Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, June 25, 1918, 11:25 AM, Volume 5, Part 2

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

2,t a regular meeting of the.:federal Reserve
hoard held in the office of the Board

on Tuesday, June

25, 1918, at 11:25 11.L.,
211E6LNT:
-

Lir. Harding, presiding,

Mr. Hamlin,

Yr. Warburg,

Ur. V,illis, Secretary.

r

Mr. Miller,
The minutes of the meeting of the Board held on
June 20th and 22d were read and on motion approved.
The minutes of the meetings of the .xecutive
Committee held on June 21st and 22d were read and on
motion approved and the action therein set forth ratified.
The minutes of the Gold Export Committee held on
June 21st, 22d, 24th and 25th were presented and on
motion approved and the action therein set forth ratified.
Governor Harding filed with the Board a letter
from the Comptroller of the Currency dated June 22d, re6arding
the attitude of the Governor re guaranty of bank deposits,
which vas read and ordered filed.

A reply written by

Governor Hardin„; to the Comptroller was road and ordered
filed.
letter from the Comptroller of the Currency
asking that further discussion of the question of guaranty
of bark deposits be deferred until late in the meeting
was read and on motion it vs abroad to vote on the subject at 12:45

this day.

1....";




Discount rate sheets for Federal Reserve
Banks (no changes) were presented and ordered filed.
The question of discount rates in general
was taken up for consultation and discussed.
In this connection Governor Harding submitted
to the Board a plan set forth in resolutions adopted
by the Federal Reserve Bank of Kansas City re a differntial in discount rates, which was read and referred to
Committee

re.

2.

Mr. Millar moved that it is the opinion of the
i?ederal Reserve Board that the rate should be advanced on15 day Liberty Loan paper to
and that in its opinion no risk would be run in carrying through the present program of Government financing
on this basis during the coming months, the subject to
be made the basis of a memorandum for presentation to
the Treasury Department and to be reported back to the
Board.
2,:r. Hamlin moved as a substitute that Mr. Miller
be requested to prepare a report on the v.hole subject
to be presented at the Governors! conference.

Both

motions were laid on the table.
Mr. ";;arburc offered an informal report for Committee Fe. 2 that it is the sense of the Board that there




should be an increase in the 15 day rate and the
matter be taken up in full at the conference with
Goiernors and each Governor be asked that he state
his view of the effect of the increase on Government financing.

The report was received and it was

agreed that a further report be filed in writing.
A letter from Assistant Secretary Leffingw.ell
transmitting a letter from Governor V,old, re discount
and barking conditions in the Minneapolis district
was read and referred to Committee No. 2.
On motion it was voted to approve the appointment of Matthew C. Lynch as Assistant Federal Reserve
e.4.00 per month, effective
Agent at Jan irancisco at'
on assuming duty.
On motion it was voted to appoint George B.
Smithson as clerk in Mr. Miller's office at 45 per
month, effective July let.
On motion it was voted that the Statistician
be requested.to report fully on the subject of percentage relation's of reserve deposits and rediscounts
of member banks.
It was ordered that the question of salaries
and dividends at the Federal Reserve Bank of Philadelphia be docketed for Thursday, June 27th.

It was




further agreed that salary and dividend matters
referred to the Executive Committee during the
present month shall be referred with power.
letter from the Secretary of the Board
re-submitting his resignation zas read and on
motion it was accepted ef:ective one month after a
date to be named by him, he to be relieved of
regular official duty during that period.

The

Governor was authorized to express the Board's 'feeling regarding the work of the Secretary.
The special Corp.mittee of the Board (Mr.
Harding and Mr. :Alliams) appointed to name directors at the new Jacksonville branch reported
that it had accordingly named the following as
directors for the Board: John C. Cooper,Chairmand Fulton
Saussy.

The following directors for the Jacksonville

branch named by the Bank were approved: B. 1.
Barnett, E. i. Lane, G. L. :;ilson.
The resolution re guaranty of bank deposits,
already reported by the Executive Committee was prosented and adopted as follows:
VIIEREAS, It is important that nothing should impede
the unification of the banking system of the country
under the Federal neserve Act, to which the President
called attention in his statement of Cot. 13, 1917.

