u l l y performed

i t s

fun ct ion s, t ha t committee

went out of existence, s ince i t was no t created a s a standing

committee b u t only a s a committee f o r a specif ic purpose.

I t i s

true that , during

t h e

Conference

of

Counsel which

was held here i n June, 1930, we discussed with t h e Treasury

Department

t h e

provis ions

of

Treasury Circular

No. 176 and

succeeded i n inducing t h e Treasury Department t o amend those

po r t ions o f i t s ci rc ul ar which dea lt with t h e c o l l e c t i o n of

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. 3 9 5

X-7169-d

t3—

bank checks

"by the


f o r t h e

Treasury Depart-

ment;

bu t you

will remember that

we

could

n o t

reach

any

agree-

ment either among ourselves

o r

w i t h o f f i c i a l s

o f t h e

Treasury

Department regarding

t h e

rev i s ion

of

those prov isi ons

o f the

Treasury cir cu la r which pe rt ai n

t o t h e

cashing

of

government

checks an d warrants b y t h e Federal reserve banks, and i t was

agreed

t o l e t

that matter remain

i n

abeyance indefini tely .

My

memorandum

of

Apri l

17 , 1931 ,

which resulted

i n t h e

ac t ion o f t h e Governors' Conference o f Apr i l 2 7 - 2 9 , 1 9 3 1 , r e -

f e r r i n g

t o t h e

Standing Committee

on

Collect ions

t h e

subject

of

t h e

cashing

of

Government checks

and

warran ts , s tar ted

a n

e n t i r e -

ly new chapter an d an e n t i r e l y new e f f o r t t o obtain amendments t o

t h e

provis ions

o f the

Treasury circular relat ing

t o t h e

cashing

of

Government checks

and

warrants;

and the

Sub-committee

of

Coun-

s e l which had been appointed pursuant t o t h e r e s o l u t i o n of June

10 , 1930 , had no

au tho r i ty

t o

deal with this subject ,

and was

n o t

requested

o r

inv i t ed

t o

at tend

t h e

meeting

o f t h e

Standirg

Committee on Collect ions or to assist that Committee in any way.

In my memorandum of Apr i l 17 , 1931 , suggesting that

th is sub ject

b e

cal led

t o t h e

a t t e n t i o n

o f the

Governors'

Con-

f e rence ,

i n

order that

a

further effort might

b e

made

t o p u r -

suadc th e Treasury Department t o rev i se and q u a l i f y t h e p r o -

v i s ions

of

Sect ions

32 and 34 of th e

Treasury Department

Circu lar

No. 176 , as

amended September

2 , 1930 , so as to

def ine c lear ly t h e s t a tu s o f t h e Federal reserve banks i n

cash ing government warr ants

and

checks

and so as to

c l a r i f y

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;* 3 9 6

X-7169-d

the i r du t i es a n d r e s p o n s i b i l i t i e s i n doing s o , I suggested that

i t would b e appropr ia te f o r t h e Governors' Conference t o re fe r

t h e matter t o t h e Standing Committee on Col lec t ions , t o t h e

Conference of Counsel o r to some other appropriate committee f o r

f o r study an d r e p o r t . The Board presented my memorandum t o t h e

Governors' Conferonce, which referred t h e subject t o t h e

Standing Committee on Collect ions f o r considera t ion and report

without suggesting that a Committee o f Counsel should b e appointed

t o

a s s i s t

t h e

Standing Cor.xd.ttee

on

Collect ions

i n i t s

considera-

t ion o f t h e mat t e r . Af t e r t h e conference, both Governor Francher

and Mr.

St ra ter to ld

me

th at they thought

t h e


ought

t o

have arranged

f o r a

Committee

of

Counsel

t o

col laborate

with

t h e

Standing Committee

on

Collections

and

said that they would

suggest

i t t o M r .

Walden, Chairman

o f the

Standing Committee

on

Collections»

b u t I

understand they failed

t o

convey this suggestion

to Mr.

Walden.

I n

f a c t ,

I was not

consulted about

t h e

meeting

o f the

Standing Committee on Collect ions and d id no t know i t h a d been called

unt i l June 1 5 , 1 9 3 1 , when I received a le t ter f rom M r. Attobcry

which incidentally mentioned t h e fact that a meeting of the

Committee

h ad

been called

t o

consider that subject

on

June

23 ,

1931 . I immediately called M r. Walden on the telephone and

suggested that Counsel f o r some o f th e Federal reserve banks should

b e inv i ted t o a t t end t h e meeting; b u t h e said that h e d id n o t fee l

f r e e to do so without t h e consent o f t h e Committee, an d that t h e

time was too shor t f o r h i m t o obtain t h e Committee's consent and

arrange f o r t h e Counsel t o a t t end . He seemed t o feel that i t was

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3 9 7 .

X-7169-d

- 5 -

n o t

necessary

fo r any of the

Counsel

t o

a t t end

t h e

meeting

and

said that t h e report could "be submitted t o them f o r comment a f t e r

a t e n t a t i v e d r a f t had been pr ep ar ed . I to ld h im tha t I d id no t

bel i eve tha t t h i s would produce sa t i sf ac to ry re su l t s a n d h e r e -

plied that , inasmuch a s t h e meeting would "be held a t t h e Federal

reserve hank

o f S t .

Louis,

t h e

Committee could call upon

y o u f o r

any legal advice which i t des i r ed . A few days later h e invi ted

me to a t t end t h e meeting, "but the time was so short and I was so

busy that I was unable t o arrange to do so.

On

Ju ly

22, 1931, Mr.

Walden sent

me a

copy

of the

t e n t a t i v e d r a f t

of the

Committee's report

and

i n v i t e d

my

comments;

but I was extremely busy a t t h e time and had not had an opportun-

i t y t o send him ray comments when I received a final copy of the

repor t on August 12, 1931.

On

August

13, 1931, I

wrote

M r.

Walden

a

le t t e r express -

ing my disagreement with ce rt ai n por tio ns o f the Committee's

r e p o r t , a f t e r a very hurr ied considerat ion thereof , an d subse-

quently

I

sent copies

t o

Counsel

f o r a l l


f o r

their informat ion.

I th ink tha t , i n prepar ing i t s r e p o r t , t h e Committee

f a i l e d t o apprec ia te cer ta in o f the l e g a l d i f f i c u l t i e s and dangers

growing

ou t o f the

ambiguity

o f the

provis ions

of

Sections32

and

34 of the Treasury Circular and al so misunderstood t h e legal effect

of their suggest ion that t h e Treasury Circular should show that

i n

cas hin g Government warr an ts

and

checks,

t h e

Federal reserve

banks a c t a s agents f o r t h e banks from which the y have rec ei ve d

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- 6 -

3 9 0

X-7169-a

such checks pursuant t o t h e terms of Regulation J . The Committee

apparently thought that t h e provis ions of Regulation J would

give t h e Federal reserve banks a l l o f t h e protection which they

need; "but I th ink th i s i s a mistake. Regulation J i s designed

t o

p ro t ec t

t h e

Federal reserve hanks against l iabi l i ty

t o t h e

holders of checks f o r f a i l u r e t o collect them; whereas what we

need t o obtain through a n amendment o f t h e Treasury Circular i s

a c l a r i f i c a t i o n o f the lega l r ight s , dut ies an d r e s p o n s i b i l i t i e s

of the


i n

r e l a t i o n

t o t h e

Treasury Department

when they cash Government checks

and

warrants drawn

on the

Treasurer o f the United States. I n other words, Regulation J d e -

f i n e s t h e du t i e s o f t h e Federal reserve banks a s col lect ion agents

b u t i t does n o t undertake t o def ine thei r dut ies a s agents to pay

o r cash checks f o r t h e Treasurer o f the United States. I n my

*

opinion, t h e l a t t e r sub j ec t i s dea l t wi th very unsa t i s fac tor i ly

i n t h e Treasury Circular and I des i r e t o s e e i t c l a r i f i e d and

improved.

I

would like

t o s ee t h e

Treasury Circular amended

so as

t o provide that , i n cashing government checks and warrant s , t h e

Federal reserve banks a c t a s f iscal agents , thereby rel ieving

them o f a l l l i a b i l i t y when they a c t within t h e scope of the i r

au thor i t y and with ordinary care. I would also like to see a

provis ion Inser ted f ix ing

t h e

time when

a

Government check

sha l l b e considered t o b e f ina l ly pa id ; s ince I understand that

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x-7i69~a 3 9 9

- 7 -

t h e

Treasurer assumes

t h e

r i g h t

t o

stop payment

on

such

checks even after he ha s examined them, perforated them,

and entered them o n h i s hooks a s pa id . I also bel ieve that

t h e

provis ions

of

Section

34 o f t he

Circular should

h e

amended

so as to be

en t i re ly consis ten t wi th

t h e

theory that Federal

reserve banks a c t only a s agents i n cashin g such checks and

that they assume no l i ab i l i t y except f o r losses resul t ing from

a f a i l u r e t o exercise ordinary care o r t o a c t wi th in t h e scope

of the i r au tho r i ty . I realize, however, that I may n o t appre-

ciate some o f t ha p rac t i ca l d i f f i cu l t i e s i nvo lved i n t h e accom-

plishment

of

these ob jects ,

and I am not

wi l l i ng

t o

commit

mysel f def in i te ly to any speci f ic p roposal un t i l t h e subject has

been thoroughly threshed out in a joint meeting between the

Standing Committee on Collect ions a nd the Conference of Counsel

o r a Committee thereof.

