The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
The Papers of Charles Hamlin (mss24661) 363_05_001- Hamlin, Charles S., Scrap Book — Volume 203, FRBoard Members ''% 205.001 - Hamlin Charles S Scrap Book - Volume 203 FRBoard Members 0 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Office Correspondence TO The Files From Mr. Coe Date August 1, 1941 Subject: tocAfter correspondence with Mrs. Hamlin (see letters of May 25 and June 4, 1941) the items attached hereto and listed below, because of their possible confidential character, were taken from volume 203 of Mr. Hamlin's scrap book and placed in the Board's files: VOLUME 203 Page 2 - MR1110 by Mr. Hamlin - Reasons for Voting in Favor of the 3% Discount Rate Established by the Federal Reserve Bank of New York. Page.59 - Principal Resources and Liabilities of All Member Banks on March 27, 1930. Page 82 - Earnings & Expenses of F.R. Banks, April 1930. Page 87 - Letter to Governor Young from Frederic A. Delano trends of banking business in Richmond District. Page 93 - Proposed Reply of F.R.Bk. of N.Y. re Reparation Bonds. Page 96 - Memo from Mr. Hamlin to Dr. Miller re unreasonable use of Federal Reserve credit to support speculative loans. Pate 97 - Direct Pressure - Suggested Addition to Annual Report by C. S. Hamlin. Page 98 - Memo to Mr. Hamlin from Mr. Smead re Reduction of Speculative loans. Page 99 - Letter of Board to Federal Reserve Banks dated January 23, 1930, re Open Market Policy Committee. Page 101 - Open Market Policy Conference. Page 105 - Memo to Mr. Hamlin from Mr. Wyatt re Digest of State laws re Branch Banking. Page 108 - Memo to Mr. Hamlin from Mr. McClelland re handling of reparation bonds in this country. Page 102 - Preliminary memo for the Open Market Investment Committee. Pa:1p 113 - Report of the Secretary of the Open Market Investment Committee to the meeting of the Committee at Washington on March 24, 1930. Pao 117 - Letter to Governor Young from Governor Harrison re recent developments in credit and business conditions. Page 121 - Memo to Mr. Hamlin from Mr. Smead re Security loans and Federal Reserve Bank Credit. Page 13,1 - Memo to Mr. Hamlin from Mr. McClelland re proposed procedure to be followed in connection with the pending issue of reparations bonds in this country. Page 135 - Memo re Reparation bonds. May1,3O.L64 44f Uemorandun C. S. H. Reasons for Voting in Favor of the 3% Discount Rate Established. by the Federal Reserve Bank of New York. C.S.H. stated to the Board that he was in considerable doubt yesterda y as to how to vote in this matter; that he realized, however, that the Directors had voted unanimously to establish the 3% rate in the belief that it would help existing conditions; that he, C.S.H., however, felt some doubt as to this; that the action of the Bank of England and the Bank of France in reducing rates, to his mind created a new situation; that he feared that a lower rate at the Bank of England, for instance, than in the United States, would certainly tend to bring gold from England to the United States; that since the 4% rate was established on February 8, 1930, the gold stock in the United States has increased 136 millions, and the money in circulation has declined 62 millions; that while this increase in the gold stock had came largely from South America and Japan, he feared that maintaining a rate higher than that maintained by the Bank of England at the present time would certainly bring much more gold into the Unitei States, which would finally get into the member bank reserves and form the basis of an unhealthy expansion. VOLUME 203 PAGE 2 mit Cc51111IDEITIAL PRINCIPAL RESOCES AND LIABILITIES OF ALL MEMBER BANKS ON MARCH 27, 1330, COMPARED WITH DECEUBER 31, 1929, AND MARCH 27, 1929 (In millions of dollars) st.65g3 Mar. 27 Increase or decrease since Dec. 31 Mar. 27 1930 1929 1929 Loans and investments - total 35,056 -g78 - 337 Loans - total Acceptances payable in United States Bills,acce72tances, etc., payable in foreign countries Commercial paper bought in open market Loans to banks: On securities All other Loans on securities, exclusive'''of loans to banks: To brokers and dealers in New York To brokers and dealers elsewhere To others Real estate loans: On farm land On other real estate All other loans 267) - 21 2,344 + 465 706 - 30g + 49g 7,024 394 2,776 10,595 Loans eligible for rediscount with F. R. bank 4,204 Investments - total U. S. Government securities Other securities - total Domestic Foreign atie from banks in United States Due from banks in foreign countries 9,937 4,o85 5,852 5,242 610 1,902 248 139 Net demand deposits Time deposits - total Evidenced by savings pass books Of banks in United States Of banks in foreign countries . All other denosits Due to banks in U. S.(except F. R. banks) Due to banks in foreign countries Bills 2ayable and rediscounts Capital and surplus Acceptance liability FEDERAL RESERVE BOARD Drvisiou OF BANK OPERATIONS UAY 9, 193o VOLUME 203 PAGE 59 •(/ 'CONFIbiNTIAL RCES AND LIABILITIES OF 1:E1,1ER .o.ANKS IN PRINCIPAL RE CENTRAL RESERVE CITIES ON MARCH 27, 1930, COMPARED WIIH DECEMBER 31, 1929 AND MARCH 27, 1929 (In millions of dollars) St. 6583a New York City Chicago Increase or Increase or Mar, 27 decrease since :r,27 decrease since 1930 Dec.31 Mar. 27 1930 Dec. 31 Mar. 27 1929 1929 1929 1929 Loans and investments - totol 8,238 -536 +512 1,717 - 4o -76 Loans - total 6,192 -)490 +438 1,406 - 41 -50 - 39 + 31 3 - 5 -14 - 6 - 12 11 + 6 +6 + 29 + 13 33 +28 +23 -123 - 52 - 30 - +275 + 5 -270 +375 + g +184 140 194 474 +129 - 47 -59 +122 -117 - 2 - 19 -343 + 2 -109 2 18 472 - 1 -63 - 1 -72 - 97 - 21 223 -19 +i14 310 146 164 1 +30 -29 -26 -18 - 8 147 17 -30 + 2 -17 • 9 -10 +17 +55 • 24 + 12 +15 + 9 + 2) + 11) - 8 _ 1 + 29 + 2 -23 Acceptances 2ayable in United States 89 Bills, accentances, etc., payable in foreign countries 40 Commercial papor bought in open market 49 Loans to banks: On securities 92) All other 107) Loans on securities, exclusive of loans to banks: To brokers and dealers in New York 1,477 To brokers and dealers elsewhere 60 1,876 To others Real estate loans: On farm land On other real estate 150 All other loans 2,252 Loans eligible for rediscount with Federal reserve bank Investments - total U. S. Government securities Other securities - total Domestic Foreign Due from banks in United States Due from banks in foreign countries 970 2,046 1,150 897 827 69 112 153 8) -63 -20 + 15 +59 +60 - 1 - 66 - 38 - 15 - 55 123 39 -786 +125 + 19 + 3) + 11) + 93 + 67 +172 - 1 + 31 1,199 434 165 22 19 229 - 45 7 + 38 16 -195 +331 +144 338 27 2 270 78 + 38 -83 Net demand deposits Time deposits - total Evidenced by savings pass books Of banks in United States Of banks in foreign countries All other 5,632 1,462 636 42 1)11 i 639 U. S. deposits Due to banks in United States (except F. R. banks) Due to banks in foreign countries Bills payable and rediscounts Capital and surplus Acceptance liability 91 + 72 959 416 39 1,758 783 -238 - 81 -139 4 -113 50) +141 + +27 - 39 14 + 19 + 6 -26 +28 +13 -85 +12 +31 • CONtIDENTIAL PRINCIPAL RAIIIJRCES AND LIA3ILITIES OF MEMBEAIILNKS IN RITSERVE QITUS AND OF COUNTRY BANKS ON MARCH 27, 1930, C01,22ED WITH DECK= 31, 1929 AND ZARCH 27, 1929 St.6583b_ (In millions of dollars) Reserve city banks Countr7 banks Increase or Increase or Mar. 27 decrease since Mar. :7 decrease since 1930 Dec. 31IYar.21930 Dec. 31 Mar. 27 1929 192') 1929 1929 -498 Loans and investments - total -132 -171 -275 11,858 3,243 Loans - total 8,752 Acceptances payable in United. States 55 Bills, acceptances, etc., payable in foreign countries 214 Commercial pa,Der bought in open market 209 Loans to banks: 104) On securities 101) All other Loans on securities, exclusive of loans to banks: To brokers and dealers in New York 469 360 To brokers and dealers elsewhere To others 2,576 Real estate loans: 113 On farm land 1,411 On other real estate All other loans 3,330 Loans eligible for rediscount with Federal reserve bank 1,349 -332 + 20_ + 13 + 20 8,768 27 3 4 +107 + 73 207 - - 53 + 9 14) 51) -168 - 6 -234 -18 - 4 + 145 +16 +20 +26 +230 + 64 - 66 -178 -199 +161 258 93 2,097 + 50 + 11 -134 - 96 - 21 +155 +3 • 1 - 17 + 36 -349 -162 279 1,196 4,541 +3 + 10 -165 - 10 + 20 -303 - 33 1,662 - 22 - 99 3,105 + 161 -294 1,516 0 1 1,45 135 + 148 -216 _ 8 + 1 + 12 - 61 + 1 - 17 4,475 1,273 202 2,81 388 + + + + - 36 7 2 31 1 -265 -150 -11 - 81 - 34 849 52 - 98 + 83 6 - 8 + 817 4 - 91 - 1 +37 - 1 Net demand deposits Time deposits - total Evidenced by savings pass books Of banks in United States Of banks in foreign countries All other 6,035 4 6 3,7 5 32 13 1,173 - 256 -146 + 7 +183 + 22 + 57 + 3) 1) + g + 52 +118 5,623 6,660 5,080 6 - 279 + 70 - 15 -295 -166 -135 U. S.deposits Due to banks in U. S. (except Federal reserve banks) Due to banks in foreign countries Bills payable and rediscounts Capital and surplus Acceptance liability 159 Investments - total U. S. Government securities Other securities - total Domestic Foreign Due from banks in United States DUB from banks in foreign countries 1,543 53 69 1,732 274 FEDERAL RESERVE BOARD DIVISION OF BANK OPERATIONS, MAY 9, 1930 W. - + 54 1,5714 83 - 6 67 - 61 + 2 - 223 3 + - 33 + 78 + 6 -403 +116 + 82 365 3 236 1,867 16 ) - 4 - ) + 85 - 28 + 28 -10 - 9 -124 + 57 + 2 D ( C44. 