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meetin3 f the Lxecutive tAlmittee of the ?ederal ,Wserve Board held in the office of the Board on 7Aursday, 1,'ovember 15, at 3 p.m., Mr.Hamlin, Mr. arinzr, :Ir. .1111., b'ecretary. Jovernor Harding submitted an opinion received from Counsel with respect to the warehousing of tobacco, receipts a2;ainst it to be used as a protection for f,ccef ance paper. The Case in Tlestion related specifically to 4 r.ulor-ndu!... submitted. by liecretary Jirtis of 1:ew York rez;ardinj; certain fin,„ncin,2 of the .crican Tobacco Company, -,77.1i3:1 is arranin ' credit of „;:.,5,000,000 with the ',,;uaranty Trust Compt.my, such credit to take the form of acceptances protected by tobacco in warehouse. The opinion of Counsel was to the effect that acceptances protected in this way, if drawn in technical compliance with the law, wO'uldbe eligible for rediscount at 2ederal deserve banks. The Committee informally accepted the opinion, subject to be set forth in a letter to 2ed.em1 Aeserve Lsent Jay as follows: "I;ovember 15, 1917. Pierre Jay, Jhaiman .of the Board, 7edera1 '.:leserve rew York. Dear :3ir. "The letter addressed by r. J. jurtis, L,ecretary of the Aderal 2eserve Bank of rew Yor.k to. Vice-C;overnor arbar3. enclosinE; copy of a letter addressed to your bank by the Vice President of the rnerican 7ole„.cco Ampany, has been duly considered by the 3oard. "It appears that the tobacco company aas no, and will continue to have darin,.; the ne;:t two years, leaf tob-cco valued at a large sail, stored in various localities. It is desired by the company to use this tobacco in the warehouses as security for certain credits to be obtained throq7h the acceptance of drafts secured by warehouse receipts for this tobacco. It is proposed that a custodian be appointed who, :athoaL,h an employe of the company is, as custodian to be entirely independent of and is in no way subject to the orders of the 4merican Tobacco ;ompany. He is, on the contrary, to be the representative of the accetin, ; - banks so far 42 the custody of the tobacco is concerned, and is to be under their control and jurisdiction and is to lve a bond with sufficient surety for a stipulated amount, for the faithful :lischare of his duties. 2,1thou2,h the letter itself does not ce:pressly state the manner in “hich this custodian is to be given independent control of the warehouses in which the tobacco is held, the Board assumes that proper steps will be taken in each instance to comply with the re..aircments of the laws of any state in which 4 warehouse may be located 50 45 to jive him conplete legal authority as w,,.reeouseman under those laws. 'Tor instance, in any case ,,here the laws of a state relaire the warehouseman to have legal possession throuh lease or otherwise of the premises in which the goods are stored, it has assumed that proper steps will be taken to j_ve this possession, and if necessary to nrohibit access to the warehouse, e_cept with the permission of the custodian, who should, of course, have an authorized representative at each warehouse. It is the opinion of the Board ta-t in some respects it mi,_;ht be a better plan to have two custodians appointed, but in this particalar case this point will not be insisted upon but will be left to the discretioe of the acceotin banks. The Board agrees that if the custodian exercises his functions in that capacity separate and apr.rt from his obliations as an employe of the tobacco company, and is not in any way sibject to the control or jarisdiction of the company in his capacity as castodian, a aarehouse receipt issued by Aim v,ould come aithin the intent and spirit of the Board's ruling that sach receipt mast be issued by some person or oorroration indelicndent of the borrower. The I:oard is of the opinion further that there is nothing unusual or 1,1pro9er in a bank or a ;/-c).111 of banks agreeing with a solvent borrower to accept drafts from time to tie over a period of two years, on the security of readily marketable staples, properly