While I have no t ye t rece ived o f f i c i a l no t i f i ca t ion

of the

act ion taken

a t t h e

recent Conference

of

Governors,

I

understand that t h e repo r t o f t he Standing Committee on Collec-

t ions was r e f e r r e d t o t h e Conference of Counsel f o r considerat ion

and consul tat ion with t h e Standing Committee on Collect ions and

o f f i c i a l s

o f t h e

Treasury Department, with

a

view

of

obtaining

a c l a r i f i c a t i o n of the applicable provisions o f t he Treasury

Department Circular No. 176 with respect t o t h e dut ies and

r e s p o n s i b i l i t i e s

o f t he


i n

cashing Govern-

ment checks a n d warran ts . I believe that this should load to a

s a t i s f a c t o r y s o l u t i o n of t h i s d i f f i c u l t y ; but I am a f r a i d i t would

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4 0 0

X-7169-4

- 8 -

b e d i f f i c u l t t o arrange a joint meeting o f t he Conference of

Counsel f o r a l l Federal reserve banks and of the Standing

Committee on Col lec t ions a t which this subject could b e consid-

ered with sufficient thoroughness

t o

p roduce sa t i s f ac to ry r esu l t s ,

before some time next summer.

With apologies f o r t h e length of t h i s l e t t e r and with

best personal regards,

I am

Cordially yours,

(S )

Walter Wyatt,

General Counsel.

WW gc

-4

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C O P Y X-7169-e

LOCKE, LOCKE, STROUD & SAUDOLPH,

F i r s t Na tional Bank Build ing

DALLAS, TEXAS.

January 6 , 1932.

Walter Wyatt, General Counsel,


Washington,

D. C.

Dear Mr. Wyatt:-

As requested i n your telegram I am enclosing

herewi th f i l e of correspondence concerning treasury

checks involved

in the

f a i l u r e

o f t he

Citizens

National Bank

of

Brownwood, Texas.

Sincerely yours,

(Signed) J . P . Dreibelbis .

JPD: g

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C O P Y

I 4 0 2

X-7169-e-l

December

29, 1931

Honorable G-. 0 . Barnes

Assistant Treasurer o f t h e United States

Treasury Department

Washington, D. C.

Sirs

Reference i s made to your le t ter of November 21 , 1931 , concerning

t h e following described checks:

Check jTo. Date Amount Payee Drawer Symbol

2595778 9-30-31 $160.83 Jos eph Hamilton A. Zaponne 70-001

108170 9-30- 31 100.00 Cl ar a Pa rr Achor a s

guardian of es t a t e

of Noah A. J . Achor H. E. Waters 11-519

1150388 9-28- 31 617.40 Char les $ . Bennett J . B . Shommer 99-220

We are

informed th at pla ns

a r e

well under

way

whereby

t h e

Cit izens

National Bank

of

Brownwood will reopen

or a new

bank will

b e

organized which will

succeed t o i t s a f fa i r s . E i ther p l an , of course , wi l l sa t i s f ac to r i ly d ispose of

these pa r t ic u l ar i tems.

Notwithstanding t h e foregoing, we think that i t i s n o t inappropr ia te a t

this t ime to d iscuss t h e subject generally with you and express t o you ou r views

i n regard t o t h e problems which present themselves to us in connection with the

general subject.

A f u l l unders tanding o f t h e posi t ion of this bank i n t h e handling of

these items

can

b e s t

b e

conveyed

to you by

placing before

you the

f u l l d e t a i l s

o f t h e

handling

o f t h e

par t i c u la r i tems l i s t ed .

Our

information

as to how the

items were handled

b y t h e

original deposi tary bank

and

also

b y

your of f ice

i s

l imi t ed

t o

such facts

a s a r e

made known

b y t h e

correspondence between this bank

a nd the

original deposi tary bank

and

between this bank

and

your of f ice .

How-

ever, most

o f t h e

per t inen t f ac t s

a r e

d isc losed

by

that correspondence.

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t 4 0 3

X-7169-e-l

Page

2

The

f i r s t

two of

those items were apparently deposited

in the

Citizens national Bank

of

Brownwood

n o t

later than October

1 , 1931 .

This

da te

v/e f i x by th e

endorsement

on the

back

o f t h e

items

i n

qu es ti on . They

were received b y this bank on October 2 , 1931 , i n the cash l e t t e r o f t he

Citizens National Bank dated October

1 , 1931 , t he

let ter total ing $804.48.

I n

accordance with

o u r

usual pr ac ti ce , immediate cr ed it

was

given

upon these two it ems . That i s t o s a y , t h e funds became subject to immediate

withdrawal,

a nd in

th is respec t

y o u a r e

advised that

a t t h e

c lose

o f

that

day's business

t h e

Citizens National Bank

h a d

drawn

i t s

balance with

u s

down

to t h e sum of

$43.02.

The

l a s t

o ne o f t h e

three items mentioned above

was

apparent ly

d e -

pos i t ed i n t h e Citizens national Bank on October 3 , 1931 , such date being the

date

o f t he

ba nk 's endorsement. October

4

f e l l

on a

Sunday,

and on

October

5

t h e

item

was

rece ived

i n t h e

cash le t te r

o f t h e

Citizens National Bank dated

October

3 ,

that l e t t e r to ta li ng $813.90. This item

was

likewise passed

to the

c re d i t o f t he Citizens National Bank, a nd the funds represented thereby became

immediately available

f o r

withdrawal.

We

have

no

knowledge

a s to the

circumstances under which

t h e

items

were deposited with

t h e

C it iz en s Nati onal Bank oth er than

i s

r e f l e c t e d

by the

correspondence with t h e examiner i n charge. We were advi sed , however, on

October 16 , 1931, by Ernest Lamb, t h e examiner i n charge, that t h e records of

that bank showed that

t h e

parties mentioned deposited these checks

f o r

credit

a nd

tha t

i n

each instance they

h a d

checked against their balances before

the

suspension of the ba-ik. We assume, t he re fo re , t ha t t h e Brownwood bank gave

immediate credit

f o r t h e

items

a nd

permitted

t h e

depos i tors

to

withdraw funds

agains t

t h e

items,

in so f a r a s

they desired

to do so.

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Xr-7169-e-l

The

f i r s t

two of

these items were forwarded

to

your o f f i c e with

our

t r a n s c r i p t

of

October

2 , a nd the

l a s t

was

forwarded

to

your o f f i c e with

our

t r a n s c r i p t

of

October

5 . We

havo

no

knowledge

as to

when these items reached

your off ice .

Our

experience

i s

th at items mailed he re

on a

given

day

reach

•Washington upon

t h e

t h i r d

day

t h e r e a f t e r .

At any

r a t e ,

we

assume that

t h e

f i r s t

two

items reached your office

n o t

later than October

6 and

tha t

t h e

las t

item reached your office

n o t

l a t e r than October

9 .

These da te s

a r e

f i x e d

by the

perfora t ions p laced

o n t h e

items

i n

your office.

The

Cit izen s nat ion al Bank f ai l ed

to

open

on

October

6 , 19 31, a nd we

assume that

i t wa s

with knowledge

o f

th i s fa i lu re tha t

t h e

various payees,

themselves

o r

through

t h e

drawers

o f t he

various items, requested your office

t o

decline payment.

Under date

o f

October

7 , 1931 , t h e

f i r s t

two

items were returned

to

us by

your office with advice that payment

o f t he

items

was

being declined

i n

compliance with

t h e

requests dated October

6

from

t h e

drawer

an d

payee,

respectively; under date of October 9 , 1931 , t he third item was re turned to us

b y your office with advice that payment o f t he same was being declined in com-

pliance with t h e request dated October 7 , 1931 , from t h e drawer. Being unab le

t o e f fec t co l l ec t ion o f these items from t h e examiner in charge, we returned

them

to

your office under date

o f

October

17 , 1931.

On October 28 , 1931 , t h e items were again returned to us by your

o f f i c e . In t h i s l e t t e r we were advised that i n t h e case o f checks which a r e

deposited f o r c o l l e c t i o n i t i s t h e p ra c t i c e o f t he Comptroller o f t h e Currency

t o charge t h e depositor 's account an d re tu rn t h e checks to h im i f h i s balance

will _iermit such action, an d tha t i f t h e depos i tor ' s ba lance i s less than the

amount o f t h e check, t h e bank i s t h e owner o f t he check to that extent a nd the

check i s re tu rned t o t h e depositor upon repayment o f t h e difference between h i s

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* 4 0 5

Page 4 X—7169—e—1

balance a nd the amount of the check. I t was suggested, also, that o u r c o r -

respondents should be advised that checks received in your off ice a r e perfora ted

with t h e date and assembled f o r ident if icat ion purposes before clearance o r

examination,

and

such perforation does

n o t

s ign i fy that

a

chock

h a s

been paid.