641 CONFIDENTIAL Not for publication St. 6-)87 EARNINGS AND EX=SES OF FEDERAL RESERVE BANKS, APRIL 1930 Month Federal April $45,752 $111,412 235,253 557,012 25,126 127,236 51,536 126,929 $8,003 37,439 5,059 15,867 $217,391 991,193 254,092 281,858 $154,156 $178,141 522,394 154,902 205,423 562,750 172,409 225,000 Current net earnings Ratio to Amount paid-in capital Per cent $39,250 4.1 428,443 7.5 81,683 5.9 56,858 4.3 3,951 16,710 32,562 1,771 124,518 16'3,447 3,81,174 143,282 118,910 107,306 304,290 105,755 129,460 118,669 361,778 111,430 (a)4,942 44,778 19,396 31,852 104,830 117,896 123,912 239_,038 76,392 141,782 106,331 241,043 82,367 22,463 150,513 (a)32,617 113,892 10,020 262,030 a 22 2 8.8 3,142,631 2,238,684 3,569,125 2,173,063 5,514,585 2,200,228 15,275,236 8,845,885 23,406,062 8,789,498 2,468,439 674,192 2,484,475 1,084,650 2,957,181 2,557,404 9,720,990' 5,554,246 4.7 7.4 20.1 Earnings from Reserves Discounted I chased bills bills •Bank Boston New York Philadelphia Cleveland $52,224 161,489 96,671 87,526 Ti. S. I securities Current expenses Other sources Richmond At Chicago St. Louis 57,399 67,517 78,648 51,406 29,462 54,447 63,668 30,204 33,706 24,773 206,296 59,901 Minneapolis Kansas City Dallas San Francisco 11,571 44,078 27,586 44,934 32,727 33,011 22,500 87,587 34,746 16,394 72,945 102,973 5,786 24,413 801 3,5)01 711,273 775,057 678,627 5,156,168 3,484,783 1929 15,150,591 5,072,147 1,494,323 1,610,765 531,237 5,935,472 155,986 176,739 195,624 698,813 654,256 Apr. 1930 var. 1930 Apr. 1929 Jan.-Apr..1930 781,049 1,004,564 4,109,097 FEDERAL IES-ERVE BOARD DIVISION OF BANK OPERATIO:TS MAY 13, 1930 'VOLUME 203 4 PAGE 82 January 1'130 2,529,066 Total (a) Deficit Exclusive of cost of F.R.Currency Total 9,978,971 :13,427,091 10. 1.2 7.3 2.8 9.8 27. Current net earnings April 1930 Available for Dividends reserves, surplus and accrued franchise tax.* $152,048 $232,676 (a)81,224 2,626,349 1,363,026 1,498,960 628,809 619,210 331,763 316,737 94,927 295,407 665,225 215,332 120,412 (a)27,360 106,702 184,688 404,228 238,186 105,776 107,481 100,342 (a)68,596 154,544 70,64 45,427 61,733 86,374(a)151,879 88,378 307,304 254,058 54,066 228,170(a)20 ,168 5,554,246 3,)!)17,975 2,224,539 13,427,091 3,029,433 9,872,460 *After adjustment for current profit and loss entries, purchases of furniture and equipment, etc. VOLUME 203 PAGE 82 J. DeLano 407 Hibbs Buildinr, Washington, D. C. Washington, D. 0.1 May 10, 1930. Honorable R. A. Young, Governor, The Federal Reserve Board, Washington, D. O. My dear Governor: At several of the recent meetings of the Board of Directors of the Richmond. Reserve Bank there has been discussion of the trends of the banking business in our District, and even outside of the District. There is con— siderable alarm felt as to just What is going to happen, for this trend is particularly pronounced in the Carolinas. At one of our meetings I expressed my views, and my colleagues to reduce them to writing and by was asked present them to the Federal Reserve Board, This I have done, and enclose it in the form of a brief outline memorandum. I am aware that the Comptroller of the Currency, and some members of your Board, have taken an active interest in the subject. I, therefore, contribute this remorandum to the general dis— cussion. Yours very sincerely, (Signed) Frederic A. Delano .3nclogure. VOLUME 203 PAGE 87 Discussion of Trends in the Development of Banking in the United States. towards centralisaIt seams to be evident that there is a strong tendency in other industries and tion of Banking, due to the same conditions observable commercial undertakings. ess in the Banking To some extent, however, this is due to an inherent weakn has developed between structure itself, and to the excessive cam?etition that State Banks and. National Banks. note the following: Among the facts having a bearing on this subject, we and some Comp1. The National Banking Apt has for a long time permitted, nal Banks with a of Natio tion forma the trollers of the Currency have encouraged, capital of only 05,000. well as more flexible and 2, State Banking Laws are usually more liberal, as easily amended than the National Banking Act. Banks once had a monopoly 3. Whereas, by the Tax on note issues, the National at a disadvantage. of general banking, now the National Banks are and banks of very nall 4, Many States permit State wide branch banking, capital without very close supervision. the failures of National 5. While many National Banks are small and weak, d, have been far less frequent Banks since the Federal Reserve Bank Act was passe than among State Banks. is to drain the cash away from 6. The tendency with the large corporations This tendency, together with the small banks to the banks in larger centers. in a vicious circle to still further weakening of many country banks, operates weaken the small town bank. te in the same direction. 7. Good roads, the motor vehicle, also opera * * * * * * * * * Trends should be met. Tuggestions as to how these Conditions and a member of the Federal Reserve Sys1. No Bank shall be permitted to become $250,000. tam with a capital and surplus less than hes or annex branches in 2. A member bank should be permitted to have branc y contiguous states - either in contiguous territory in its own and immediatel the same or adjacent Federal Reserve District. on the capital and surplus 3. A limit (say, $2,000,000,000) shall be fixed of any such bank. a0 Y JIA uiltiraN 3o 4, No State Bank should be permitted to do n country wide, foreign, or general inter—state business, mlese it belongs to the Federal Reserve System, and if a State Bank agreel to comply with the provisions of the National Banking Act. 5. Trust lampanies and Savings Banks shall be under State charters, and National Banks shall not be permitted after a definite date to do a savings bank or trust business. 4' 1,14.4, 1930. • C40+1 RA) ARATION BONDS. Proposed Re-oly of Federal Reserve Bank of Nevv York. The Federal Reserve Bank of New York has the honor to acknowledge the receipt of your cablegram asking whether it dissents from the offering in the United States of the reparation bonds referred to. In reply I would say that the power of the Federal Reserve Bazik of New York is limited by the terms of the Federal Reserve Act, and it can acquire no additional power not enjoyed under said Act from the provisions of Section 20 of the Statutes of the Bank of International Settlements; that under the Federal Reserve Act it has no authority either to approve or dissent from the offering, of securities, either domestic or foreigi, in the United States; that it is unable, therefore, to answer the question propounded by you, — whether or not it desires to express any dissent to such offering, but that such failure to dissent should carry no implication of either approval or disa-oproval. ••••.••• VOLUME 203 PAGE 93 am .• • 1.6. ••.0 411. • WHEREAS, Governor Harrison of the Federal Reserve Bank of New York, on May 14, 1930, stated to the Board that if any request should come from the Bank of International Settlements asking whether the Federal Reserve Bank of New York dissents to an offering in the United States of reparation bonds, he would prepare a cable and letter which he would submit to the Federal Reserve Board for approval or disapproval, and that if the Board should disay:rove such cable and letter they would not be sent, - C. .H. introduces the following res)lution as a proposed rerly of the Federal Reserve Bank of New York to such request, said resolution to be submitted to the Federal Reserve Bank of Ne-: York by way of suggestion. • May 15;410 REPARATION BONDS. Stlge:ested Rely of Federal Reserve Bank of New York. (To be submitted to the Federal Reserve Bank for its consideration) The Federal Reserve Bank of New York has the honor to acknowledge the receipt of your cablegram asking zhether it dissents to the proposed offering in the United States markets of the reparation bonds referred to. In reply I would say that the Federal Reserve Bank of New York does not dissent, for the reason that under the Federal Reserve Act it has no power to pass upon such securities as a condition precedent to their offering in said United States markets. Its failure to dissent, therefore, should not be construed either as an approval or disa:nroval of the terms, conditions, or worth of such securities, or as a waiver of any of its lawful powers to take necessary action at any time to protect the credit stability of the United States. , Form No. 131 Office Correspontence To Dr•Miller From FEDERAL RESERVE BOARD 41110 Date 7eb. l7 19309 Subject:_ 3amlin •PO Dear Dr. Hiller: I ;k:.‘ve read over your draft, and I think It is in very good shape. The only suggestions I would make are as follows: 1. On pege 2, in the Last paragraph, the CAL line f.com b;t"--, I inL'artinei, after nit5 :turd "stated" a coEma and dash, and then 3ddiag the folloviing: "referring to the present strained condition in the general creit 3itt7..At'on, My reason for the above Is that sor_le construed this letter as a ruling that under no circumstances would a:bank be entitled to discount to maintain reserves against speculative loans, linich I assume we never intended to rule, but ?that we really had in, mind was that a bank is not ntitled to an unreasonable use of Federal reserve credit to support speculative loans. 