Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, February 3, 1919, Volume 6, Part 1

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At a meeting. of the Federal Reserve Board held in
the office of the Board on February 3, 1919, at 11:20 A.M.,
PRESENT: The
Mr.
Mr.
Mr.
Mr.

Governor
Miller
Hamlin
Williams
Broderick, Secretary.

By unanimous consent the reading of the minutes of
the meetings of the Board held on January 29th and 30th, of
the Executive Committee held on January 31st, and of the
Gold Export Committee held on January 30th and 31st, and
February 1st and 3d, was postponed.
Morning business was presented and disposed of as
follows:
The Governor submitted final proof of the text of
the Annual Report of the Board for the year 1918, and asked
authority to have 600 copies thereof printed for release for
publication at twelve o'clock noon, February 8th.
Approved. Ordered that a copy be delivered
to each member of the Banking and Currency Committee of the Senate and House of Representatives.
The Governor reported the purchase on January 31st,
of special 2;; certificates of indebtedness of the United
States for :500,000 for the Federal Reserve Bank of Atlanta
for deposit with the Comptroller of the Currency as collateral
for Federal Reserve bank notes.




Approved.

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Letter dated January 31st, from the Federal Reserve
Agent at New York, requesting formal approval of the purchase
by the Federal Reserve Bank of New York of the Penfield and
Ely properties, at a cost of

663,000 and 4;200,000 respectively,

general approval having heretofore been expressed by the Board.
Approved.
Memorandum dated February lst, from Fiscal Agent Imlay,
submitting list of State banks whose applications for membership in the Federal Reserve System were conditionally approve°
by the Board prior to rovember 30, 1918, but which banks have
not completed membership by accepting conditions and making
payments on capital stock.
Voted that any application for membership in the Federal Reserve System received from
a State banking institution and approved by the
Board prior to September 30, 1918, the conditions of approval of which have not up to
this date been completed, shall be regarded as
abandoned.
The Governor reported the reserve positions of the
several Federal Reserve banks.
REPORTS OF COMUITTLE NO. 1:
Dated February 3d, recommending admission of State institutions as set forth in the auxiliary
minute book as of this date, subject to
the conditions stated in the individual
reports attached to each application.
Approved.




)
c
Dated February 3d,(2 reports) recommending changes in stock
at Federal Reserve banks as set forth in
the auxiliary minute book as of this date.
Approved.
Letter dated February 1st, submitting the resignation
of W. E. Walter as Federal Reserve Examiner, effective February 6th.
Approved.
Other business was presented and disposed of as
follows:
Letter dated January 31st, from Director of the
Bureau of Engraving and Printing, requesting approval of plan
to plate print federal Reserve notes without the name and
symbol of each bank and afterwards surface print such identification marks in proper position.
Approved.
The Governor stated that the situation with respect
to cotton in the :;outh had become an acute one and that he
had been invited to address the Legislature of the State
of South Carolina on the subject on Thursday, February 13th,
and asked authority to visit Columbia, South Carolina, for
this purpose at the expense of the Board.
Approved.
The Board than proceeded to the consideration of
the proposed creation of a fifty million dollar Belgian ac-




87

-4ceptance syndicate.

The following gentlemen appeared be-

fore the meeting upon invitation of the Board:

Mr. Pierre

Jay, Federal Reserve Agent at rew York; Mr. E. R. Kenzel,
Manager of Investments, Fedei'al Reserve Bank of New York;
Mr. Albert Breton and Mr. Harold Stanley, Vice Presidents
of the Guaranty Trust Company of New York; and Mr. J. E.
Rovensky, Vice President of the National Bank of Commerce
•
In New York; the three gentlemen last named representing
the American syndicate managers.

Mr. Jay stated that the

gentlemen named had a conference on the subject today with
the Secretary of the Treasury, who had informed them that,
while he felt that contracts calling for renewal of credits
were not entirely in accord with the spirit of the Federal
Reserve Act as enacted, he recognized that present circumstances altered the situation.