Following t h e r e c e i p t o f t h e items from you, we forwarded them to

t h e examiner in charge, together with a copy of your le t ter to u s . The examiner

again returned them

to u s , and we

wrote

you

under date

of

November

9 , 1931,

quot-

i n g i n i t s e n t i r e t y t h e l e t t e r of the examiner which accompanied t h e items.

You now suggest to us tha t a s the fa i l ed bank 's deposi t t i ck et

s t a t ed de f in i t e ly tha t

i t was

a c t i n g

a s

agent

f o r t h e

deposi tor

i n t h e c o l -

l e c t i o n

of

checks,

i t i s

your understanding that, unless

t h e

Federal Reserve

Bank h a s a l t e r e d i t s p o s i t i o n o r extended additional credit i n r e l i a n c e o r

fai th upon t h e supposi t ion that t h e deposit i n fact belonged t o t h e bank,

i t now h as no r i g h t t o offset proceeds of these items against t h e indebted-

ness owing

t o i t b y t h e

failed bank.

Leaving f o r t h e presen t th e l e g a l , a s well a s t h e equi tab le fea tures

of the case, i t seems to us tha t a great deal of the d i f f i c u l t y i n these cases

i s brought about by a l ack of understanding upon t h e p a r t of this bank, a s well

a s i t s

correspondents,

a s to the

circumstances under which

a

Government check

o r warrant may be considered paid.

We have car ef ul ly considered t h e provis ions of Circular % . 176 of

t h e

Treasury Department, particularly with respect

t o t h e

payment

of

Govern-

ment checks and warran ts , and while i t i s c le ar there from th at such items

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£ .406

5

X-7169-e-l

s h a l l

b o

considered, paid only after examination

b y t h e

Treasury Department,

t h e quest ion o f what action o n t h e p a r t o f t h e Treasurer shall amount t o

ayment i s left unanswered. I t seems to us obvious that a t some p o i n t i n

t h e handling o f a pa r t i cu l ar i tem some sp ec if ic o r d e f i n i t e a c t o n t h e par t

o f t h e Treasurer should const i tute payment, b u t t h e c i r c u l a r i s e n t i r e l y

s i l e n t on tha t po in t , s o f a r a s we a r e able t o d i sce rn . I n o the r 7, ords, i t

appears t o u s t h a t t h e r e a l and f ina l ques t ion i s approached from a negative

ra ther than a po si t i ve viewpoint . While w e a r e advised as to what will n o t

const i tu te payment , w e a r e n o t informed aa to what will.

We do

observe from

t h e

c i rcu la r tha t

t h e

Treasurer reserves only

t he

usua l r igh t

o f t h e

drawee

t o

examine, when re ce iv ed ,

a l l

Government checks

and

warrants cashed

b y

Federal reserve banks.

We

assume that

t h e

purpose

of the

word usual

i s t o

r e s e r v e

t o t h e

Treasurer

t h e

same r ig h t t ha t

a

commercial

ins t i tu t ion do ing , t h e same ch ar ac te r o f business would have. We als o note

t h a t t h e c i rcu la r p rov ides tha t t h e Treasurer reserves t h e r i g h t to examine

t h e items when re ce iv ed . From t h e language o f t h e c i r c u l a r i t i s o u r under-

standing that

t h e

Trea sur y Department inte nded ther eby

t o

represent that upon

r e c e i p t

o f a

check

o r

warrant

i t

would examine

i t a nd a c t i n

regard

t o i t

wi th-

i n t h e

same time required

o f a

commercia l ins t i tu t ion

>

doing

t h e

same ch ar ac te r

of

bus iness ,

o r

c e r t a i n l y w i t h i n

a

reasonable

a n d

def in i te t ime.

We, of course , r ea l i ze tha t t h e p e r f o r a t i o n o f t h e i tems, i n i t s e l f ,

does n o t const i tute payment i n t h e absence o f o the r f ac t s and circumstances.

n the other ha©d, i t i s a circumstance which c a n be taken into considerat ion

i n determining whether o r n o t payment h a s been made,

a l l , t h e ul t imate ques t ion i s one of fac t .

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( 407

X-7169-e-l

Page 6

Without reference t o t he handling o f th e pa rt ic ul ar i tems described

i n

t h i s l e t t e r ,

we do

feel that

i f a

commercial bank

ha d

rece ived

an

item, credit

f o r which had already been passed t o t he depositor, held i t f o r over twenty-four

hours ,

and

p e r fo ra t e d

i t

with

i t s

cancellation stamp, there

a r e f ew

courts that

would n o t hold that t h e item was paid o r accepted.

Returning t o t he legal aspects o f the pa r t i cu la r cases , a s evidenced

by t he ava i l ab le fac t s , we recognize, of course, t h e genera l propos i t ions a s -

ser ted by you in your le t te r of November 21, 1931, and while we agree that t he

r i g h t s o f t he p a r t i e s may be f i x e d by contract evidenced by provis ions incor-

pora ted i n t he depositary bank's deposit s l ip, we fee l tha t , b y t h e same token,

t h e bank may, by i t s ac t ion or by special contract , create a d i f f e r e n t r e l a t i o n -

ship.

I n

these pa r t ic ul ar cases ,

so we a r e

advised,

t h e

depositary bank

gave immediate credit f o r t h e items and permitted t h e various depositors to

withdraw ag ai ns t them. That the y

d i d n o t

withdraw

a l l o f t h e

funds evidenced

by

these items

was

probably because they

d i d n o t

des i re

to do so . At any

ra te ,

i t i s ou r

opinion that

t h e


o f

Brownwood,

by

giving

immediate credit without restriction, bought t h e items in question and created

t h e r e l a t i o n s h i p o f debtor and creditor, ra ther than that of pr inc ipa l

and agent . In this connection, your attention i s d i rec ted t o t he case of City

of Douglas v . Federal Heserve Bank of Dal las , 271 U. S. 4 89 .

As to th is bank 's pos i t ion in the t ransac t ion be ing a l te red , i t

seems to us that every time i t rece ives a Government check o r warrant and

passes immediate credit to the forwarding bank, i t changes i t s p o s i t i o n . As

a matter o f feet, i t i s because we a re constantly changing o u r p o s i t i o n by

paying

o u t

funds

and

crea t ing credi ts subjec t

to

immediate withdrawa l tha t

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Page

7

» 4 0 0

X-7169-e-l

t h e

question gives

us so

much concern.

In

conclusion,

we a r e

hoping that under

t h e

circumstances

you

will conclude that

t h e

various payees have

no

claims except

a s

agains t

t h e

depositary bank

i n

which they chose

to

deposit their funds,

a n d ,

accord-

ingly, we a r e herewith returning t h e items.

Yours very truly,

Governor

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4 0 9

C O P Y X-7169~e-2

C O P Y

LETTERHEAD OF THE TREASURY DEPARTMENT, WASHINGTON

O f f i c e o f t h e Treasurer o f the United States

I n

reply ing quote in i t i a l s

AWS: C

November 21, 1931.

Mr. L. G. Pondrom,

Assistant Cashier,

Federal Reserve Bank,

Dal las , Tex.

REGISTERED MAIL

S i r ;

Receipt o f your l e t t e r of November 9 i s acknowledged, forwarding

three checks, described below, drawn

on

t h i s o f f i c e

and

returned when

p r e -

sented

f o r

payment because

o f

drawers'

and

payees' req ues ts

due to t he

f a i l -

ure of The


o f

2rov/nwood, Texas, a f t e r

t h e

deposi t

of

t h e checks there and before they were presented t o t h i s o f f i c e f o r payment:

Check

No.

Date

Amount

Payee

Drawer

Symbol

1 , 1 5 0

,388

9—28— 31

$617.40

Charles E. Bennett

J . B . Schommer

99220

2,595

,778

9-30-31

160.83 Joseph Hamilton

A. Zappone

70001

108

,170 9-30-31

100.00

Clara Earr Achor

B. E. Waters

11519

as Gdn. of Est .

o f Noah A. J . Achor

I t appears that when t h e checks were returned you acknowledged r e -

ce ip t o f them under da te s o f October 10 and 13 and wrote that you ?ere return^-

i n g t h e checks t o your endorser and as soon as you received an y information

regarding them you would advise this office.

The payee o f t h e f i r s t check above, Mr. Bennett , telegraphed and

wrote

to

t h i s o f f i c e

on

November

3 ,

tha t

h i s

check

h ad

been returned

to him

and he

req ues ted th at stoppage

b e

l i f t e d .

I n h i s

l e t t e r

h e

s ta ted tha t

h e

had redeposi ted t h e check in The First National Bank o f Brownwood. On Novem-

b e r S , h e telegraphed that complications h a d a r i s e n and requested renewal

of stoppage.

The payee o f t h e second check, Mr. Hamilton, wrote on October 16,

t ha t t h e examiner i n charge o f the fai led bank refused t o r e tu rn h i s check

al though t h e payee h a d tendered t o t h e examiner t h e amount o f t h e di f fe rence

between h i s bapk balance an d t h e amount of this check.

The

fa i l e d bank ' s deposi t t i cke t s t a ted def in i t e l y tha t

i t wa s a c t -

i n g a s

agent

f o r

depos i tors

i n t h e

col lec t ion

of

checks.