2. At the bottom of pagp 2, you refer to the public stataaant of February 7th, but do not quote it. I would suggest that you quote one sentence Cron& this statement of February 7th contained in the 5th paragraphs as follows: "which, in the iumediate situation, means to restrat% the use, either directly or indirectly, of Federal reserve credit facilities in aid of the froripl of speculative credit." This latter sentence, I believe, contains the real gist of the letter of February 2nd and the statement of February 7th. What we were after was to restrain further growth in speculative credit. Kindly let me know how this strikes you,. VOLUME 203 . PAGE 96 Very sincerely yours, :2-8405 .9 X-5508 February 13, 1930. DIRECT PRESSURE. Suggested Addition to Annual Report, by C. S. Hamlin, February 13, 1930: Strike out, on page 2, the 7th line from the bottom, beginning "The continued growth of the use of credit, etc." through the words "unfavorable condition of the bond market" on page 3, 10th line from the bottom, and substitute the following: At the beginning of the year 1929, the Board felt much disturbed at the alarming increase in speculative security loans, sustained in material measure by the use of Federal reserve credit. During the period 1922 to 1928, security loans of reporting member banks increased from 3.6 billions to 7.5 billions, - an increase of 3.9 billions, or over 100%; on the other hand, commercial loans increased from an average of 7.4 billions to 8.7 billions, - an increase of 1.3 billions, or only 18%. During the same period, the -percentage of security loans to total loans and investments, increased from 25% to 34%, while the percentage of commercial loans to total loans and investments, decreased from 51% to 39%. Member bank reserves during this period increased from an average of 1.7 billions to 2.4 billions in January, 1928, - an increase of 700 billions, or 40%. Federal reserve credit in December, 1928, was 1.8 billions, taking daily averages, while the corresponding figure for the year 1927 was 1.5 billions, - an increase of 300 millions. The Members of the Board felt that in view of the speculative conditions, there might not be the customary liquidation of credit VOLUME 203 PAGE 97 .177/ 1 X-6508 -2during the first part of the year, and that decisive action was necessary. Requests had been made by several Federal reserve banks to incrcase discount rates from 5 to 6% to correct this situation. The Board felt, however, that an incrcase to 6% would have little effect on speculative activity, and that to bring about any restriction through discount rates would require drastic progressive increases, perhaps u7) to 7 and 8% or even higher, and that such a policy would bear heavily upon business and agriculture, the cost of whose credit was already enhanced by the unreasonable diversion of Federal reserve credit into reserves against deposits created by speculative loans. The Board determined, therefore, to keep the 5% rate in effect, but to bring direct pressure on the member banks to reduce, or at least not to increase, their borrowings for the purpose of maintaining reserves against deposits arising from such speculative credits. A warning was accordingly issued by the Board on February 7th, the gist of which was that farther increase in speculative credits must cease. The banks, as a Thole, complied with this warning, and while it was in effect, - from February 7th to about June 15, 1929, there resulted a great decline in security loans. Taking the average for January, 1929, and comparing it with June 12, 1929, we find that security loans for reporting member banks decreased from 7.5 to 7.2 billions, - a reduction of 297 millions; that commercial loans, on the other hand, for the same period, increased from 8.7 billions to 9.1 billions, - an increase of 361 millions. Member bank reserves 1 lik-6508 -3for the sane period decreased from 2,387 millions, the average for January, 1929, to 2,331 millions for the week ending June 15th, - a decrease of 56 millions. The percentage of security loans to total loans and investments decreased duriag this period from 33.6% to 32.6%; on the other hand, the percentage of commercial loans increased from 39.4% to 41.4%. Federal reserve credit, comparing the averages for January and May during 1928 and 1929, had decreased 310 millions during 1929, as against an increase of 84 millions in the same period of 1928. While this decline in Federal reserve credit was caused primarily by the seasonal return flow of currency and gold imports, it was nevertheless true that, in the absence of direct nresaure, some part of the funds released would have faund its way into member bank reserve balances, and would have formed a basis of further expansion. On Juno 12, 1929, the Board prepared a letter to the Federal Reserve Baak of New York which was given to Governor Young and Mr. Cunningham as a Committee, to deliver to the New York Bank. This letter was not left with the New York Bank at this meeting, but on June 14th the Board voted to send the letter to the New York Bank. This letter stated that the Board was 1i1ling to auspend direct action for the present, except as to certain offending banks, in view of the need for more Federal reserve credit; that the Board recognized that some banks were so involved that they cauld not immediately cease to be frequent borrowers; that the 5% rate should continue for the present, and that the need for further Federal reserve credit, when 0 10. C-6508 -4it arose, should be met by easing the bill market, and if absolutely necesary, by the purchaf-le of Government securities, that if speculation started up again unreasonably, because of any such easing, direct action would be resumed, and if such policy were not believed to be quick enough, other action would be taken. This suggested policy of easing the market, outlined in the letter, was followed, in fact, by an increase in Federal reserve credit and loans on securities. Finally, .on August 8, 1929, follow- ing a conference with the Governors of the Federal reserve banks, the Board voted that it would approve an increase to 0 at New York and other financial centers, together with a lower bill rate, on the assurance of the Governors that the Federal reserve banks at other than the financial centers could and would retain the 5% rate. The purpose of the increase to 6%, as stated by the Governor of the New York Bank, was to bring some pressure upon the member banks to take down their rediscounts with the proceeds of the purchase of acceptances at lower rat,s by the Federal reserve bank, and to prevent the banks from using the proceeds as the basis of further expansion of security loans. It was under this policy of easing the market, in fact, that the Stock Exchange collapse in October took place. The Board adopted this policy of direct pressure because it felt that the banks owed a duty to their stockholders, depositors, and to the public, to conduct their banking operations on sound • X-6508 -5- banking principles, and that when the banks by unreasonably large and incr,2asing security loans were threatening the soundness of the general credit situation, relying in material part upon Federal reserve credit to support this unreasonable and unsound banking condition, it became the duty of the Federal reserve biirs and the Federal Reserve Board to see to it that this dangerous condition should be corrected, at the sane time protecting business and agriculture from the higher rates, so far as was humanly possible. Although, as above stated, the banl:s generally cooperated with the Federal Reser-re System to restrain the growth of speculative credit during this period of direct pressure, there was decided op-2osition on the part of some banks, which maintained that in a period of general credit or speculative exnansion, a customer having a good balance and offering acceptable security, could not be denied a loan, but that he was entitled to the loan provided he was willing to pay the discount rate determined upon by the member bank. In other words, the contention was made that while individual banks loaning more on speculative securities than the other banks of their class, could be restrained, yet when all banks were expanding no restraint could be put upon this ex-2ansion except by increasing discount rates. The Board does not accent this principle of banking. On the contrary, it believes that the individual member bank, as above stated, owes a duty to its stockholders, its deoositors, and to the public, to conduct its bank on sound banking principles, and when it 411X-6508 -6deviates from this rule, it becomes the cluty of the Federal reserve banks and the Federal Reserve Board to bring about a return to such sound banking principles. The Board is gratified at the success attained by this policy of direct pressure, and feels that it has established a new technique in regulating the volume of Federal reserve credit to the productive needs of the country. 1,44 orm No. 1.11. Office Corresponcence To Mr. Hamlin FEDERAL RESERVE BOARD Ehae April 24, 1930 Subject; GPO 2-8495 In your memorandum of April 23, you raised the following question: "If the banks of the country had forced their customers to reduce their speculative loans (apart from brokers' loans) would not that very fact have tended to reduce the size of brokers' loans and exercise a stablizing effect on the credit situation, which might possibly have averted the crash which came in October?" If the banks of the country had forced their customers to reduce their speculative loans (apart from brokers' loans) such customers would have had open to them two courses of action: (1) to sell part of their securities or (2) to transfer their accounts from their banks to their brokers. Had the banks followed such a policy security loans as a whole would no doubt have been reduced but brokers' loans would have increased by the extent to which speculative accounts were transferred from the banks to the brokers. In view of the attitude of the banks the increase in brokers' loans would have had to come for the most part from non-bankers and the additional demand for such non-banking loans would presumably have resulted in higher call money rates. If, therefore, the banks had followed the practice you refer to, beginning say in 1928, greater pressure would have been placed on the market, higher call rates would have prevailed, and a check on expansion would have no doubt occurred much earlier than October 1929. In such ease security prices presumably would not have reached the heights that they did and the crash which came in October would have been somewhat less severe. VOLUME 203 PAGE 98 A •March 1, 1930. 