A




'The Federal Reserve Act is the only
constructive financial legislation which we
have ever had which was broad enough to accommodate at the same time banks operating
under powers granted by the General Government
and banks whose charters are granted by the
respective States. The unification of our
banking system and the complete mobilization
of reserves are among the fundamental principles
of the Act'.
.HERLAS,. such unification is threatened by the proposed
plan for the guaranty of deposits in national banks:
(1) Because it would tend to stimulate a spirit
of competition and antagonism between State bank systems
and the national banking system;
(2) Because of the difficult and embarrassing situation in which such State banks, which, owing either to
insufficient capitalization or to existing contractual
or trust obligations, could not convert into national
banks, would be placed;
(3) Because of the agitation which would be produced
in many States to secure local legislation for the guaranty
of deposits in State banks, thus destroying the harmony
now happily developing and almost established between
State and national bank systems, as evidenced b;,- the increasin number of State member banks in the Federal Reserve System and the cordial cooperation which many States
are giving to the policy of the Federal Reserve Board in
seeking to bring about a unification of the Lmerican banking system under the Federal Reserve x",ct:
:,711i1REAS, there is no sufficient evidence to establish that
there are great sums of currency and specie, now in hiding,
which would be drawn out and deposited in national banks
were such deposits guaranteed beyond that is already being
accomplished, any more than the are now brought out by the
Postal ,avinf;s System and the ::ar savings Stamps;
7HELEAS, in the judgment of the Board, no plan of insurance,
applied either to bank deposits or to any other form of
credit or property, is sound or can long be successfully mainained where a uniform premium is assessed upon all participants,




strong or weak, good or bad, alike; or equitable
unless the insurance privilege be extended to all
member banks at their election;
THEREAS, relieving depositors of the necessity of
exercising care and vigilance in choosing banks in
vthich to deposit their funds would make for weakness,
rather than strength, in the organization and conduct
of banks;
the extension of the principle of insurance
to bank deposits raises large and .most difficult
questions of general governmental policy which ought
to be decided only after the most mature consideration;
7,11.1S, the Government could not safely and wisely
undertake the guaranty of bank deposits without exercising a degree of control over banking loans and investments, which would, in effect, amount to the government guaranty of such loans and investments and thus
bring banking credit under the complete control of the
Government;
7.HiazikJ, the hardships now suffered by depositors of insolvent banks could be materially lessened by the establishment of a fund for the prompt liquidation of the valuable assets of failed banks;
B1, IT iO4,Vii.D, that the Board deprecates the
injection into the banking situation at this time of the
bitterly controverted luestion of guaranty of bank deposits as prejudicial to the development of the Federal
Reserve Oystem, and as menacing to the successful financial
conduct of the war, because of the agitation of mind produced in the business and banking community;
IT FURT1U1L Rik;OLVLD, that it is the judgment of the
Board that a fund, under the administration of the Federal
Reserve Bunks, might well be set up to provide and insure
ianediate determination of the value of the assets of
failed member banks of the Federal Reserve system and an
immediate distribution of the estimated value of such
assets among depositors, pending their final liquidation;
this to the end that the hardship and injury now sustained
by depositors of failed banks, because of the delays to
which they are subjected in receiving their pro-rata of




the assets of failed banks, may be reduced to
minimum.
W. .G.HAJiDIIG
A. C. MILL
Signed
PAUL M. WARBURG
On this motion the vote stood as follows:
Affirmative:

Negative:

Mr. Harding,

Mr. Hamlin,

Mr. Warburg,

Mr. Williams.

ar. Miller,
It was agreed that Li'. Delano may record his
vote on the matter.
It was further agreed that no publication of
the action be made until further order.
A letter from the Comptroller of the Currency
to Governor Harding dated June 25th, and delivered at
11:20 A.L. on that day ro conversations as to bank
Guaranty was read.

11r. Harding stated that the con-

versations referred to in the letter had in his opinion
been entirely unofficial, but that he thought the subject fully covered by the letter written by hi-1 to Mr.
;diliams and already read at an earlier period in the
meeting.