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4 1 0

Page

2

X-7169-e-S

Under date

of

October

1 7 ,

yctu re tu rn ed

t h e

three checks

t o

this

off ice wi th

a.

cooy

o f a

le t t er f rom

t h e

examiner

o f the

failed bank dated

October

15, in

which

h e

returned

t h e

checks

to you and

s t a t ed

i n

-oart:

ii we a r e no t in

pos i t i on

to

give

you

au thor i ty

t o

charge

t h e

account

of

The


of

Brownwood with

t h e

checks.

On

October

2 8 , t h e

checks were again sent

t o y ou f o r

re tu rn

to the

receiver o f t h e failed bank with information as to the practice approved

b y t h e Comptroller o f the Currency f o r handling such checks when deposited

f o r co l lec t ion .

With your letter

of

November

9 , you

again forwarded

t h e

checks

and

quoted

a

le t t er f rom

t h e

Receiver

i n

p a r t

a s

fol lows:

11

' A t t h e

time these

checks were returned

to me

with your le t t e r

o f

November

2nd , i t was my

thought

that

I

could have

t h e

payees reimburse

me the

difference between

t h e

amount

of the

checks

a n d t h e

amount standing

t o

thei r cred i t

o n t h e

individual

ledger, which would enable

me to

make

a

debit against

t h e

account, which

would close each o f t h e accounts, and you in turn debit t h e credi t balance

of The


o f

Brownwood, Texas . Upon inves t iga t ion ,

I

f ind that you have closed t h e account of The Cit ize ns Nati onal Bank on your

books, an d i t i s presumed t h e amount was applied a s a c red i t on the r e d i s -

counts of subject bank with you , although I have never been advised to that

e f f e c t .

As you a re

aware,

I am n o t in a

pos i t i on

t o

draw drafts against

credit balances with other banks

i n

order

to

reimburse

y o u t h e

amount

o f the

checks involved, therefore,

I am

re tu rn ing

t h e

checks herewith

an d a s k

that

you

please acknowledge receipt

o f

same.

1

" You

also sta ted ; Regarding

t h e

balance standing

t o t h e

c red i t

of The


o f

Brownwood

on our

books, referred

to in Mr.

Lamb's let ter ,

we

advise tha t t hi s balan ce

h a s been applied on the indebtedness of The Citizens National Bank cf Brown-

wood

an d t h e

subject bank does

n o t

show

any

balance

t o i t s

c r e d i t

a t t h e

present t ime.

As

understood

by

t h i s o f f i c e

t h e

failed bank acted

a s

agent

f o r

co l l ec t ion

of out of

town items deposited until collection

was

e f fec t ed .

The agency relationship continued until t h e fai led bank received t h e p r o -

ceeds from i t s subagent. Where an agent makes a deposit, even in h i s own

name, o f funds belonging t o h i s p r i n c i p a l , t h e bank, although unaware of the

beneficial ownership

o f

such deposit cannot offset such deposit against

an,

indebtedness owing

b y

such agent

t o t h e

bank, where

t h e

bank

h a s n o t

al tered

i t s

pos i t i on

o r

extended

an y

addi t ional cre d i t ,

i n

re l i ance

o r

faith upon

t h e

supposition that

t h e

deposit

i n

fact belonged

t o t h e

ag en t, numerous

decisions sustain this view.

I t thus appears that t h e payees of these checks own the proceeds

except t o t h e extent that t h e failed bank permitted withdrawals against

t h e deposi ts , unless t h e Federal Reserve Bank after t h e r e c e i p t o f these

items changed i t s p o s i t i o n t o i t s detriment. No information a s to this

f e a t u r e

i s

contained

i n t h e

f i l e .

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A

i 4 1 :

X-7169-e-2

Page

3

The checks a r e again ruturned to you herewith and unless your

bank can he shown to have changed position t o i t s detr iment af ter receipt

of the checks, i t would appear t ha t your o f f s e t t i n g them ag ai ns t a n i n -

debtedness owing to you by th e fai led bank may not be upheld upon your

fur ther considera t ion .

Respect fu l ly ,

G. 0. Barnes (Signed)

Assistant Treasurer .

Inclosures.

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4 1 2

C O P Y

X-7169-0-3

C O P Y

LETTERHEAD

OF THE

FEDERAL RESERVE BANK

OF

DALLAS

November 23, 1931

Mr. G. 0.

Barnes

Assistant Treasurer

of th:>

United States

Treasury Department

Washington,

D. C.

S i r -

Under date of November 9, we forwarded you t he

following described Treasury warrants:

number Amount Drawn

t o t h e

order

o f :

1,15 0,388 $617.40 Char les

F .

Bennett

108,170 100.00 Clara Fa rr Achor

2,59 5,778 160.83 Joseph Hamilton.

We do not

appear

to

have received

an

acknowledg-

ment covering these items

and

shal l appreciate

i t i f you

will advise

u s

whether they have reached your office.

Respectful ly

L. G.

Pondrom

Assistant Cashier

LGP:HH

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C O P Y

4 1 3

X-7169*>e-4

C O P Y

LETTTEH3AD OP THE FEDERAL RESERVE 3A H OF DALLAS

November 9, 1931

M r. G-. 0 .

Barnes

Assistant Treasurer

o f t h e

United States

Treasury Department

Washington,

D. C.

S i r -

I n

rep ly

t o

your let ter

of

November

4 ,

i n i t i a l e d AWS-C,

we ret urn Tre asu rer 's check Mo. 1,150,383, f o r $617.40, drawn to

t h e

order

of

Charles

F .

Bennet t , referred

t o

therein, together with

warrant fo r $100 , No . 108,170, drawn t o t h e order o f Clara Farr Achor,

Guardian

o f t h e

Es ta t e

o f

IToah

A. J .

Achor,

an d

warrant

No.

2,595,778,

f o r $160,83, drawn t o t h e order of Joseph Hamilton, which checks were

mentioned

i n

T r e a s u r e r ' s l e t t e r

of

October

28.

Our

action becomes necessary

i n

view

o f

le t ter today

r e -

ceived from

M r.

Ernest Lamb, na t ion al Bank Examiner

i n

charge

o f the

Citizens National Bank of Brownwood, returning these warrants t o u s ,

which

we

quote below;

With further reference

t o t h e

three checks drawn

on the

Treasurer o f the United States f o r $ 1 0 0 , $160.83, and $617.40,

payable

t o

Clara Pharr Achor, Joseph Hamilton,

an d

Charles

F .

Bennett, respectively, about which there h a s been so much c o n -

t roversy ,

I am

re tu rn ing

t h e

checks herewith.

"As you

were previously advised

t h e

payees

o f

these checks

deposited t h e items in The Citi zens Nationa l Bank pr io r t o i t s

suspension, received immediate credit

f o r t h e

items against which

cr ed it each payee h ad checked prior t o t h e suspension of business.

At the

time these checks were returned

to me

with your le t t e r

of

November 2n d, i t was my thought that I could have t h e payees re?-

imburse

me t h e

di ff er en ce between

t h e

amount

o f t h e

checks

and

t h e

amount standing

to

thei r cred i t

o n t h e

individual ledger,

which would enable

me to

make

a

debi t against

t h e

account, which

would close each

o f t h e

accounts,

and you in

turn debit

t h e

credi t

balance of The Citizens National 3ank o f Brownwood, Texas.

Upon investigation, I find that you have closed t h e account

of The


on

your books,

a n d i t i s

presumed

t h e amount was applied a s a c r e d i t on the rediscounts o f subject

bank with

y o u ,

although

I

have never been advised

t o

tha t e f f ec t .

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Page

2

Xs7169»e=4

i'Afc

you ard

atfare,

1 am n o t iti i

pos i t i on

tb

diraw drafts

ag ai ns t c re d it balances wi th oth er banks i n order t o reimburse

y o u t h e amount o f t h e checks involved, th er ef or e, I am r e -

turning

t h e

checks herewith

and

ask . t ha t

you

please acknowledge

r e c e i p t o f same.

Regarding

t h e

balance standing

t o t h e

credi t

o f t h e

Ci t izens

National Bank o f Brottnwood on our books, referred to in Mr. Lamb's

l e t t e r , we advise th at t hi s balance h as been applied o n t h e indebted-

ness

o f t h e


of

Brownwood

an d t h e

subject bank

does n o t show an y balance t o i t s c red i t a t t h e present time.

We sh al l await your fu rt he r advice i n connection with these

warrants and wi ll thank you to acknowledge their receipt.

Respec t fu l ly

L. G. Pondrom

Assistant Cashier

LGP:HH

Attachments

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fr

4 1 5

C O P

X-7169-e-5

C .6 ^ Y

LBTI5REEAD

OF THE

TREASURY UBPASTCTfS, fASHIKGTOK

November 4, 1931

Off i ce of Treasurer o f t he United States

I n

replying quote initials A7S-C

,

Cashier,


Dallas, Texas.

S i r ;

Reference

i s

made

t o

off ice let ter dated October

9 ,

1931 , r e l a t i v e t o check ITo. 115,388, dated September 28 , 1931,

drawn on t h i s o f f i c e to the order of Charles F . Bennett f o r

$617.40

by J . B .