He stated that the Secre-

tary had expressed the view that he hoped the wish of the
Belgians could be met, that the guaranty of discounts would
be made at a commission of one-half of one per cent instead
of one per cent above the Federal Reserve Bank 90 day discount rate for bankers' acceptances, but that he was not
opposed to the credit and would not insist upon a reduction
of the rate.

In response to the Board's inquiry, the repre-

sentativesof the American Syndicate managers stated that it




88

would not be possible to reduce the rate because of the
fact that the drafts against the credit would be drawn by
the Societe Generale Belgique and the limitation of 1(i'; of
capital and surplus for any one corporation would restrict
to '49,500,Lio0 acceptance by the New York bankers, and it
would be necessary to market same all over the country where
discount rates were higher than in Yew York.

The meeting

then proceeded to a detailed discussion of the plan of operation and terms of the agreement under which the credit would
be extended.
(During the course of the discussion the Governor withdrew
from the

meeting

to consult with the Secretary of the

Treasury on the subject, but finding him engaged requested
his private secretary to inform him that the Board was in
session on the subject and would like the benefit of an expression of his views.

The Secretary of the Treasury

informed the Board through his private secretary, Mr. Kyle,
that he did not care to express any further views on the
subject and was perfectly willing to leave the solution of
the matter entirely in the hands of the Board).
The officers of the Federal

eserve Bank of New York

and the representatives of the American Syndicate were then
requested to withdraw from the meeting, and further discussion




89

-6was had by the members of the Board.
Voted that the Executive Committee be authorized to prepare and transmit to Mr. Jay, in
response to Mr. Kenzel's letter of January 26th,
a letter to the effect that, without indicating
approval by the Board of the tenor of the agreement creating the syndicate nor of the charges
mentioned therein, the Board admits the eligibility for discount by Federal Reserve banks of
acceptances drawn pursuant to the plan as submitted
to it.
At one o'clock P.:., the Board took a recess pending
the preparation of the letter.

After recess, the amicutivo

Committee submitted for approval the following:
"February 3, 1919.
"Dear Sir:
"The Board has considered your bank's letter
dated January 26th, signed by Mr. E. R. Kenzel,
1.:anager of Investments, Which relates to a proposed
credit of .;,50,000,000 for Belgium to be granted by
a syndicate of Belgian banks.
"It is understood that drafts drawn against
this credit are to be drawn by the Societe Generale
Belgique, representing the consortium of participating
Belgian banks, at ninety days' sight and three renewals,
and it is also understood that one year's time is estimated by the Belgian banks as the minimum time required
for the purchase of raw materials in the United States,
their transportation and manufacture, and the sale and
realization on the manufactured goods sold. It is further understood that the security for this credit is the
joint and several guarantee of the Belgian Bank Syndicate, consisting of seventy-seven leading banks, secured
by the obligations of Belgian manufacturers to these
banks In the form of acceptances or notes, and that the
National Bank of Belgium, which is one of the banks included
in the group guaranteeing the credit, will see that the




90

-7proceeds are used only to provide funds in America
to purchase American supplies for the reestablishment of industrial operations, and that no part of
this credit will be used for other than industrial
and commercial purposes.
"The Board deems it unnecessary to approve or
disapprove of the proposed terms to participants in
the syndicate and to syndicate managers, and cannot,
of course, make any engagement that the Federal Reserve Banks will discount or purchase the bills drawn
and accepted under the proposed credit arrangement,
but it will admit the eligibility of the bills so
accepted and drawn in case the Federal Reserve Banks
should desire to discount or purchase them.
Very truly yours,

Governor.
"Mr. Pierre Jay, Chairman,
Federal Reserve Bank,
New York."
Approved.
At 3:30 P.M., the meeting adjourned.

7U, LcSecretary.
Approved:




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