Discussion ensued.

The following reports taken u? by unanimous
consent out of order, were approved:




-17.0. 3.
Dated June 25th, recommending changes in stock'
at Federal Eeserve Banks as follows:
Applications for additional stock:
District No. 9
Adrian, Minn.
First National Bank,
"
National Bank of Aitkin,
It
First National Bank of
The Farmers National Bank,
Alden,
First rational Bank,
It
Argyle,
First National Bank,
Atwater,
First rational Bank,
Beaver Creek,
First National Bank,
Bovey, Minn.
First National Bank,
Browerville,Minn.
First' National Bank,
tt
Chaska,
First National Bank,
It
Crosby,
First National Bank,
Merchants National Bank, Detroit,
Dunnell,
First National Bank,
It
Fairmont,
First National Bank,
Fergus Falls National Bank,Fergus Falls,"
Foley,
First National Bank,
Gonvick,
First National Bank,
tt
Hallock,
First National Bank,
Hibbing,
First National Bunk,
tt
Jackson,
Brown rational Bank,
tt
First National Bank,
Kasson,
National Farmers Bank,
Lake Benton,
First National Bank,
Lake Crystal,"
First National Bank,
Little Fall,"
American National Bank,
Metropolitan National Bank,Minneapolis, "
Farmers (3: Merchants National Bank,Minneotal
Do
Do
Minn.
Mora,
First National Bank,
Mountain Lake,"
First rational Bank,
Nashwauk,
First National Bank,
Rushford,
First National Bank,
It
St. Cloud,
Merchants National Bank,
Do
First National Bank,
St. Faul,
Peoples Bank of

Shares
1
6
5
1

6

1
2
3
1
1
3
39
9
1
3
4
6

1
1

1
'3
144
6
6
2
1
3
1
.1u
6




District No. 9
Brought forward,
Springfield,Einn.
First National Bank,
It
American Exchange Bank, Virginia,
Do
First National Bank,
Lerchants National Bank, ;;adena,
':;aseca,
First National Bank,
Stillwater Valley National
Absarokee,
Bank,
Anaconda National Bank, Anaconda,
tt
Billings,
:ontana National Bank,
Conrad,
First National Bank,
Harlowton, I,
First National Bank,
ft
Hardin,
First National Bank,
Grass Range,"
First National Bank,
Kalispell, "
Conrad National Bank,
tt
Citizens National Bank, Laurel,
I,
Libby,
First National Bank,
Plentywood,
First National Bank,
Plevna,
First National Bank,
Poison,
First National Bank,
Poplar,
First National Bank,
Scobey,
First National Bank,
Stevensville,Lont.
First National Bank,
American National Bank, Three Forks, "
Abercrombie, N. Dak.
First National Bank,
Bismarck,
First National Bank,
Carrington,
First National Bank,
Cass County National Bk. Casselton,
Ellendale National Bank, Ellendale,
ft
Farmers National Bank,
Forman,
First National Bank,
ft
Goodrich,
First National Bank,
Hettinger,
First National Bank,
Citizens National Bank, Jamestown,
Farmers & Lerchants
It
ti
National Bank,
It
Killdeer,
First National Bank,
It
Linton,
First National Bank,
ft
Marion,
First National Bank,
11
New England,
First National Bank,
It
Northwood,
. Citizens National Bank,
If
Reynolds,
First rational Bank,
ft
Scranton,
'First National Bank,
Sentinel Butte,"
First National Bank,