warehoused and insured. .Ln acceptance secured by approved warehouse receipts against such commodities, and having not longer taan ninety days to run, will be eligible for rediscount by a 2edEral deserve bank, but the 3oard is of the opinion that in a transaction of this kind the acceting banks should not purchase their own acceptances or ask the -?ederal deserve bank to rediscount them." Very truly yoars, Governor. Governor Harding submitted an opinion of 3ounse1 as to whether certain notes owned by the Imerican Oar and 'oundry Company, and secured by elaipnient trusts representing the cars in use by certain oil companies, would be eligible for rediscoant at 7?ederal eserve Banks. It was advised by i;ounsel that they would be so eligible in view of the fact th.t when the cars were sold, their sale was - commercial transaction, and it made no difference whether the purchaser of the property intended to use it commercially, or to regard it as a long period investment. It was noted, however, that the notes did not becomp eligible for rediscount a ti :o action was thin the specified pe iod of ken, 1:at the matter ttrity. cferx—d back to the • ommittec for .LA letter from Lancaster,addressed to he President, and relative to possible harsh action on the par' of the banks inmaking; collections under sting condition, • was read and referred to the Comptroller of the uircrcj. Clovcrnor Harding stated briefly: the views of the retary of the 7reasury refer to endments to the ion banking law, and called part' - Jar attention te the whether it woald be ise , to interstate checks of no to impose ember banks. 4 tax upon He described salts of a conversation he had had this morning v.ith President qinsch of the american Bankers ssociatinn, and :;r. J. Puelicher of Ullwalkee, both being members of the Jolmitt(c on 7,embers'lip in the 7ederal :lest ve —meric n Bankers ssociation. yatem appointed by the ovcrnor Harding stated taLt, these gentlemen thoajlt it ,vould be unice to attempt coercive legislation at the present time. aiij He furthc.;. gested the desirability of extendirg the present collection system. taken. Infor -1 discussion occurred,bat no action TheLil,testion of the records to be 1:pt at the T:leetin:: •of 7Lovember 6 bein presented, the c:Ltter of providinL-; a comnd it icte steno;Lphic report was discassed, stenopiler be present to - fld th...t if crw)r c areed ct on direction of the ov- o: the Po-rd sh.oald .; oc,--Itrrin,..; in the accoaLt of anythin: h. Lleetin; it t- '). '11'3 ithott t.kin; lection n: 1:*t. 'o it ” , n L 1 the :rovtrnors, 1t. ,0 ' ' t e on j LL'LLr- for :roil no votes be - :IrtiC: vote. '02 „IC 1. ,Inn : ch. on n-Ption, voted to elect the the !.teetin:; of october 10, and LccordiAly followinj; were declare- elected as ]overnnunt directors ,t the branch. 7onoraule Jidson J.ron, hr. Jharle f n notion, the no-in(es n...-ted by the kder.t1 ic-ccveof Jlev( land Ls directors of the JinciLnLti . irTed: -r. .11 -r. The secretary of the B .rd was directed to :give eUnesday, ',rover:11)er the newspapers for use in the issues of the (mornin -- ;) ti v directors of the iJincin- nati 3r presented a revised draft Jovernor lard in posed by-h,wsor i 11nkt1 t t the new Branches se pro- Tts modified and inforlail..y accepted. of ..;hi f -didi liner Br deril eder,1 Aeserve . r1 the 'ict1iocl of cut, ody of pa.• 1;an .2rancisco, was o. lity O-7 the plan.. director of ers ti 11 of 1'ederal or.tittce readand referred to for report as to the iL re!rdin:• .., , serve Bank of Boston, w.ts read and, on motion, t I, the 1overnOr to re' ernor presented basiness as follows: din letter from the jtockton proposed n -Abe avin7,s Bank rt-lative to hip - noted ;,..nd filed. letter from the Banite de Pari to the Lecretary of the de des reasary, offer1nL; : s service, In exne operations, was read and noted. letter from the thrn, TL., avins dressed to the Secretary of the 7rea(Jary nd p .otesting a.3.,ainot the publication of the nariles „of subscribers to Liberty bonds, was read and noted. 