frsbog_mim_v31_0203.pdf

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FEDER L RESERVE BO RD

WASHINGTON

ADDRESS OFFICIAL CORRESPONDENCE T O

T H E FEDERAL RESERVE B OARD ^ 6 4 1 3

November 7, 1929.

SUBJECT: Canadian Currency.

Dear

S i r :

After reviewing replies received from the Fed-

era l reserve banks

to the

Board's letter X-6370

of

September

4, the

Board

has

approved

the

report

of the

Committee on Canadian currency with some modification

in the

press statement.

The

Board will issue

the

statement

to %he

press

a t 2 o'clock on Friday, November 22, and i t i s suggested

that

a

corresponding statement

be

given

to the

press

a t

your head office and if you think i t advisable a t each

of

your branches,

if any.

I t

should

be

understood

i n

this connection that

th e Canadian currency r e ceived from member banks may be

shipped to the Detroit branch of the Federal Heserve

Bank

of

Chicago

f o r

conversion into United States

cu r -

rency or i t may be disposed of locally in any manner

which

the

Federal reserve bank

may

deem advisable.

A

copy

of the

statement

to be

given

to the

press by the Federal Reserve Board together with a

draf t

of a

l e t t e r

to be

sent

by

each Federal reserve

bank

to

member banks

i n i t s

d i s t r i c t

i s

enclosed here-

with. If you feel that the l e t t e r to member banks i n

your district should

be

amplified somewhat

th e

Board

has no

objection

to

your adding

to i t bu t

would

sug-

gest that no changes be made in the statement to be

given

to the

press.

Very truly yours,

E. M.

McClelland,

Enclosures Ass is tan t Secretary*

TO

GOVERNORS

OF ALL F , R .

BANES.

7/17/2019 frsbog_mim_v31_0203.pdf


&-6413-A

September-*,

1929.

p

rW

REPORT

o r

W v i i m i l

ON

BZBEMFHOH OF ASi-DIAU CUKR3NCY

Jfo the Federal Reserve Board,

Washington, D. C.

Dear Sirs:

The Committee appointed to determine th e most efficient

and economical means of effect ing th e redemption of Canadian c u r -

rency begs, to transmit herewith i t s recommendations;

( a ) That a l l Federal Reserve Banks offer their

f a c i l i t i e s to member hanks fo r t h e collection

and conversion of Canadian currency into United

States currency a t t h e current rates of exchange,

(b ) That t h e Federal Reserve Banks absorb th e cost of

shipping Canadian currency from th e member banks

to their respective Federal Reserve Banks but

that they deduct am allowance to cover shipping

charges, if any, from th e Federal Reserve Banks

to the points of conversion into United States

currency,

( c ) That a l l Federal Reserve Banks send a circular*

similar to the attached draft, to their member

hanks stating th e terms upon which Canadian c u r -

rency will be received,

(d ) That t h e Inderal Reserve Board and each Federal Re-

serve Bank and Branch simultaneously give to the

7/17/2019 frsbog_mim_v31_0203.pdf


X- 6413-ii

S O

- 2 - I

f

press copies Of the attached circular announcing

terms under which the Federal Reserve Banks and

Branches will receive Canadian currency.

With respect to the procedure under which Federal *56serve

Banks and their Branches will handle the collection and conversion

of Canadian smi rflrrey, th e Committee suggests that th e Federal Re-

serve Banks

and

Branches ship Canadian currency direct

to the

Detroit Branch

of the

Federal Reserve Bank

of

Chicago

f o r

conversion

and

credi t ,

or

make such other disposition thereof

a s

conditions

i n

their distr icts warrant. The Committee believes that i t i s impor-

tant that each Federal Reserve Bank employ

th e

most economical means

of

conversion.

The

Committee also suggests that Federal Reserve

Banks permit member banks to include Canadian currency i n their ship-

ments of United States currency provided both kinds of currency a re

properly segregated within the package.

The Committee believes that the Fedaral Reserve Banks should

not at %his

t ime offer their faci l i t ies

to

member banks

fo r t h e c o l -

lec t ion and conversion of Canadian coin.

Your Committee h as considered th e des i rabi l i ty of a pos-

sible arrangement with

the

Canadian Government

or the

Canadian banks

which would provide

fo r t h e

exchange

of

United States

and

Canadian

currencies a t p a r | While in theory much may be said i n favor of

such

a

plan,

i t

appears

to be

inadvisable

to

endeavor

to

exchange

»

•

Canadian and United States currencies a t p a r without making similar

arrangements

to

maintain exchange

a t

parity between

the two

countries,

a subject which your Committee does no t have under consideration#

*

Respectfu lly submitted:

E . L.* Saead

(S ) W e i . R. Cation

J . B . Crane

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X-6413-b

November

22, 1929


To

Member Bank Addressed:

Enclosed herewith i s a statement which the

Federal Reserve Board

and the

Federal reserve banks

and branches have given to the press, relating to the

conversion into

U. S.

funds

of

Canadian paper currency

spent

i n

this country.

I n

accordance with this statement,

you may

include Ca.nad:La~i paper currency

i n

your shipments

of

United States currency provided the two kinds of currency

a r e

properly segregated withif.

the

package.

Credit f o r such currency will be given f o r

i t s

face value

and

when

the

cost

of

conversion into

United States funds

i s

determined, which should

generally average loss than one per cent, such cost

wil l

be

charged

t o

your reserve account.

7/17/2019 frsbog_mim_v31_0203.pdf


COPY

X 6 4 1 3 C

F E D E R A L S I S E B T E B O A R D

STATEMENT FOE THE PRESS

For

release

Friday, November 22, 1929%


The

Federal Reserve Board, announces that

a

plan

h as

been

worked out and. wi l l be p ut in operation f o r handling Canadian currency

deposited, with Federa l reserve banks, a t a miriiwnp of the actual c o l -

lection charges incurred by them.

The discount on Canadian currency brought int o the United

States by travelers has frequently ranged a s high as 10 and sometimes

even

a s

high

as 20 per

cent,

a t

places remote from

th e

border line.

This i s regarded a s excessive and has given rise to a feeling o f re -

sentment i n Canada, especially as United States currency i s generally

accepted a t pa r i n Canada, *

The

Federal Reserve Board

h as

taken

the

subject

up

with

the

Federal reserve banks and they have agreed to of fe r the i r fac i l i t ie s

to member banks f o r t he collection and conversion of Canadian paper

currency into United States currency a t t he current rates of exchange.

The

Federal reserve banks wi ll absorb

the

cost

of

shipping Canadian

paper currency from the member banks to their respective Federal r e -

serve banks

b u t

will deduct

an

allowance

to

cover

the

actual exchange

charges, and insurance and shipping charges, if any, from the Federal

reserve banks to the points of conversion into United States currency.

Daring

the

past three years

the

cost

of

conversion

of

Canadian currency

into United States funds, including both

the

exchange

and the

shipping

charges, h a s averaged less than 1 pe r cent.

The new method which is to be pu t into effect by Federal reserve

banks

f o r

handling Canadian currency

in the

future, will, however,

r e -

sul t

i n

such substantial reductions

in the

cost

of

collecting this

currency as to bring i t close to p a r . The Board feels that i f member

banks cooperate i n this mattfr by extending a similar service to their

customers, Canadian tourists traveling i n th is country wi l l fi nd Ameri-

can merchants willing to accept Canadian currency a t o r near p a r .

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