24412.4 • en Market Po3inittee Letter of Board to Federal Reserve BtOks dated January 23 1930. Replies of the Federal Reserve,Barikst #1. Boston. Approves general theory of the plan. Suggested amendments: 1. Paragraph 2. Each bank to be represented by the Governor or by an officer designated by the Board of Directors. 2. Amend paragraph 3 so that Executive Committee can hold meetings on own initiative as well as on call of Board. 3. Amend paragraph 6 so that conclusions or recommendations of Open Market Poligy conference shall be subject only to the approval of the Board. 4. Amend paragraph 7 so as to give Executive Committee power to carry out policies agreed or, by the conference through open market operations, subject to the review and coordinating authority of the Federal Reserve Board. Will participate in all open market operations, without, however, surrendering any authority, rights, or powers of independent action conferred by the Federal Reserve Act. VOLUME 203 PAGE 99 AL 2. #2. New York.. Will not make any detailed suggestions, as in some respects not clear as to the purport of the Board. Will express general views as to open market operations in Goverment securities for System account. We favor continuing Open Market Coromittee composed of representatives of the Federal reserve banks. Its duty should be the initiating amd recommending of plans and policies with regard to purchase and sale of Government securities through the open market. (i) It should have authority to execute approved plans and policies in behalf of such banks as care to participate. The Committee should include representatives of the 12 banks, provided an effective operating committee is appointed with full authority to execute approved plans or policies. (i),> Otherwise, the Directors feel the procedure will become too cuMbersome. The Committee should be composed of Governors. 0 We do not object, however, if other Boards of Directors Should appoint (i) other representatives. (2) We assume that meetings of the Committee, or the Executive Committee, will be aalled by the Chairman of the Committee after consultation with the Governor of the Federal Reserve Board, whenever desired by the Board or by the Committee. The poliqf as to purchase or sale of Government securities should be made subject to review at any time that may seam wise either to the Board or to the participating banks. Any Federal reserve bank may decline to participate in any purchases or sales at any particular time. Any Federal reserve bank may withdraw from the Committee procedure altogether, if it deans it advisable. We recognize that the banks and the Board have a joint interest in matter of open market policies with respect to purchase and sale of Government securities. 3 . We will be agreeable to continue our participation as long as the composition and functions of the Committee will insure and facilitate the formulation and expeditious execution of sound System open market policies. The views of some banks may at tim es of the majority of the Committee. be at variance with the views Without waiving the powers conferred upon us by law to make purchases and sales of Government securities, we would naturally assume, certainly so long as we continue a part of any approved open maxket committee procedure acting for the System, that we would not exercise our power to buy and sell Government securities in conflict with approved System policies, except as that might be necessary in an emergency in our own market. Our Directors are agreeable to continue participation in System open market procedure worked out and agreed upon by the Board and the Co.limittee, provided it is not inconsistent with these general views. Man 4. #3. Philadelphia. Our Directors unanimously adopted a report of Committee of our Board of Directors as follows: We favor the resultion at the Joint Conference of Agents and Governors in November, 1929) adapting the recommendation of the Federal Advisory Council. This resolution recognizes: 1. The right of any bank to participate or not in open market System operations. 2. The right of the Committee to meet whenever in the judgment of the Exeautive Committee a meeting is advisable. 3. The function of the Federal Reserve Board as a supervising and coordinating authority, rather than as an originating or operating body. The Federal Reserve Board letter transforms the Committee into a Conference, the conferees consisting of a representative of each Bank and the Federal Reserve Board. (17) (?) Not material whether the bank be represented by the Governor or by a represent tive designated by the Board of Directors. Objects to (3) of Board's letter, - a provision that the representatives of the banks shall meet WA the Board. It fails to observe the distinction running through the Act that the banks are the initiators of all transactions, subject to the review and coordinating authority of the Federal Reserve Board. The Board can not properly review policies in the framing of which it participates, nor should it take any pact in the routine execution of policies which it has approved. Objects to provision that the conference shall meet only at such times as may be arranged by or with the Board. This would give Board an absolute veto power over any meeting of the committee. The Board has a veto power over the recommendations of the Committee, but should not have a veto power over its meetings. kkecutive Committee should have power to call a meeting at any time. • 5. Objects to (6) in Board's letter that the recommendations of the conference should be submitted to each bank for consideration and,- or action. A very cuabersome requirement which midat prevent prompt action and prove disastrous. The Board should not be put in the position of having to consider and decide policies which it had assisted in franing. These policies would not represent, as they now do, the uninfluenced and independent views of the banks, subsequently allowed or approved by the Board, but would be the outcome of a wholly extra-legal conference, in Which the reviewing authority had participated ab initio. Objects to (7) of Board's letter, that Open Market Committee shall merely execute purchases and sales Which have been approved by the banks and the Board. This would put the Committee in a position little better than that of a broker or dealer. The Ihecutive Committee should continue to keep close watch upon financial developments, and anticipate as far as possible situations likely to arise, and be prepared to formulate recommendations and suggestions for the consideration of the full Committee. The Committee finds itself in full accord with the Federal Advisory Council, the Agents, and the Governors, and out of accord with the letter of the Federal Reserve Board. 6. #4. Cleveland. We agree with Board that all banks should take part in formulation of open market policies. We believe the plan of Federal Advisory Council, Agents, and Governors will tend to operate more smoothly than proposed plan of Board, for following reasons: L)) (a) The title should continue to be the Open Market Investment Committee. (b) We believe that meetings of the Committee should be called either by the Board or by the Executive Committee. Two of the regular meetings of the full Committee should be held at the time of the sani-annual Governors Conference. (c) The executive Committee should have power to carry into effect the policies recommended by the full ammittee and approved by the Board, as recaamended by the Governors. Membership of the Executive Committee should be rotating, so that the Governor of each bank within over-night traveling distance from Washington would serve at appropriate times. The Governor of the New York Bank should be a permanent member and act as Chairman of the full Committee, and of the Executive Committee, as the Committee's operations must obviously be carried on in New York. (?) (d) Objects to (6) of Board's letter as cumbersome, retarding action particularly in emergencies. Prefers recommendation of Governors that the full Committee shall consider and act upon the recommendations of the Executive Committee, and shall then meet with the Board to discuss these recommendations before action by the Board. Will cooperate with Canmittee, reserving our legal right to engage in open market operations under Section 14. We have declined to participate only when, in our judgment, the legitimate demands of our menber banks made it necessary so to do. We will continue to support the open market policies approved by the Board, reserving the right to purchase at our option, Government securities and bills in limited or reasonable amounts When offered to us by our own member banks, and will exercise our right to engage in open market operations for our own account only in unforeseen emergencies. 7. #5. Richmond. Pear the Board's procedure is too cuMbersame. Have appointed a Committee and will consider their report when rendered. 