FEDERAL RESERVE BOARD 558

WASHINGTON 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 December 29, 1933* 3-941.

SUBJECT: Fiscal Agency and Depositary Expenses.

Dear Sir:

The October 1933 Governors' Conference considered Under Secretary

of the Treasury Ache son's l e t ter of August 21, 1933» suggesting that the

Treasury hereafter reimburse the Federal Reserve "banks only for f i s c a l

agency expenses which represent direct additional expenses, such as

printing and postage, incurred sole ly on account of now issues of secu-

r i t i e s at the time of i ssue , and appointed a committee of throe gover-

nors to confer with the Federal Reserve Board and the Treasury with a

view to arriving at some equitable basis for reimbursement. Following

a conference with this committee, consisting of Governors Fancher,

Martin and McKinney, the Board requested the Division of Bank Operations

to work out a uniform formula for use in determining f i s c a l agency ex-

penses, to assemble data showing the amount of such expenses absorbed

by each Federal Reserve bank, and to obtain an estimate of the additional

amount which each bank would be required to absorb i f the suggestion

contained in the Under Secretary's l e t t er of August 21 were adopted*

Inasmuch as the question of reimbursement for f i s c a l agency ex-

penses has arisen on several occasions in the past and as to comply

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

559 — 2 —

with the request of the Under Secretary of the Treasury would r e s u l t in

the Federal Reserve banks assuming a large proportion of the cost of

new i s s u e s of s e c u r i t i e s in addit ion to the cos t of a l l other serv ices

rendered the Treasury, i t i s f e l t that complete information should be

avai lable as to the cost of the various c l a s s e s of operations performed

by the Federal Reserve banks for the Treasury in the several c a p a c i t i e s

of f i s c a l agent, depositary, and custodian, and p a r t i c u l a r l y the ir out -

of-pocket expenses in t h i s connection. Such f i g u r e s are not now a v a i l -

ab le .

Accordingly, we have prepared the attached forms on which i t i s

requested that the Federal Reserve banks report their expenses during

the l a s t ha l f of 1933 in connection with their f i s c a l agency and deposi -

tary operat ions . Forms are also included covering s erv i ce s performed

for the Reconstruction Finance Corporation and the Farm Credit Adminis-

trat ion in order that v/e may have data s imi lar ly compiled covering a l l

f i s c a l agency and depositary serv ices performed for the Government and

a l l i t s agenc ies . The cost of s erv ices , i f any, performed for Government

agencies not s p e c i f i c a l l y mentioned should be reported on the inc losed

blank forms. I t w i l l bo noted that the expenses are c l a s s i f i e d in accor-

dance with B u l l e t i n Ho. 1 of the General Accounting O f f i c e and are sub-

divided into reimbursable expenses and expenses not reimbursable; a l so

that in addit ion there i s to be shown the part of the t o t a l expenses

representing d i r e c t , or out-of-pocket expenses, such as s a l a r i e s of

employees regular ly assigned, compensation paid extra help, supper money,

travel expenses, p r i n t i n g , postage, e t c . , which wuuld not be incurred in

connection with other a c t i v i t i e s of the banks.

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

It i s hoped to obtain f igures for the l a s t hal f of 1933, based on

careful estimates where actual f igures are not avai lable , covering the

tota l expense to the Federal Eeserve banks of a l l services performed for

the Treasury and for other Governmental agencies, and to have th is in -

formation compiled on as nearly a uniform bas i s as pract i cab le . Accord-

ingly , i t i s requested that in preparing the information ca l l ed for in

the attached forms specia l attention be given to the description at the

top of each form of the operations, the cost of which i s to be included

in the report . Attention i s invi ted to the fac t that while some of the

operations are ident i ca l with those included in certain "expense uni ts"

of Form E, the to ta l expense w i l l not agree with Form E f igures because

of the inclusion in the attached forms of certain expenses that are not

distr ibuted in Form E reports*

As i t has been the po l i cy of the Treasury Department for a number

of years to reimburse the Federal Reserve banks for expenses incurred in

connection with new i s sues only, your comment i s part i cu lar ly invi ted

on Exhibit A defining the operations which for present purposes are to

be regarded as being connected with new i s s u e s . Please indicate any

amendment of this exhibit that you would recommend for any future com-

p i l a t i o n of expenses connected with new i ssues and also the extent , i f

any, to which the operations described therein d i f f e r from the operations

which you have included heretofore in determining the cost of new issues

for the purpose of obtaining reimbursement from the Treasury.

It i s be l ieved that a l l of the items on the attached forms except

those commented on s p e c i f i c a l l y below are se l f -explanatory. Salaries

of bank o f f i c e r s should include an appropriate part of the salary of any

o f f i c e r v/lio devotes an appreciable amount of time to supervision Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

- 4 -

of the operations covered in any given statement. The items "Furnish-

ing of heat, l i g h t , power, water and e l e c t r i c i t y " and "Furnishing of

janitor, elevator and cleaning service" should "be shown for a l l oper-

ations to which de f in i t e space has been assigned and in most instances

wi l l represent an estimated part of the total expenses of the Federal

Reserve bank for such purposes.

I t i s contemplated that the expense reports submitted on the

attached forms shal l show combined f igures for the head o f f i c e and

branches, i f any. As regards the statement on space u t i l i z e d , however,

i t i s requested that a separate report be submitted for the head

o f f i c e and for each branch, i f any. Special attention i s ca l led to

the footnote on t h i s form providing that rent received shal l include

any expenses incurred by the bank for heat, l i g h t , power, water and

e l e c t r i c i t y and for janitor, elevator and cleaning service, the cost

of which i s reimbursed to the Federal Reserve bank.

Very truly yours,

E. L. Snead, Chief, Division of Bank Operations.

Inclosures.

COPY TO ALL GOVERNORS*

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