Schommer, symbol 99-220, payment

o f

which

check was declined when presented f o r t h e reason that th e Citizens

Hational Bank of Brownwood, Texas, i n which th e item had 'been d e -

posited, subsequently closed.

Inasmuch a s t h e check was re turned by the rece iver o f

t h e fai led bank to t h e payee and as you do not appear to have

entered credi t i n t h e Treasurer 's account f o r this i tem, i t wi l l b e

great ly apprecia ted

i f you

will communicate with your indorser with

a view of obta in ing t h e amount involved.

Respect fu l ly ,

G. 0.

Barnes (Signed)

Assistant Treasurer .

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C O P Y

C 0 E Y

f 4 1 6

X-7169-8-6

LSttSRHklAD Of TS6 FEDEELAL RESERVE BANK OP DALLAS

November 9, 1931

Mr.

Ernest Lamb

National Bank Examiner


Brownwood, Texas.

Dear M r. Lamb;

This will acknowledge receipt

of

your le t te r

of No-

vember

6 ,

enclosing

to us the

following described Treasury

warrants:

Number Name

of

Payee Amount

1,150,388 Charles F . Bennett $617.40

2,595,7 78 Joseph Hamilton 160.83

108,170 Clara Fa rr Achor

a s

Guardian

o f

t h e

Es ta te

of

Noah

A. J .

Achor 100.00

We are

quoting your letter

t o t h e

Treasurer

of the

United States today

and

sha l l

b e

pleased

t o

advise

you of any

further developments that might occur

i n

connection with these

checks.

Yours very truly

L . G-.

Pondrom

Assistant Cashier

LOP: EE

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O P Y

? 4 7

X-7169~e~7

t , 0 ' P Y

LETTERHEAD

OF THE

CITIZENS HATIOMAL BAlS

Of

BEOlOTOOD

November

6, 1931,


Dallas, Texas.

Gentlemen;

With further reference

t o t h e

three checks drawn

o n t h e

Treasurer

o f t h e

United States

f o r

$100.00, $160,83

and

$617.40, payable

to

Clara Ph arr

Achor, Joseph Hamilton

and

Charles

F .

Bennett respectively, about which there

h a s been so much controversy, I am re tu rn ing t h e checks herewith.

As you

were previously advised

t h e

payees

of

these checks deposited

t h e items in The Ci tize ns natio nal Bank pr io r t o i t s suspension, received

immediate credit

f o r t h e

items against which credit each payee

h a d

checked

p r i o r

t o t h e

suspension

of

business .

At th e

time these checks were returned

to me with your le t t e r of November 2nd , i t was my thought that I could have

t h e

payees reimburse

me the

difference between

t h e

amount

o f t h e

,checks

and

t h e

amount standing

t o

the i r c redi t

on the

individual ledger which would

enable

me to

make

a

debit against

t h e

account, which would cl ose each

of

t h e

accounts,

and you in

turn debit

t h e

credit balance

of The

Citizens

National Bank

o f

Brownwood, Texas.

Upon investigation,

I

find that

you

have closed

t h e

account

of

The


on

your books

a nd i t i s

presumed

t h e

amount

was applied a s a c r e d i t on the rediscounts of subject bank with you,

although

I

have never been advised

to

tha t e ffec t .

As you a r e aware, I am n o t in a pos i t ion t o draw drafts against

credit balances with other banks

i n

order

t o

reimburse

you the

amount

of

t h e

checks involved, therefore,

I am

re tu rn ing

t h e

checks herewith

and

a s k tha t you please acknowledge receipt of same.

Respectful ly yours ,

Ernest Lamb, (Signed)

National Bank Examiner.

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4 1 8

X-7169-©r,§

C 0 P Y

LETTERHEAD OF THE FEDERAL RESERVE 3AM OF DALLAS

November

2, 1931

M r.

Ernest Lamb,

National Bank Examiner,

Citizens National Bank,

Brownwood, Texas.

Dear M r . Lamb:

We are

enclosing

th e

three checks drawn

on the

Treasurer

of the United States f o r $100,00. $160.83 and $617.40, which y o u f o r -

warded

to us in

your l e t t e r

of

October

1 6 t h

after having refused

to

accept thei r re tu rn . We a r e also enclosing copy o f a l e t t e r f rom the

Treasurer regarding t h e checks that i s se l f - exp lana to ry .

The

check drawn

to the

order

of

Clara Farr Achor

ag . Gdn. of

E s t . o f

Noah

A . J .

Achor should

"be

endorsed exactly

a s

drawn before

i t i s again presented f o r payment.

Please acknowledge receipt

of the

check

a n d

advise

u s r e -

garding t h e mat ter .

Yours very truly,

L . 6 . Pondrom,

Assistant Cashier .

LGP/S

s

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t 419

X-7169-e-9

C O P Y

LETTERHEAD

OF THE

EEEER&L KBSBBVB BANK

Of

nAT.TAR

November

5 , 1931

M r. Joseph Hamilton

P, 0 . Box 813

Brownwood, Texas

Dear

S i r :

This will acknowledge receipt

of

your le t ter

o f

November

4 ,

enc los ing Unit ed St at es Treasury check

Mo.

2595778, dated September

3 0 ,

d r a m

t o

your order

f o r

$160.83.

We observe th at y o u would have u s cancel o u r e n -

dorsement

i n

order that fu rt he r negotiat i on

o f the

check

may

b e

accom plishe d. This

i s t o

advise that certain matters

i n

connection with this particular warrant

a r e

s t i l l u nd er a d j u s t -

ment with

M r .

Ernest Iamb, Examiner

i n

Charge

o f t h e

Cit izens

national Bank

o f

Brownwood,

an d we a r e n o t a t t h e

present time

a t l i b e r t y t o cancel o u r endorsement. We have re tur ned t h e

warrant today t o M r . Lamb an d suggest that y o u call upon h im ,

and he

w i l l

b e

g lad

t o

fu l ly expla in

t h e

mat ter .

Yours very truly

I . 0 .

Pondrom

Assistant Cashier

LGP:HH

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t 4 2 0

X-7169-e-10

C O P Y

LETTERHEAD

OF THE


OF

TIAT.T.AR

November 5, 1931

t

M r. Ernest Lamb

Examiner

i n

Charge


Brownwood, Texas

Dear M r. Lamb:

Furthering

o u r

telephone conversation regarding

c e r -

tain Government warrants,

one of

these checks

f o r

$160.83

was

received b y u s today direct from t h e payee, Joseph Hamilton.

We a r e

w r i t i n g

M r.

Hamilton that

t h e

warrant

h a s

been returned

to you and

tha t

he

should

g e t i n

touch with

y ou

with further

reference

to i t s

payment.

We might st a te tha t h e h as asked u s t o cancel o u r e n -

dorsement

i n

order that

t h e

warrant

may "be

neg oti ate d. This,

o f course, we cannot do u n t i l t h e question now in controversy

i s

s e t t l e d .

Please acknowledge receipt

o f t h e

enclosure.

Yours very truly

L. G. Pondrom

Assistant Cashier

LGSPsHH

Attachment

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4 2 1

X-.7169-.eall

C O P Y

Post Office

Box 813,

Brownwood, Texas,

November 4 , 1931 .


of

Dallas,

Dallas, Texas.

Gentlemen:

I am

enclosing check

No.

3,595,778 dated September

3 0 , 1 9 3 1 , f o r

$160.83, drawn

on the

Treasurer

o f t he

United

Sta tes t o t h e order o f t he undersigned by A . Zappone, symbol

70-001. Payment on t hi s check h a s been suspended.

I n accordance with instructions from th e Treasurer

o f t h e United States to have a l l endorsements cancelled before

redeposi t ing this i tem y o u a r e kindly requested t o cancel your

endorsement thereon

a n d

re tu rn

to

undersigned.

Yours very truly

Jose ph Hamilton (Signed)

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4 2 2

X-7169-Q-12

C O P Y

IJCTTERHEAD

0 1 THE


OF

DALLAS

November

4 , 1931

M r.

Dean Bippetoe, Assistant Cashier

First National Bank

Brownwood, Texas

Dear

M r.

Bippetoe:

We r e f e r t o your l e t t e r o f November 3 , enclosing Treas-

u r y

warrant

N o.

1150388, drawn

t o t h e

order

o f

Charles

F .

Bennett

f o r

$617,40, requesting that,

i f i n

order ,

t h e

amount

b e

credited

t o your account.

As advised you over t h e telephone today, this warrant

i s i n

con tro ver sy, having been ret urn ed

to u s "by th e

Treasurer

o f

t h e

United States

f o r

reclamation through

t h e

Examiner

i n

Charge

of the


of

Brownwood

on

account

of the

fac t

tha t

th e

payeee

h ad

requested that payment

h e

stopped

o n i t .

We

re turned

th e

warrant

to M r .

Lamb, Examiner

i n

Charge

of the


a t

Brownwood

f o r

reimbursement,

a nd

th is mat te r i s s t i l l r e c e i v i n g M r. Lamb's co ns id er at io n. There-

fo re

we

r e t u rn

th e

warrant

to you a nd a s k

tha t

y o u g e t i n

touch

with M r. TjmWh so t h a t he may he present when y o u discuss t h e m a t -

t e r

with your depositor,

who we

understand

i s t h e

payee, Charles

F . Bennett.