1 Digitized•for FRASER 8. #6. Atlanta. We approve the policy outlined. in Board's letter. Understood that we may continue ordinary every-day practice of buying acceptances within, our own District, and of buying from and selling to our member banks Government and other securities authorized by Section 14. Above practice will not hamper or interfere with the operations of the Open Market Conference. Any action necessary in a large amount, in case of emergency, would be submitted to Board for approval. 9. #7. Chicago. Our Executive Committee duly authorized, and unanimously approved following expression: 1. Each Federal reserve bank should be represented on Open Market body. 2. The Open Market Conference should have an Executive Committee clothed with authority to function. 3. The Chairman of the operating body should be authorized to call a meeting of the body on the request of two or more medbers. The Federal Reserve Board could always call the body together. 4. Board does not indicate that existing procedure of buying and selling daily in nominal or reasonable amounts will be dhanged. This practice should continue as at present. (.4) 5. Approves 4 and 5 of Board's memorandum. Objects to (6) as unworkable. Each Federal reserve bank should delegate authority to its representative on the Conference to act for his bank at all meetings of the Conference. This clause should also be amended to clearly indicate that each Federal reserve bank retains the powers conferred upon it by Section 14 to the extent that it may protect any sudden or extreme emergency. Three of our individual Directors have approved of this expression. ii S #8. St. Louis. Our Bank approves letter of Board.. Believe that there should. be some method of rotation on proposed. ixecutive Committee, excepting only the Governor of the New York Bank. ,,,,.........11141.11 10. Our Board is heartily in accord. with procedure indicated in Board's letter. #12. San Francisco. Resolution passed by Board of Directors February 20, 1930: 1. Approves Board letter without waiving any right, or delegating any power conferred upon this bank under the Federal Reserve Act. Designates the Governor as its representative. 6;) 6) Provided: The conclusions and (or) recomendations of the Conference shall be submitted to the Federal Reserve Board for consideration, and, if apDroved by it, shall thereupon became immediately operative, to be participated in by each Federal reserve bank as it may dean expedient. Provided: This Board, in approving the establishment of said Conference does not surrender but expressly reserves to the Federal Reserve Bank of San Francisco, the right to determine whether this Bank will participate in transactions recommended by the Conference and, if it does participate, the extent of such participation. Provided: No present or future participation by this Bank in the transactions of said Conference shall be interpreted as a commitment to further participation. .111114norms £4A41 Ma411 7, 1930: .e4.-eve 04.4,444044 0.6 vs-64A IA-4444 en liariference . . The principal objection to the Board's new circular is that it tends to submerge the Executive Committee and the full Committee with the Federal Reserve Board. It seems to be desired that the Executive Committee may meet at any time, and make, from time to time, a careful review of financial conditions, reporting the same to the full Committee, and that meetings of the full Committee may be called at any time when the Chairman or the Board desires. The feeling is strongly expressed that the Board's fanction should be that of a reviewing body, and not of an initiating or operating body. Opposition is expressed to referring conclusions of the Committee aiaproved by the Board to the individual banks, and it is suggested that each bank delegate authority to its representative on the Committee to act for it, and that the review and determination of the Board shall be final. .gro•••• VOLUME 203 PAGE 101 Oft. • (0 44 401 4 010A o40 X-S525 OPZ7 :,LL32.71 POLICY COL:MITTEE Analysis of Replies of the Federal 7.eserve Banks to Board's Letter dated January 23, 1930. (To replies received from the Richztond, 7.ansas Cit7 or Dallas Banks.) 1. Board's letter: - Changes name to Onen Market Policy Conference. Yew York prefere )resent name. Cleveland objects, and Prefers old name. Other banks do not mention this. 2. Board recommendation: - Each Federal reserve bank to be represented on the 0:7en Market Policy Conference. Boston: Suggests representation by the Governor, or by an officer designated by the Board of Directors. Yew York: To be coz.posed of representatives of the twelve Federal reserve bans, provided an effective operating committee is a.,_flointed with full authority to execute al-proved plans or nolicies. Committee should be comosed of Governors. We do nJt object if other 2oards of Directors should a.-.Dpoint other renresentatives. Philadelphia: :Tot material whether Governor or other representative be designated by Directors. Chicago: Zach Federal reserve bank should be renresented. San Francisco: The Board of Directors has designated the Governor as its representative. 3. Board letter: - The Conferences should meet with the Federal Reserve Board at such times as may be arranged by or with the Board. • X-5525 Boston: Suggests amendment so that Executive Committee can hold meetings on own initiative as well as on call of Board. New York: We assume that meetings of the Committee, or the Executive Comzlittee will be called by the Chairman of the Committee after consultation with the Governor of the Federal Reserve Board, whenever desired by the Board or by the Committee. Philadelphia: Asserts the right of the Committee to moot whenever in the judgment of the Executive Couunittee a meeting is advisable. Objects to the provision of (3) that the representatives of the banks shall meet with the Board. This fails to observe the distinction running through the Act that the banks are the initiators of all transactions, subject to the review and coordinating authority of the Federal Reserve Board. The Board cannot properly review policies in the framing of which it 2artici:pates, nor should it take any part in the routine execution of policies which it has a7)roved. Objects to Provision that the Conference shall meet only at such times as may be arranged by or with the Board. This would give the Board an absolute veto power over meeting of the Committee. _ The -:',oard has a veto -power over the reco=endations of the Committee, but Should not have a veto Power over its meetings. The Executive Committee slio-ld have .-power to call a meeting at any time. Cleveland: We believe that meetings of the Committee should be called either by the Board or by the Executive Committee. Two of the regular meetings of the full Committee Should be held at the time of the semi-annual GovernorslConference. Chicago: The Chairman of the operating body Should be authorized to call a meeting of the body at request of two or more members. The Federal Reserve Board could always call the body together. tA....4 4 4. Board letter:- The function of the Open Market Policy Conference should be to consider, develop, and recommend plans with regard to the purchase or sale of securities in the open market. /1064044.1~4.44 ) ' 41 64(4 -tot,644,1 ,t4.44,=04. 24.44 *-4.c -3- X-6525 Chicago approves this. The other banks do not mention it. 5. Board letter: - The time, Character, and volume of such purchases and sales to be governed with the view of accommodating commerce and business, and with regard to their bearing upon the credit situation. The banks do not comment on this. 6. Board letter: - The conclusions and (or) recommendations of the Open Market Policy Conference to be submitted to each of the Federal reserve banks and to the Federal Reserve Board for consid-ration, and (or) action. Boston: Suggests amendment so that conclusions or recommendations of the Open Market Policy Conference shall be subject only to the approval of the Board. Yew York: The policy as to purchase or sale of Government securities should be made subject to review at any time that may seem wise either to the Board or to the participating banks. We recognize that the banks and the Board have a joint interest in the matter of open market policies with respect to purchase and sale of Government securities. Philadelphia: Feels that the function of the Federal aeserve Board is as a supervising and coordinating authority, rather than an originating or operating body. The Federal Reserve Board letter transforms the Committee into a Conference, the conferees consisting of a representative of each Bank and the Federal Reserve Board. The Board's draft that the recommendations of the Conference should be submitted to each bank for consideration and, - or action, is a very cumbersome requirement which might prevent prompt action and Prove disastrous. The Board should not be put in the Position of having to consider and decide policies which it has assisted in framing. These policies would not represent, as they now do, the uninfluenced and independent views of the banks subsequently allowed or approved by the Board, but would be the outcome of a wholly extra-legal conference, in which the reviewing authority had participated ab initio. • -4- • X-6525 Cleveland: Objects to (6) as cumbersome, retarding action, particularly in emergencies. Prefers recommendation of Governors that the full Committee shall consider and act 11-.2on the recommendations of the Executive Committee, and shall then meet with the Board to discuss those recommendations before action by the Board. Chicago: Objects to (6) as unworkable. Each bank should delegate authority to its representative on the Conference to act for his bank at all meetings of the Conference. San Francisco: Sug:ests that the conclusions and (or) recommendations of the Conference shall be submitted to the Federal Reserve Board for consideration, and if approved by it, shall thereupon become immediately operative, to be participated in by each Federal reserve bank as it may deem exoedient. /14.A44.1.40.44. 