4.1 letter from federal ..teserve jntHeath relative to the Clerman-merican ::,ank of '.J.a._;inaw, 1-1,;hi,-;an, and it:, desire to join the ?ederal aeserve Lystel, was read and noted. 4. letter i7rom the President of the ,va6hin3ton Loan .7c Trust Coml,any of ,fasiiLjton, D. J., at..1in,2; for a conference on time derosits and reserve re i zire.lents as -2fectin• the institution, was read and a conferenJe dith the ,loverno: and of . 'ice ..lovernor 'Board vas set for ”ednesday, :ove-lber 7, ,t 11 letter from federal deserve 2„;ent .ellborn relative to the pl.ols :or the prol'osed vallt at the federal _eserve of 4,tlanta, was read and noted.. Jorrecvondence passin,; betwee_i Jif -.7...a-iner latch of 1rancis7;o President L. J. _Ills of the first :7s,tiol. 1 -Lan7e, - ederza ...pn, f of Portland, Ore; eserve .jent Perrin, and U. Liner, as to the pact played by the .first Lational connection with the Liberty iman,was read in fill. :lardinz stated that a tele:;ram sent by r. 4 • an: in Governor Gatch to the first nJ,tioral 7,ank was one which was transmitted at the re,dest of the -jomptroller of the Currency, ,Aao had. asked. all eaciners to send out such a messae to certain banks. t 7he telezram was sent without consultation with the ,jovernor or any member of the Board. s soon as r, t.trding heard of it on the day it was orij:nally sent out, he ot into touch with the jomptroller on the matter, and expressed doubt of the propriety of the Aderal Reserve Banks j,ving inforrtion reuested by the Amptroller as to what member banks had or had not subscribed for Liberty Bonds. lie liarding) had expressed regret at the sending of the message, and had himself sent the following message to all 2ederal .Reserve Banks: Jomptroller has shon me telegram which he sent chief exa'ftiners re,;_rding list of nonsuoscribin:; proposed telegram to be sent national banks them by examiner. This matter has not been brought bcr'ore the Board, and I am uncertain as to the advisC:Jility of the action. Auld that you exercise your discretion in the r. This message had been stated in very moderat. lanaa.7,e so as not to embarrass the 2omptroller. he had lerned neat day that the telegrams arrived too late to have any effect. The matter v.as referred to the 2o% i tee on thean ?ranoisco Bank and the lovernor. telegram from ?ederal :teserve kgent :Perrin rearding clearing house examinations, was read and referred to '411 j,U. ri liner for reply. ii the Post (2fice DeLr.tn r. DelLno r1t proble.'a woald be :reatiy the z 0041d be to f ,ot77-,•::.,ster Ied tTu.t any : in hi2, to. .Jth%,ny cle-f)oit A,Thods it (7:11d of t.ttiit . he Ill t ii1i lOu if it -0At 110 ation taThen* f...:Ltered this foint the joptroller o.7 the the s'et L . ti':e to tie :coetarce o7 r(Tec:C on The revort of dLte:d 7evc.'fuer 7o. re:ort of kicr%1 2.c‘serve tim ai)Drovej, c-r:1',.tce 7o. datd 7nvc1-JJer re14- .:c.terve notes at tiv.e to the ;,;.c,oeft;_:n4e of redec-.0,,1 Orle:...no, was red ufi, On notion,2oved. 7he reort of JwINittee ITO. 3 reL,.,:ive to iitriOi ,Jirectorsilipzi :at the 7nior 7ational 73an'r of .stin, tited .77:oveber 1, ws rc,d :;nd, oh Notion, Lr. roved. The reort (v: the .A7.7..1ttEe on ()" oerion toce-ift dr%fts qp to the 7..o.231t of oi.)fit1 lonal ;-; of A?dford, nd..;JrrlA : : the tff reo!:vnendi.: n bills of by the re C n, approved. was, on 7pon r oommendation of Jormittce deral notion, voted to admit to the follov;in eserve system the nred applicant banks, upon conditions named in eala case by the Balti.r.or .ittee: Con,qercial 3an17 Brooklyn, Peoples rl'rust iompany. Y. PrtlArie*Depot,0- rers• T,ankinL:i ;JompanY Jounty !, 2 Home Iaitiore, avings Bank Detroit, ',Lich. Lem ers of the board inforlly e.plined to the :1,omptroller of the Currency the facts with reference to the correspondence between .:e'ssrs. and rin, ilatch , already presented to the Board before the Jor,ptrolier entered the room.'iscssion e saed but no action Was taken. On *notion, at 6 p. 3oard adjoin
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