Kindly favor

us "by

acknowledging receipt

o f t he

enclosure.

Yours very truly

L . G-.

Pondrom

Assistant Cashier

LGPjHH

Attachment

c c to M r .

Ernest Lamb

National Bank Examiner

c / o


Brownwood, Texas

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4 2 3

X-7169-e-13

0 6 P Y

IS1TBEHELAD OF THE FIRST NATIONAL BASK, BROWNWOOD, TEXAS

November 3 , 1931 .


i n

Dallas,

Dallas, Texas.

Gentlemen:

We enclose here in Adjusted Service Ce rt if ic at e loan check

b y J . 3 .

Schommer, Disbursing Clerk

on the

Treasurer

o f t h e

United

States, dated September

28, 1931, and

being numbered 1,150,388,

i n

th e sum of $617.40, payable t o t h e order o f Charles F . Bennett, 109

E .

Chandler, Brownwood, Texas.

Prior endorsements on th i s i tem indi cate s that i t w as d e -

pos i ted i n t h e Citizens National Bank of th i s c i ty on October 3 r d ,

by

payee,

b u t o n

account

o f t he

closing

o f

that bank, payment

was

requested

to be

stopped,

a n d t h e

item

h a s

consequently been returned

t o t h e payee, who has today wired th e Treasurer o f t he United States

a t

Washington,

a s

follows:

Lift stop payment against check #1150388

J . B .

Schooner

* disburs ing c le rk t o Charles F . Bennett $617.40, adjusted

se rv ice ce r t i f i ca te loan

and

confix® your action

t o

First National Bank, Brownwood, since check

has now

been returned to me by other bank.

11

I f i t i s now in

order

to pa y

this check,

we

w i l l thank

you to

c r e d i t

o u r

account

a n d

advise

u s

when finally paid,

i n

order

tha t we may pay the funds over t o t h e endorser of the check only when

we

have rec ei ved f i n al payment.

Yours very truly,

Dean Bippetoe (Signed)

Assistant Cashier.

Y-r

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X-7169-S-14

6 0 F Y

EBTTBEHEib Off THE TBEASUBY DEPARTMENT WASHINGTON

Off ice o f

Treasurer

o f t he

United States

I n

replying quote initials AWS:C

October 28 , 1931.

Cashier,


Dallas, l e x .

REGISTERED MAIL

S i r :

Herewith a r e returned checks received with your letter of

October 17 , wi vh inc los ur e from Ern est Iamb, na ti on al Bank Examiner,

Brownwood, Texas,

a s

fol lows:

of

Check H o. Symbol Amoint Payee

108,170 11519 $100.00 Clar a l a r r Achor as Gdn.

E s t . o f

IToah

A . J .

Achor

1,150,388 99230 617.40 Charle s

F .

Bennett

2,59 5,77 8 70001 160.83 Jos eph Hamilton

I n case o f checks which were deposited f o r c o l l e c t i o n i t

i s t h e p r a c t i c e of the Comptroller of the Currency to charge t h e d e -

pos i to r ' s accoun t

a nd

re tu rn

th e

checks

t o h i m i f h i s

balance will

permit such ac ti on .

I f t h e

deposi to r ' s balance

i s

less than

the

amount o f t he check t h e bank i s owner o f t he check t o that extent ,

a nd the check i s re turned to the depositor upon repayment o f t h e d i f -

ference between h i s balance a nd the amount of the check.

Please return

t h e

checks

t o t h e

rep resen ta t ive

of the

Citizens National Bank, Brownwood, Texas,

a n d

advise th is o f f ice

i n

d e t a i l a s t o h i s pos i t i on i f y o u a r e n o t reimbursed within a reason-

able time.

Your correspondent should

be

advised that checks received

i n

t h i s o f f i c e

a r e

perfora ted wi th

a

date

and

symbols

f o r

i d e n t i f i -

cation purposes before clearance o r examination and such perforat ion

does n o t s ign i fy tha t a check h a s been paid.

Respectful ly ,

W. 0.

Woods

Treasurer .

(Signed)

Inclosures .

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4 2 5

X-7169-e~15

O O P Y

LETTERHEAD

OF THE

PEBERAL RESERVE BANK

OP

DALLAS

October

17 , 1931 .

Hon. W. 0. Woods,

Treasurer o f the United States,

Washington,

3D. C.

Sirs

Reference

i s

made

t o

your le t ters

o f

October

7 th an d

October

9 t h

enclosing checks

a s

described below:

Check

N o .

Payee Amount

108,170 Cla ra Pa rr Achor,

a s

Guardian

of Esta te o f Noah A . J . Achor • $100.00

1,150,388 Charles

P .

Bennet t 617.40

2,595 ,778 Joseph Hamilton 160.8 3

The

mat ter

o f

obtaining refund

t o

cover

th e

checks

was

r e f e r r e d t o t h e National Bank Examiner i n charge o f t h e Citizens

National Bank, Brownwood, Texas,

and we are

today

i n

r e c e i p t

o f

a

l e t t e r f rom

h im ,

copy

o f

which

i s

at tached .

The

checks

a r e

enclosed

f o r

your disposi t ion

and we ask

tha t

y o u

please advise

us i f we can be of

fu r t he r as s i s t anc e .

Respectful ly ,

L . G>. Pondrom,

Assistant Cashier,

LGP/S

8

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4 2 6

X-7169~e~16

C O P Y

LETTEHHEJU) Of THE FEDERAL RESERVE BANK OF DALLAS

October

13 , 1931 .

Hon, W. 0.

Woods,

Treasurer o f t he United States,

Washington,

D. C.

S i r :

Receipt i s acknowledged of your l e t t e r of October

9 t h , 1 9 3 1 , initials AWS-C, enclosing check N o. 1,150,388, drawn

t o t h e

order

of

Charles

F ,

Bennett

f o r

$617,40,

on

which payment

h a s

been stopped because

t h e

bank

i n

which

i t wa s

deposi ted

ha s

closed*

We are re turn ing t h e check to ou r endorser and as

soon as we receive a n y information regarding i t y o u w i l l b e a d -

vised .

Respect fu l ly ,

L . 0 . Fondrom,

Assistant Cashier.

LGP/S

s

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X-7169-e-l?

4 2 7

0 0 P Y

LETTERHEAD

OP THE

TREASURY DEPARTMENT, WASHINGTON

Office of

Treasurer

o f t h e

United States

I n

replying quote initials AWS-C

October

9, 1931

Cashier,


Dallas ,

Tex.

REGISTERED MAIL

S i r :

There i s returned herewith check N o. 1,150,388 dated

September

28 , 1931 ,

drawn

on

th i s o f f i ce

t o t h e

order

of

Charles

3P. Bennett, f o r $617.40, b y J . B . Schommer, symbol No, 99230,

which

w as

l i s t b d

i n

your t ranscr ip t

o f t he

Treasurer's account

dated October

5 , 1931 .

Payment

i s

declined

a t

this time

in com-

pliance with request dated October 7 , 1931 , from drawer, who asked

that payment

b e

stopped because

th e

bank

i n

which

t h e

check

was

deposited

h a d

become insolvent.

Please return

t h e

check through

t h e

indorsers

to the

rece iver

of the

fai led bank

f o r

del ivery

t o t h e

payee

i f t h e c i r -

cumstances war ran t t h i s a c t i o n . Returned Check Cre dit Ticke t

No.

72194 i s in cl os ed , with which to enter c redi t i n t h e Treasurer ' s

account.

Respectful ly,

W. 0.

WOODS (Signed)

Treasurer.

Countersigned:

Asst. Chief, Accounting Division.

REBiNR

AC-152

4

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X-7169-e-18

d f i

LETTEBHEAD OF THE FEDERAL HE SERVE BANK OF DALLAS

October 10 , 1931 .

Hon. W. 0 . Woods,

Treasurer

o f t he

United States,

Washington, E. C.

S i r :

Receipt

i s

acknowledged

of

your l e t t e r

of

October

7 t h , initials AWS-C, enclosing check No. 2,595,778, drawn to the

order o f Joseph Hamilton f o r $360.83, on which payment h a s been

stopped because t h e bank i n which i t was deposited h a s closed.

We are re tu rn ing t h e check t o ou r endorser a n d a s soon

as we

rece ive

a n y

information regarding

i t y o u

w i l l

be

advised.

Respectful ly,

L. G-. Pondrom,

Assistant Cashier.

LGEP/S

s

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C O P Y

EETIEEHEAD OF THE ZEDBEAL RESERVE BAM 07 DALLAS

October

10 , 1931.

Hon. W. 0.

Woods,

Treasurer

o f t he

United States,

Washington,

T. C.

S i r :

Receipt i s acknowledged of your l e t t e r o f October

7 t h , initials AWS-C, enclosing check l io , 108,170, drawn t o t h e

order

o f

Clara Parr Achor

a s Gdn . o f Es t . o f

Noah

A . J .

Achor

f o r $100.00, on which payment h a s been stopped because t h e bank

i n

which

i t w a s

deposited

h a s

closed*

We are

re turning

t h e

check

to ou r

endorser

a nd a s

soon

as we

rece ive

any

information regarding

i t y o u

w i l l

b e a d -

vised.