2.44? C04.4.44.4•4644.44.44,44 7. Board letter: - A Committee to be known as the Onen Market Executive Committee to be constituted for the purpose of executing such purchases and sales of securities as have been approved by the Federal reserve banks and the Federal Reserve Board. Boston: Sugests amendment to give Executive Committee power to carry out policies agreed on by the Conference through open market operations, subject to the review and coordinating authority of the Federal eserve Board. Now York: The Committee (presumably also the Executive Committee) should have authority to execute approved plans and policies in behalf of such banks as care to participate. The meetings of the Committee, or the Executive Committee, should be called by the Chairman of the Committee after consultation with the Governor of the Federal Reserve Board, whenever desired by the Board or by the Committee. Philadelphia: Objects to provision that the Open Market Committee Shall merely execute purchases and sales which have been a-oproved by the banks and the Board. This would Put the Committee in a position little bettor than that of a broker or dealer. The Executive Committee should continue to keep close watch woon financial develoPments, and anticipate as far as Possible -5-- • X-55.25 situations likely to arise, and be prepared to formulate recommendations and augestions for the consideration of the full Committee. Cleveland: The -xecutive Committee should have power to carry into effect thc policies recommended by the full Committee and a?proved by the 2oe.rd, as recommended by the Governors. kombership of the Executive Committee should be rotating, so that the Governor of each bank within over-night traveling distance from Washington would serve at eeyoropriate times. The Governor of the 1Tew York sank should be a permanent iamber and act as Chairman of the full Committee, and of the Zxecutive Committee, as the Committee's operations must obviously be carried on in "few York. Chicazo: The 0.7)en 1.a..rket Conference should have an Executive Committee clothed with authority to function. St. Louis: There should be some method of rotation on the --)rcnosed Executive Committee, excepting only the Governor of the Yew York Bank. e•644.icst. 414.4-• /44,‘ 4444, e446:44 ii,44,4•4.6=^ vuie g44. A.t .C4001.44 A44,4 2.3 Suggestions by the Banks as to Participation: Boston: Will Participate in all open market operations, without, however, surrendering any authority, rights, or powers of independent action conferred by the Federal Reserve Act. New York: Any Federal reserve bank may decline to Participate in any purchases or sales at any particular time. Will continue our -oarticipation as long as the composition and functions of the Committee will insure and facilitate the formulation and exneditious execution of sound System onen market policies. Our directors are agreeable to continue participation in System open market procedure worked out and agreed unon by the Board and the Committee, provided it is not inconsistent with these general views. Cleveland: will cooperate with the Committee, reserving our lee-al right to engage in cy2en market onerations under Section 14. We have declined to 'Darticipate only when, in our judgment, the legitimate demands of our member banks made it necessary ;;o to do. We will continue to support the ooen market policies a-eproved by the Board, reserving the right to purchase at our option, Government • -6- 111 X-6525 securities and bills in limited or reasonable amounts when offered to us by our own member banks, and will exercise our right to engage in o-Pen market operations for our own account only in unforeseen emergencies. San Francisco: Our Board expressly reserves to the Federal Reserve Bank of San Francisco, the right to determine whether the bank will particinate in transactions recommended by the Conference and, if it does narticinate, the extent of such participation. Yo oresent or future .participation by this bank in the transactions of said Conference Shall be internreted as a commitment to further participation. Reservations. Boston: Reserves all authority, rights, or powers of independent action conferred by the Federal Reserve Act. New York: Without waiving the powers conferred unon us by law to make purchases and sales of Government securities, we would naturally assume, certainly as long as we continue a part of any al-proved open market committee procedure acting for the System, that we would not exercise our power to buy and sell Government securities in conflict with anproved System policies, except as that might be necessary in an emergency in our own market. 3 44 , 4 44 Cleveland: Will coo-perate with the Committee, reserving our legal right to engage in open market operations under Section 14. We will continue to sun)ort the open market policies an-proved by the Board, reserving the right to -purchase at our option, Government securities and bills in limited or reasonable amounts when offered to us by our own member banks. Will exercise our right to engage in open market operations for our own account only in unforeseen emergencies. Atlanta: It is understood that we may continue ordinary every-day practice of buying acceptances within our own District, and of buying from and selling to our member banks, Government and other securities authorized by Section 14. The above practice will not hanper or interfere with the operations of the Open Market Conference. Any action necessary in a large amount, in case of emergency, will be submitted to Board for approval. • -7- X-5525 San Francisco: An-oroves Board letter without waiving any right, or delegating any power conferred upon this bank under the Federal Reserve Act. This Board, in approving the establishment of said Conference, does not aurronder, but expressly reserves to the Federal Reserve Bank of San Francisco, the right to determine whether this bank will narticipote in transactions recommended by the Conference and, if it does -participate, the extent of such participation. in transactions No present or future -Dartici:Jation by this .cank of said Conference Shall be intororeted as a commitment to further Pexticipation. Joint Interest. Now York: We reco&nize that the banks and the Board have a joint interest in the matter of o-:?on market policies with respect to , ourchase and sale of Government securities. AAAA4A4b.41.0.e Riht of Withdrawal from the Conference. 7ew York: Any Federal reserve bank may withdraw from the Committee procedure altogether, if it deems it advisable. 7xigencios. :Tew York: We would not exercise our power to buy and sell Government securities in conflict with approved System policies, except as that might be necessary in an emergency in our own market. Cleveland: While we reserve the right to -mrchasc at our option Government securities and bills in limited or reasonable amounts v'hen offered to us by our ova member banks, we will exorcise our right to engage in oPon market crocrations for our own account on17 in unforeseen emergencies. Atlanta: Any action necessary in the way of buying accaytances within our own District, and 'buying- from and selling to our member banks Government and other securities authorized by Section 14, in a large amount, in case of emergency, would be submitted to the Board for arnroval. Chicago: The Federal reserve bank retains the powers conferred lroon it by Section 14 to the extent that it may protect any sudden or extreme emergency. it Form No. 131 -• Office Corresponance T. Mr. Hamlin From Le4.11.44 FEDERAL RESERVE BOARD Itar._1041930 Subject: Digest of State Laws re Branch Banking. Mr,. Wyatt-General-Couliseli I am handing you herewith for your information, a copy of the final draft of the Digest of State Laws regarding Branch Banking, which was prepared in this office with the assistance of Counsel to the Federal Reserve Banks. Respectfull /I: l foater Wy t unsel. General Digest attached WW sad VOLUME 203 PAGE 10, • • X-8528 March 7, 1950. DIGEST OF STATE LAWS RELATING TO DOnESTIC BRANCH 3ANI=G. On pace 182 of the Federal Reserve Bulletin for March, 1925, there was published a digest of State laws relating to brandh banking, which was prepared by the Counsel's Office of the Federal Reserve Board with the assistance of the Counsel to the various Federal reserve banks, and which showed the status of brandh banking legislation in the various States at the close of the year 1924. The follawinc digest of the branch bankine; laws of the several States, which was also prepared by the Office of the Board's Counsel with the assistance of the Counsel to the various Federal reserve banks, supersedes the digest published in the March, 1925, Federal Reserve Bulletin, and shows the status of branch banking legislation in the various States as of December 31, 1929. laws as It contains a digest of only such State • relate to branches established within the United States and does not cover laws relating to branches established in foreign cuuntries. • X76528 -2- SU:,/iMARY OF STATE Li.WS. having : Statls prohibiting ; States States permitting : States permitting ation legi§l no ; . with- : -oranth ba-iking State-wide branch : branch