Shares
L91
1
6
6
1
3
1
3
6
9
4
3
2
4
2
3
3
1
1
1
1

3
60
6
1
2
1
3
1
7
4
1

5
6
3
. 1
1
3
468




•

District No. 9

Shares
Brought forward 468
First National Bank,
Washburn, Mont.
6
First National Bank;
3
Beresford, S.D.
First National Bank,
Bridgewater, S.D.' 2
Farmers National, Bank,
Do.
3
First National Bank,
24
Canton,.
It
National Bank of
Gary,
tt
First National Bank,
3
City National Bank,
1
Huron,
First National Bank,
2
Lake Preston, 111
It
First National Bank,
Judith Gap,
2
First National Bank,
1
Lemmon, S.D.
It
Merchants National Bank,Milbank,
1
it
First National Bank,
Lobridge,
1
Sioux Palls Savings Bk. Sioux Falls,
1
Corn Belt National'Bank,Scotland,
3
First National Bank,
2
Toronto,
Vt
First National Bank,
Viborg,
1
First National Bank,
aebster,
4
First rational Bank,
10
.00nsocket,
First National Bank,
Durand, ';is.
3
Phillips,"
First National Bank,
2
First National Bank,
Rhinelander, 7;i s. 12
First National Bank,
3
River Falls, Vt
Iron County National Bk.Crystal
Conrad Trust & Savings
Bank,
7:elena, Llont.
12
Total
576
Application for original stock:
District No. 11
First National Bank,

Shares
Grand Prairie,Tex.15

Application for surrender of stock:
District No. 7
Rockford rational Bank, Rockford, Ill.

Shares
90

District No.
Greene County National Bank,
Carrollton, Ill.

75




Applications for additional stock:
Shares

District No. 7

3
Mooresville, Ind.
First National Bank,
3
Tipton, Ind.
Citizens National Bank,
6
New Bedford, Ill.
Farmers National Bank,
600
Harris Trust & Savings Bank,Chicago, Ill.
Crescent City,I11. 1
First National Bank,
3.
Cullom, Ill.
First National Bank,
6
Dallas City, Ill.
First National Bank,
120
Decatur, Ill.
Millikin National Bank,
Union State Savings Bank (3:
30
Kewaunee, Ill.
Trust Co.
6
Carroll,
Ill.
Carroll County State Bank,
State Savings Bank & Trust
15
Moline, Ill.
Co.
2
Prophetstown,I11.
Farmers National Bank,
1
Tampico, Ill.
First National Bank,
Des Moines, Iowa, 90
Iowa Loan & Trust Co.
3
Grinnell, Iowa,
Citizens National Bank,
10
Kimballton, Ia.
Landmands National Bank,
1
Lost Nation; Ia.
First National Bank,
1
Ia.
London,
New London National Bank,. New
2
Ia.
Perry,
Perry National Bank,
Savings
(cc
Federal Commercial
Port Huron, Mich. 30
Bank, •
5
2ochester, Mich.
Bank,
National
First
15
Peoria, Ill.
First National Bank,
D59
Total
No.
Dated June 25th, recommending the admission of state
institutions 'upon terms named by the
. Committee in each case as follows:
Deseret Savings Bank,
Fifth Avenue Bank of
New York,
Bank of Emmett,
City Savings Bank &
Trust Co.
The State Bank,
Albion State Bank,
Lake City Bank of Minn.

Salt Luke City, Utah.
New York, N. Y.
Emmett, Idaho.
Alliance, Ohio.
Akron, Ohio.
Albion, Mich.
Lake City, Minn.

11




Provident Savings Bank & Trust Co.
Struthers Savings & Banking Co.
Denver Stock Yards Bank,
Dayton Savings & Trust Co.

Cincinnati, Ohio.
Struthers, Ohio.
Denver, Colo.
Dayton, Ohio.

On motion it was voted that the '::aehovia Bank
& Trust Co., nnston73alem, N.C., might become a member'
if approved by the Board as to condition, even in the
absence of the requisite seal.
A letter from lir. F. L. Delano, statinn that he
had asked the President for release from service on the
Federal Reserve Board in order to serve in France,
noted:

The following statement appreciative of Lr. Delano's

relation to the Board was ordered entered:
"The Federal Reserve Board has heard with extreme
regret of the proposed resignation of La'. F. A. Delano.
It desires to record its appreciation of Mr. Delano's
able and faithful service as a member of the Federal
Reserve Elcerd and of those high personal qualities which
have made his relation to his colleagues one of unusual
mutual confidence and regard. Mr. Delano has served
two years as vice governor of the Board and for nearly
two years additional as member. During this period of
almost four years the Federal Reserve System has attained
its growth, thile the banking and financial problems of
the Nation, in whose solution the Federal Reserve system
has necessarily had a large part, have been of unprecedented
seriousness. Mr. Delano's contribution to the effective
organization of the system and to the successful solution
of its problems can not be over-estimated. His departure
will be a serious loss to the system and a source of extreme personal regret to his colleagues."
W.P.G.Harding
Governor.
':,arburg,
21.
Paul
Vice Governor.
H. Parker qillis,
"Secretary.
D.C.,
aashington,
June 25, 1918.