Respectfully, .

1 . 6 .

Pondrom,

Assis tant Cashier,

LGP S

s

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4 3 0

X-7169-e-20

0 0 F Y

LEiTEBEEAD OP TREASURY DEPARTMENT, WASHINGTON

October 7, 1931

Off ice o f

Treasurer o f t h e United States

I n replying quote initials AWS-C

Cashier,

Federal Reserva Bank,

Dallas, Texas,

REGISTERED MAIL

S i r :

There

i s

returned herewith check

N o.

2,595.778, dated

September

30 , 1931 ,

drawn

on

th i s o f f i ce

t o t h e

order

o f

Joseph

Hamilton,

f o r

$160#83,

"by A.

Zappone, symbol

No.

70001, which

was

l i s t e d i n your t ranscr ip t o f t he Treasurer's account dated October

2 , 1931 .

Payment

i s

decl ined

a t

this t ime

i n

compliance with

r e -

quest dated October 6 , 1931 , from th e payee, who asked that p a y -

ment h e stopped because t h e bank i n which t h e check w as deposited

h a d become insolvent.

Please return t h e check through t h e indorsers to the

r ece iver of the fa i led bank f o r del ivery to the payee i f t h e c i r -

cumstances war ran t t h i s a c t i o n . Heturned Check Cred it Tic ket No.

47030 i s in cl os ed , with which to en ter cred i t i n t h e Treasurer ' s

account.

Respect fu l ly ,

W. 0. WOODS

Treasurer .

Countersigned}


F:BB

A0-152

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4 3 1

X-7169~e^21

C . 0 P Y

LETTERHEAD t) f THE TREASURY DEPARTMENT, WASHINGTON

Off i ce of

Treasurer o f t he United States

I n

replying quote initials AWS-C

October

7 , 1931.

Cashier,


Dallas, Tex.

REGISTERED MAIL

S i r :

There

i s


N o.

108,170, dated

September' 30 , 1931, drawn on th i s o f f i ce to the order of Clara

Earr Achor

a s G dn . o f E s t . o f

Noah

A . J .

Achor,

f o r

$100.00,

by R. E . Waters, symbol N o. 11-519, which w as l i s t e n i n your

t r a n s c r i p t o f t he Treasurer

1

s account dated October 2 , 1931.

Payment

i s

decl ined

a t

this t ime

i n

compliance with request dated

October 6 , from t h e drawer, who asked that payment be stopped b e -

cause

t h e

bank

i n

which

th e

check

was

deposi ted

had

become insol-

vent.

Please return

t h e

check through

t h e

indorsers

to the

r ece iver of the fa i l ed bank f o r del ivery t o t h e payee i f t he

circ umst ance s warr ant t h i s a ct io n. Returned Check Cre dit Ticke t

N o.

47029

i s

inc los ed, with which

t o

en ter cred i t

i n t h e

Treasurer 's

account.

Respect fu l ly ,

W. 0. WOODS

Treasurer .

Countersigned:


AC-152 The check should be indorsed exactly a s drawn-

Clara Earr Achor a s Gdn . o f E s t . o f Noah A . J .

KMD:REL Achor, before i t i s again presented f o r payment.

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C . . P . * 1

X-7169-S-22

4 3 2

LETTERHEAD

o r THE

IBERAl BEE3RVE BANK

0 7

DALLAS

October 10 , 1931.

Examiner

i n

Charge,


Brownwood, Texas,

Dear

S i r :

There i s returned herewith check No, 108,170, drawn

t o t h e order o f Clara Farr Achor a s Gdn. of E s t . of Ivoah, A . J .

Achor,

f o r

$100.00, which hears

th e

endorsement

of -he

Citizens

National Bank, Brownwood, Texas,

o f

October

1 ,

1931,,

This check h a s been returned to u s "by t h e Treasury D e-

partment with

a

le t te r which,

i n

pa r t , reads

a s

follows;

Payment

i s

declined

a t

this time

i n

compliance with

request dated October

6 ,

from

th e

drawer,

who

asked that

payment

be

stopped because

th e

bank

i n

which

t h e

check

was

deposited

h a d

become insolvent.

Please return

t h e

check through

th e

indorsers

to the

rece ive r

o f t he

fa i led bank

f o r

del ivery

t o t h e

payee

i f t he

circumstances warrant th is act io n.

Under

t h e

circumstances please advise

u s i f i t

w i l l

be in

order

f o r u s t o

charge

th e

account

of the


Brownwood, Texas, t o cover.

Yours very truly,

L., Q-. Pondrom,

Assistant Cashier.

LGP/S

s

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X-7169~e«23 4 . 3 3

U p i

LStlEfiHEAD OT THE FEUEEAL RESERVE BAIJK OF DALLAS

October

13, 1931*

Examiner i n -Charge,


Brownwood, Texas.

Dear S i r :

There i s returned herewith check N o. 1,150,388, drawn

t o t he order o f Charles I . Bennett f o r $617,40, which bears t he

endorsement o f the Citizens National Bank, Brownwood, Texas, of

October

3 , 1931 .

This check h a s been returned to us by the Treasury D e-

partment with a le t te r which, i n pa r t , reads a s follows:

Payment

i s

dec l ined

a t

this time

i n

compliance with

request dated October 7 , 1931, from draw er, who asked that

payment b e stopped because t h e bank i n which t h e check was

depos i ted

h ad

become insolvent,

'•Please return th e check through t h e indorsers t o t he

rece ive r o f the fa i led bank f o r del ivery t o t he payee i f the

circumstances warrant th is act io n,

Under t h e circumstances please advise u s i f i t w i l l be in

order f o r u s t o charge t h e account o f the Citizens National Bank,

Brownwood, Texas, to cover.

Yours very truly,

L, Gr. Pondrom,

Assis tant Cashier.

LGP/S

s

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4 3 4

X-7169-e~24

6- 6 F Y

LETTERHEAD Of THE INDERAL RESERVE BANK OF DALLAS

October

1 0 , 1 9 3 1 .

Examiner

i n

Charge,


Brownwood, Texas.

Dear Sirs

There

i s


N o.

2,595,778, drawn

t o t h e order o f Joseph Hamilton f o r $160.83, which bears the

endorsement o f t h e Citizens National Bank, Brownwood, Texas,

o f October 1 , 1931 .

This check h a s been returned to us by the Treasury D e-

partment with a le t t e r which , i n pa r t , r eads a s fol lows:

Payment i s dec l ined a t this t ime i n compliance with

request dated October 6 , 1931 , from t h e payee, who asked

that payment

b e

stopped because

t h e

bank

i n

tzhich

t h e

check

w as depos i ted h a d become insolvent,

Please return

th e

check through

t h e

indorsers

to the

r ece ive r o f t h e fa i l ed bank f o r de l i ve ry t o t h e payee i f t h e

circumstances warrant this action.

1 1

Under t h e circumstances please advise u s i f i t w i l l be in

order f o r u s t o charge t h e account o f the Citizens National Bank,

Brownwood, Texas,

t o

cover.

Yours very truly,

L. G> Pondrom,

Assis tant Cashier .

LGPJS

s

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X-7169-e-25

4 3 5

A.

JO

P . I

LETTERHEAD OP teE CITIZENS NATIONAL BANK OP BBOWOTOOD, BBGWNWOOD, TEXAS

October 16* 1931.

Pederal Reserve Bank,

Dallas, Texas.

Gentlemen:

Receipt i s acknowledged of your letters enclosing Government

checks payable t o :

Clara Parr Achor,

a s

Guardian

o f

Es ta te

of

Noah A* J . Achor, f o r ——————————

Charles

P .

Bennett

-

- - - - - - - -

Joseph Hamilton - - - - - - - - - - - - -

which appear t o have been returned to you on account o f payment being d e -

cl ined i n compliance with request dated October 6 t h from t h e drawers, who

asked that payment

be

stopped because

t h e

bank

i n

which

t h e

checks were

de-

pos i ted h a d become insolvent.

The records o f this bank show that t h e parties mentioned d e -

posited these checks f o r c r ed i t and had checked ag ai nst t he i r balances

before t h e bank suspended. I n addition thereto each a n d a l l o f t h e

checks show t o be punctured paid by t he Treasury Department a n d , replying

t o your question i n t h e last paragraph o f your le t te r s , y o u a r e advised

that we take t h e po si ti on t ha t , based upon a l l t h e circumstances i n t he

case,

w e a re n o t i n

p o s i t i o n

t o

give

y ou

au thor i ty

t o

charge

t h e

account

of The Citizens National Bank of Brownwood with t h e chec ks. Ther efore ,

w e a re

re tu rn ing

t h e

checks

to you

requesting that they

b e

returned through

t h e regular order with a n y notat ion you may deem proper t o make.

Respectfully yours,

Er ne st Lamb (Signed)

National Bank Examiner.

$100,00

617,40

160.83

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436

Copy

X-7169-f

June

2 , 1932.

M r , J . S . Walden, J r . , Chairman,

Standing Committee

on

Collect ions,

Federal Reserve Bank o f Richmond,

Richmond, Virginia.

Dear

M r.