bankin,:; • regal banking : in limited areas : branch banking Georgia (2) Louisiana (3) Maine (4) Massachusetts (5) Mississippi (6) New Jersey (7) New York (8) Ohio (9) Pennsylvania (10) Tennessee (11) Arizona California Delaware Maryland North Carolina Rhode Island South Carolina Vermont (1) Virginia TOTAL 9 TOTAL 10 Alaba: Arkamas Colorado Connecticut Florida Idaho Illinois Indiana Iowa Kansas Minnesota Missouri Montana Nebraska Nevada New Mexico Oregon Texas Utah Washington West Virginia Wisconsin TOTAL 22 : Kentucky (12) : Michigan (13) : New Hampshire : North Dakota : Oklahoma : South Dakota : Wyoming TOTAL 7 establishment of No -Provisions regarding branches but State-wide "agencies" permitted. City or municipality. Municipality or parish. County or adjoining county. Same town. Same city. Same city, town, township, borough or City limits. Same city or city or village contiguous thereto. Corporate limits of same place. County. ons permit establishruert No provisions regarding branches, but court decisi ts and pay checks. of additional offices or agencies to receive deposi or village of head "Industrial banks" may establish branches in city t of branches by office; but no provisions covering establishmen other banking institutions. SES-sad • • 9 X-6528 - 3- ALABAMA.. Branches prohibited: "No bank, or any officer, agent or director thereof, shall :De permitted to establish a branch or office for the transaction of the banking business, other than at its principal place of business." (1928 Combined Banking Laws of Alabama, Sec. 6354, p. 25; Civil Code of Alabama, Sec. 6354.) ARIZONA. Branches permitted: Banks and trust companies in this state Eay establish branches if they have the capital required by law and if the consent of the Superintendent of Bank:s is obtained. The Superintendent of Banks may give his consent if the public convenience and advantage will be promoted by the opening of such branch, and he may withhold such consent if he is satisfied that the opening of the branch is undesirable or inexpedient. (Banking Laws, 1922, Sec. 21, p. 17; Special S. L. 1922, Ch. 31, Sec. 21, p. 131). Capital required: "Before any auch branch office is authorized, the corporatinn proposing to establish the sane Shall have a paid in capital and surplus of of not less than Fifty Thousand Dollars, plus Fifteen Thousand Dollars additional capital and surplus for each and every branch so authorized." (Banking Laws, 1922, Sec. 21, p. 18; Special Session Laws, 1922, Ch. 31, Sec. 21, p. 131). s IA -4- X-6528 ARKANSAS. Branches prohibited: "* * * the return of which said copy (certificate of indorporation) so indorsed and the filing of the same for record with the county clerk of the county in which the said institution (bank or trust company) is located, than. authorize it to proceed with its business, but with only one office for the transaction thereof in only the one town or city as to which the application has been made." (Banking Statutes, 1929, Sec. 14, p. 9; Section 13 of Act 113 of the Act of 1913, as amended by Acts of Arkansas, 1923, p. 519). CALIFORNIA. Branches permitted: "No bank in this state, or any officer or director thereof, shall hereafter open or keep an office other than its principal place of business, without first having obtained the written approval of the Superintendent of Banks to the opening of such branch office, which written approval may be given or withheld in his discretion, and shall not be given by him until he has ascertained to his satisfaction that the public con- venience and advantage will be promoted by the opening of sudh branch office; * * * " (Bank Aet of California, 1929, Sec. 9). Capital required: For each brandh office located in the place of business of the parent bank, the paid-in capital, in cash, must exceed by $50,000 the capital required for the transaction of business by a bank in that place. (Bank Act of California, 1929, Sec. 9). For each branch office of a bank, other than an exclusive trust company, located in any place in the state other than the place of the S -5- X-6541 . (California, continued) principal :lace of business of the parent bank, the amount of paid-in capital, in cash, must exceed the amoant required by law in the sux, required for the organization of a bank in that locality, exclusive of the ca-Atal required for a trust dapartment. (2-ank Act of California, 1S29, Sec. 9). For each branch of an exclusive trust company opened or maintained in any place in the State other than the place of the principal business of the parent trust comDany, the paid-in capital, in cash, must exceed by $50,000 the amount required by law for the transaction of a trust company business. (Bank Act of California, 1929, Sec. 9) There are alsc 1.2:- )visions concerning the discontinuance of a branch, increase of capit. 1 '1poi increase in deposits of branches, fee for the apenin of a branch, Ilenaity for violation of the law covering the establishment of branches, advertising by branch, and the establishment of branches by bans locat3d in a city or territory which is annexed by or consolidated with a city or territory -f a ,;1.1..s rflcuiring a larger capitalization. (Bank Act of Califcrn'a, 1929, Sections 9, 19, 23, 28, 60 and 82.) coLoa,zo. Branches prohibited: "Every bank &nall be conducted at a single plice of busine, and no branch thereof shall be maintained elsewhere". (Banking Laws, 1928, Sec. 55, p. 31; 1921 Compiled Laws, Sec. 2703; S. L. 1913, Sec. 46, p. 128.) COMECTICUT. Branches prohibited: H * * * no state bank, trust company, mutual savings bank or S -6" (Connecticut, continued) building and loan association shall establish any branch office or agency thereof, or employ any agent or ?erson to make loans or discounts at any other place than its banking house." 3920, (Banking Laws, 1929, Sec. •18; General Statutes of 1918, Sec. 3920, as amended by Chapter 10, P.A. 1923.) Persons, partnerships or corporations licensed to transact a "small loan" business may not make any loan provided for in the Connecticut Sa1l Loan Company Act "under any other name or at any other place of business than that named in the license. Not more than one place of business shall be maintained under the same license, but the bank commissioner nhall issue more than one license to the same licensee upon the payment of an additional license fee and the filing of an additional bond for each license." (Bankinc Laws, 1929, Sec. 8, p. 114; Ch. 219, P.A. 1919, as amended by Ch. 223 P.A. 1923.) DLIATAL-71]. Branches authorized: "To bank or trust company shall o- en any branch office or place of business in this State unless authorized so to do by the certificate of the State bank commissioner." (Banking Laws, 1929, Sec. 4, p. 16; Laws of Delaware, 1921, Ch. 103, Sec. 4, p. 288). Capital requirements: "No such certificate shall be issued by the said commissioner, unless satisfied that the apolicant has a paid-in capital stock to an amount equivalent to at least twenty-five thousand dollars for each office or place of business then established by said corporation in this State and for the branch sourjht to be established, and a surplus to an amount • -7- X-411 (Delaware, continuod) eouivalent to at least twenty-five thousand dollars for each office or place of business then established b- said corporation." (Banking Laws, 1929, Sec. 4, D. 16; Laws of Delaware, 1921, Ch. 103, Sec. 4, p. 288). Must be authorized by charter: "Nothing in this 9ection contained shall be deemed to confer on any corporation the power to establish branches not expressly authorized by its charter". (Banking Laws', 1929, Sec. 4, p. 16; Laws of Delaware, 1921, Ch. 103, Sec. 4, p. 288) FLORIDA. Branches prohibited: "The place of business of each banking company shall be in the city or town specified in its dharter, and the u.sual business of any such banking coripany shall be transaced at an office or banking house located in the city or town so specified and not elsewhere." (Banking Laws, 1921, Sec. 4139; General ComPiled Laws of Flori.da, 1927, Sec. 6070.) GCGRICTIA.. Branches authorized tut restricted as to location: Under the -provisions of an Act of the Georgia legislature approved July 20, 1929, it is --)rovided that "banks chartered under the laws of this State and having their principal office in a city, now, or hereafter having a population of not less than eichty thousand, or more than one hundred and twenty-five thousand, mav establish branch banks in the city in which its principal office is located." (Georgia Laws, 1929, An Act of the Goor,:ia lec„;isiatu.re anproved August 17, 1929, provides "that banks chartered under the laws of this State, and having their 110 _8- .528 (Georgia, continued) principal office in a municipality, now, or hereafter having a population of not less than 200,000, according to the last census of the United States or any future census of the United States, may establish branch balks in the municipality in which its principal office is located." This act also T)rovides "that all laws and parts of laws in conflict herewith, be and the same are hereby repealed." (Georgia Laws, 1929, p. 214.) IDAHO. Branches prohibited: "No bank shall maintain any brandh bank, receive deposits or pay checks, except over the counter of and in its own banking huuse. Provided, that nothing in this section shall prohibit ordinary clearing house transactions between banks." (Banking and Public Depositary Law, 1925, Sec. 84, p. 42) ILLINOIS. Branches prohibited: By an Act approved June 28, 1923 (Laws of 1923, p. 164) the Illinois legislature prohibited branch banking, subject