L letter from the Federal Reserve Bank of
Kansas City re employees subject to draft and stating
/ the necessity of obtaining exemption for certain essentially necessary employees was read and it was
agreed to refer the matter to Counsel who is engaged
in preparing a summary of the situation at Reserve
Banks with reference to this matter.
Reports of Committees were presented and acted
upon as follows:
Lxecutive Committee:
Dated June 17-22, recommendinL; the creation of a new
Division of the Board's work to be
known as "The Division of Analysis and
ReseL.rch". Approved and referred to
the executive Committee to report a
plan of organization.
Dated June 22d, mem:mending favorable action upon the
resolution approved by 11r. Hamlin re
individual expressions of opinion on
public 4uestions (L;ee minutes of June
20). Approved, and the resolution
adopted as originally presented, as
follows:
Re,WLVED, That while each member of the Board must determine for himself the propriety or necessity of expressing his ihdividual opinion on any question, it is
the sense of the Board that in the future, to avoid embarrassment, members should not quote publicly the opinions
of other members on matters which have not formally been
passed upon by the Board.
No. 1
Dated June 22d, favoring the payment of a dividend at the
Federal Reserve Bank of New York to June
30, 1918.

11 0




Dated June 22d, recommending approval of the salary
of Edward A. James as National Bank
Examiner in the 12th District at
.,,3,000 per annum, effective on assuming duty; and recommending approval of the salary of 0,900 per annum for 77ard M. Buckles, effective
on assuming duty.
1:o. 2
Dated June 18th, recommending approval of the application of the Marine Bank & Trust
Co., of New Orleans, for permission
to accept up to 100';; of their capital
and surplus.
-Dated June 22d, formulating a letter for transmission
to the Federal Reserve Bank:of New
York, with reference to the accounting treatment of the value of their newly purchased site. Approved and
ordered transmitted.
Dated Juno 22d, recommending form of letter for
transmission by the Governor to the
National straw Hut Manufacturers Association with reference to their credit
terms. Approved and letter ordered
transmitted.
Dated June 22d, recommending that the question of
discount of cold storage paper be
referred to Er. J.P.Cotton. Approved
and the reference ordered.
No. 3
Dated June 18th, recommending form of letter for
transmission by the Governor to the
Business Bourse relative to forms of
trade acceptances. Lpproved and
letter ordered transmitted accordingly.
Various dates, recommending action on.applications
for fiduciary powers as follows:




Refused:
First National Bunk, Farmland, Indiana.
suspended until a later date:
First National Bank,
First National Bunk,
Farmers National Bank,
First National Bank,
Commercial National Bank,
First National Bank,
Peoples National Bank,
First National Bank,
Citizens National Bank,

Fayetteville, Ark.
Brookings, S. D.
Ponca City, Okla.
Callispel, LIont.
Great Falls, I.:ont.
Hagerman, N.Y..
Barre, Vt.
Llwood, Ind.
Royal, Iowa.

4pproved:
Trustee and Eeigistrar:
Citizens National Bank,

Dickson, Tenn.

Trustee, i.xecutor, Administrator and Registrar:
Fourth National Bank, Greenville, S.C.
First National Bank, York, S.C.
National Bank of Decatur, Illinois.
Dated June 22d, holding that Mr. J. V. Padula, being a
private banker, can not serve as director of the American National
Sank of Newark, N.J., ap?roved and
ordered that 1.1r. Padula be informed
accordingly.
On motion at 1:37 P.L., the meeting adjourned.
122110V.L.D:

Chairman.