Walden:

I

have received

a n d

greatly appreciate your kind

l e t t e r o f June 1 , 1932, regarding t h e mat te r o f c a l l i n g a

meeting

of

Counsel

f o r th e

Federal Reserve Banks with

t h e

Standing Committee

on

Collect ions

t o

consider

th e

mat te r

of

cas hing government checks a n d warrants by Federal Reserve

Banks under

th e

terms

o f

Treasury Department Circular

No. 176.

I

apprec ia te

t h e

d i f f i c u l t i e s

of

ob ta in ing fu l l a t t end-

ance

a t a

conference

o f

this kind during

t h e

summer months,

a nd

I personally would prefer to hold th e conference i n t h e la te

summer

o r

e a r l y f a l l ;

b u t

Counsel

f o r one o f t h e

Federal Reserve

RariVp

h a s

a l ready ca l led

my

a t t e n t i o n

t o t h e

fact that many

of t he

courts which take recesses during t h e summer resume their terms

during

t h e

month

of

September,

a n d

this makes

t h e

months

of

September

a n d

October unusually busy months

f o r

some

of the

Counsel.

I t

L a y

b e

necessary , therefore ,

t o

hold

t h e

c o n fe r -

ence

n o t

later than August,

i n

order

t o

enable Counsel

t o

re turn

home i n time t o a t t end t o t h e i r l i t i g a t i o n . I n the circum-

s tances ,

I

s h a l l

a s k

Counsel

f o r

each

o f t he

Federal Reserve

Banks

t o

advise

me

when

i t

would

be

most convenient

to him to

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437

X-7169-f

Mr, J . S» Walden, J r . 2

attend such

a

conference

a nd 1

suggest that

you

make similar

inqu i r i es of the members o f your Committee and advise me of the

r esu l t s . Th i s i s t he only way that I know of whereby we can

a r r i v e

a t a

date convenient

t o a

major i ty

of a l l

those concerned.

I

wish

yo u

would also

be

giving some thought

to the

question of proc edu re. Undoubtedly, i t would be advisable f o r t h e

Counsel a n d t h e members of t he Standing Committee on Collections

t o

agree upon

a

def in i te pos i t ion before tak ing

th e

mat ter

u p

with

t h e o f f i c i a l s of the Treasury Department; bu t t he o f f i c i a l s o f

t h e Treasury Department may des i re to have some time t o study the

recommendations

o f t he

Counsel

a n d t h e

Standing Committee

on

col le c t ion s before they pa r t i c i pat e i n a conference. I t may be

necessary t o hold tw o conferences on the sub jec t ; bu t I think this

should b e avoided i f p o s s i b l e . I f a second conference i s found t o

b e

abso lu te ly necessary ,

i t

would seem

to me

tha t

i t

need

no t be

at tended b y a l l o f t h e Counsel a n d a l l o f t h e members of the Standing

Committee on Col lec t ions , b u t tha t t h e views of the Federal Reserve

Banks could

be

presen ted

b y a

small committee appointed

f o r

that

purpose. Apparently t h e Governors' Conference does n o t des i re

further recommendations

to be

submitted

t o

them

b u t

expects

the

Counsel a nd the Standing Committee on Collect ions t o take t h e matter

u p with t h e o f f i c i a l s o f t he Treasury Department, agree upon the

necessary changes

i n

Treasury Department Circular

176, and

report

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X-7169-f

M r . J . S . Walddn, tfrs 3

th e r e s u l t s . I have no fixed views about t h e matter, however,

and I s h a l l b e very glad t o receive any suggestions which you or

any of the o ther in te res te d par t i es may have t o o f f e r .

I have received t h e eight copies o f the repor t of the

Standing Committee on Collections which y ou sent me and have

obtained one additional copy from a member o f t he Board. I am,

therefore, sending copies t o Counsel f o r a l l t h e Federal Reserve

Banks except Chicago a n d Dal las , who I unde rst and from your

letter already have copies,

and Mr,

Wallace,

who can

obtain

a

copy from

y o u .

With kindest personal regards

a nd a l l

best wishes,

I am

Very truly yours,

4 3 8

WW/gc

Walter Wyatt,

General Counsel.

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4 3 9

.QoftV X-7169-g

Jede 1-4,1 fi serve Bank

Of Richmond,

June 1 , 1932 .

Uti

Walte r Wyatt, Genera l Counsel,

federal Reserve Board,

Washington,

D. C.

Dear M r . Ifyatt:

Your le t ter of May 36th, which was acknowledged by Mr.

Broaddus, was received during my absence from t h e bank which accounts

f o r m y delay i n rep ly ing .

x

I can fu l ly apprec ia te th e fac t tha t you have been burdened

with important matters

a n d

th a t

i t h a s

been impossible

f o r y o u t o

c a l l

a

meeting o f the counsel f o r t h e Federal reserve banks with t h e Standing

Committee

on

Collect ions

t o

consider

t h e

matter

o f

cashing Government

checks and warrants by Federal reserve banks, which was r e f e r r e d to the

counsel

by t he


of

December,

19 31 . I am

sure that

t he

o f f i c e r s o f the Federal reserve banks also have been burdened with work r e -

su l t ing pr incipal ly f rom t h e operations o f the Reconstruction Finance Corpo-

r a t i o n , a s I know this h a s been true i n my case.

I t w i l l b e agreeable with me to hold a meeting o f t he counsel

and Standing Committee on Collections during t h e summer a f t e r Congress a d -

journs ,

and I

presume that

one

time will suit about

a s

wel l

a s

another .

We

a r e almost certain, however, t o run into vacations a nd i t i s more than likely

that some

o f th e

members

o f the

Committee,

a s

wel l

a s

certain counsel,

may

n o t b e able to a t t en d t h e meeting unless they know o f i t f a r enough i n advance

t o arrange their vacation accordingly. You wi l l r e ca l l tha t i n t h e summer of

1930 when t h e Standing Committee on Collections w as considering t h e subject

o f a uniform cash collection circular i n consultation with a special committee

of

counsel

we

experienced

a

great deal

of

d i f f i c u l t y

i n

reaching

a n

agreement

on the f ina l r epor t and I was considerably delayed a n d inconvenienced because

c e r t a i n

o f t he

members present

a t o u r

f i r s t mee t ing s ta r ted

on

vacations

and

could no t be reach ed. While per son al ly I am perfect ly agreeable t o holding

t h e

meeting this summer,

a s

long

a s t h e

matter

h a s

already been delayed

f o r

qui te a while i t might b e adv iaa lk t o arrange a meeting during t h e ear ly f a l l

a f t e r

a l l of th e

counsel

and

members

o f the

Collection Committee have returned

from vacation. I t occurs to me that your work will be made very much easier

and you w i l l n o t b e subjected t o t h e s tra in that wil l a lmost cer ta in ly resu l t

i f you attempt t o have a n agreement reached before t h e summer i s over . I

w i l l be very glad t o communicate with t h e other members o f the Standing Committee

on Collect ions a s soon a s you l e t m e know i f you des i r e t o have t h e meeting

during th e summer months.

I am sending y ou under separa te cover eig ht c opie s o f the report

of t he

Standing Committee

on

Collect ions

t o t h e

f a l l

1931

Conference

of

Governor?,,

The topic under consideration i s t r ea ted a t t h e beginning o f t h e r e p o r t . Ifor

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4 4 0

X-7169-g

M r, Walter Wyatt> Geharal Cotinsdi» «4 & June 1 , 1932

Federal Heserve BoArd,

Washington; Dt Ci

supply of extra copies h a s been entirely exhausted.and I am sorry that I

am not able to send you t he number requ ested. When t h e repor t w as f in ished

i n August, 1931 , I sent a copy t o t he Governor o f each Federal Reserve Bank

with a letter dated August 1 3 t h , a n d I also sent a n extra copy to the

Federal Be se rve Banks o f Chicago, a n d Dallas f o r t h e u s e o f their counsel.

I also sent a separate copy t o each member o f th e Standing Committee on

Collect ions , represent ing t h e Federal Reserve Banks of New York, Phila-

delphia, Cleveland, Richmond a n d S t . Lou is . There a r e , therefore, seven

banks which should have

a t

l e a s t

tw o

copies

o f the

repor t

i n

t h e i r f i l e s .

I t does n o t seem to me t h a t i t w i l l be necessary f o r y o u t o send a copy t o

those banks represented

on the

collection committee since

I am

sure that

t h e committee members c a n l e t their counsel have their copies. I also sent

on

August

1 2 t h

seven copies

to Mr*

McClelland

f o r t h e u s e o f

members

o f t he

Federal Reserve Board a n d i t i s probable that you will find some o f these

i n t he

f i l e s

o f the

Board . When

th e

conference

met t he

f i r s t

o f

December,

1931 , I sent t o M r . S t r a t e r , c / o Federal Reserve Board, twelve copies f o r

t he u s e o f t he Governors attending t h e Governors' Conference. I t i s probable

that some

of

these were left

i n t h e

conference room

and no

doubt

yo u

wil l

be able t o g e t together a sufficient number o f copies to supply t h e counsel.

Awaiting your further advices, I am with high est perso nal

regards,

Cordially yours,

(Signed) J . S . Walden, J r . ,

Controller .

JSW:D

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