to the approval of the people at the general election of 1924; and at an election held on November 4, 1924, the act was approved by the people. This act pro- vides: "No bank shall establish or maintain more than one banking house, or receive depoSits, or pay checks at any other place than such house; and no bank shall establish or maintain any brandh bank, branch office or additional office or agency for the purpose of -9- 0 X-8528 (Illinois, continued) conducting any of its business." (Smith-Hurd Ill. Rev. Stat., 1927, sec. 9, p. 193.) On June 4, 1922, an act was approved prohibiting branch banking; but this act is subject also the approval of the people "at the next general election." This act provides: "No bank shall establish or maintain more than one banking house, or receive deposits, or --ey checks at any other place than such banking house, and no bank shall establish or maintain in this or any other state or country any branch bank, nor shall it establish or maintain in this State any branch office or additional office or agency for the purpose of conducting any of its business." (Cahill Ill. Rev. Stat., 1929, Sec. 9, p. 164; Laws of 1929, p. 178.) INDIANA. Branches prohibited: "That it shall be unlawful for any person, firm or corporation engaged in the business of operating a State bank, private bank, savings bank, or loan, trust or safe deposit company to open, or establish a branch bank or branch office: Provided, That the provisions of this section shall not apoly to branch banks or branch offices for which charters have heretofore been granted." (Banking Laws, 1929, p. 139; Acts of 1921, P. 367). IOWA. Branches prohibited: "No banking institution shall glen or maintain any branch bank, -10- X-6528 or r3ceive denosits or -)ay dhecks, other than at its nrincipal nlace of business." (Banking Laws, 1929, Sec. 9258-bl, p. 32; Act ap?roved April 18, 1927, 1927 S. L. Ch. 206, D. 181). KAYSAS. Branches prohibited: "The general business of every bank shall be transacted at the place of business snecified in its dharter or permit, and it shall be unlawful for any bank to establish and operate any branch bank or branch office or agency or place of business". (Banking Laws, 1929, Sec. 1, p. 2; Laws of 1929, Ch. 85, sec. 1.) KENTUCK?. No provision regarding branches: There is no specific nrovision in the laws of Kentucky regarding the establishment of branches. The Court of Appeals of Kentucky has held, however, that in the absence of such a provision it is not within the power of a State bank to establish a branch bank, though it may have additional offices or agencies to receive deposits and pay checks or transact other necessary duties not requiring special discretion or business acumen. (Bruner v. Citizens Bank of Shelbyville, 120 S. W. 345; Marvin v. Kentucky Title Trust Company, 291 S. W. 17.) LOUISIANA. Branches authorized: "Every increase or decrease, modification, alteration or addition to the capital or of the number of the shares, shall be submitted to a general =eeting of the stockholders, held after thirty days' notice by publication and by mail, and shall be approved by two-thirds of the amount of the capital stock; and shall be executed, recorded and published as • -11- U (Louisiana, continued) provided for the original articles, which Shall provide for the location in the parish or domicile of any BankinE Association of not more than two brandh offices. l'rovided, that no Banking Association or Savings Bank with capital stock of less than $50,000 may locate or operate branch offices; but this -provision Shall not apply to existing branch offices." (Bankinr Laws, 1928, sec. 7, 0.ro.184 J: Trust and savings banks, savings banks, and safe de-posit companies: "Any savings, safe deposit, or trust and savings bank may have one or more as hereinbelor provided offices of discount and deposit with- in the limits of the municipality or parish in which the said bank is located; provided that a savings, safe deposit, or trust and aavings bank, of fifty thgusand dollars or more capital shall operate not more than one branch; or more than fifty thousand dollars, but not more than seventyfive thousand dollars capital Shall operate not more than two branches; or more than seventy-five thousand dollars, but not more than one hundred thaasand dollars capital shall operate not more than three branches; of more than one hundred thousand dollars, but not more than two hundred thousand dollars capital Shall operate not more than five branches; of more than two hundred thousand dollars, but not more than two hundred and fifty thousand dollars shall operate not more than sxIrae of more than two hundred and fifty thousand dollars, but not more than three hundred thousand dollars capital Shall operate not more than seven branches; and for each additional hundred thousana dollars capital stock Shall operate not more than one additional branch; and provided further that before any savings, --fe deposit, or trust and savings bank shall open a branch 42,o) X-6528 -1.2(Louisiana, continued) office under the provisions of this Act, said savings, safe deposit, or trust and savings bank must first obtain a certificate of authority from the State Banlr. Coaaissioner; and provided further that whenever any such banks slu_11 have taken advantase of the provisions of this Act and Section, and Ethan have established one or more offices of discount and de-oosit Tithin the limits of said munici2ality or parish, no future political or legal subdivision of said municipality or parish shall have the effect of in anywise affecting the rit of such banks aforesaid to continue the existence, maintenance and operation of any such offices already established, nor shall any provisions contained in this Act be construed as in anywise affecting the right of any savings, safe de-posit or trust and savings bank to continue the operation and maintenance of such branch offices as may have been lawfully established prior to the enactment of this Act." (Banking Laws, 1928, sec. 1, 237; Act Yo. 146 of 1926, sec. 1) Trust and banking comnany branches authorized: No trust com)any now or hereafter organized shall establish a branch or agency until it shall have received a warrant so to do from the bank commissioner, who shall issue such warrant only when satisfied that public convenience and advanta:;e will be promoted such branch or agency, * * *. the establishment of No trust company shall be permitted to establish a branch or csency except in its own or an adjoining (Banking Laws, 1927, sec. 88, county." 56; Maine P. L., 1923, Ch. 144, -sec. 88). Canital requirements: Trust eompanies are required to have a ca-pital varying with the • -13- 17.-5528 _ (Maine, continued) place in which they are located. Trust comanies with branches must have the capital required of trust companies located in a place with a population equal to the agregate population of the place in which the parent institutions are located and the 7)opulation of all places in which its branches are located‘ (Banking Laws, 1927, sec. 69, p. 46; sec. 88, p. 56; Maine P.L.,1923, ch. 144, secs. 59 and 88). MA2YLAND. Branch banks and trust companies authorized: The laws of Earyland provide for the capital of branches established by banks c.nd trust companies and, therefore, impliedly authorize the establishment of branches by these institutions. The capital re- quired for the organization of a bank or trust company depends upon the size of the place in which such bank or trust company is located. a. bank hereafter establishing a branch outside of the city, town or village in which it is located must increase its capital stock for each branch so established to a sum equal to the amount required for the organization of such bank and the organization of a bank in the place in which the branch is located. A trust company establishing a branch outside of the city, town or village in 1,nich it is located must add to the amount of capital stock required for its organization for each branch so established a certain enumerated sum depending upon the size of the place in which the branch is established. No "branch shall hereafter be established" by any bank or trust company "in the city, town or village where said bank (or trust conpany) is now locatea, and engaged in business", until said bank or trust col:nany "conforms to the requirements * * *, as to the miniram amount of capital stock for banks (or trust companies) in said city, town (Maryland, continued) or villae". (Banking Laws, 197, sec. 2C, 7; sec. 42, IT). 19; 1924 Annotated Code of liaryland, Article 11, soc. 20, and sec. 42, as amended by Acts of 1927, Ch. 108, Sec. 42.) 1:,ASSACHUSETTS. Branches of trust com-)anies authorized: Board of 'Dank incorporation may authorize in writing any such cor-DorJ.tion to maintain one or more branch offices of the town where its main office is locatea; provided, that in any town the pooulation of v.hich accordin,; to fae last preceding state or natioilal census does not exceed fifty thousand not more than one such branch, and in anzT toim the ponulaivion of which according to said census e::ceeds fifty thousand but does aot exceed one hundred thousand not more than to such branches Shall be so authorized." "hese restrictions do not a-Toly to branch offices authorized Prior to January 2, 1928. (Act of May 8, 192,8.) "Any office of a trust company tne business of which has been taken over under section forty-four 'oy, or any cffice of a national barL purchased by or merged in, a trust compan:c- located in tho same town, may be maintained as a branch office of such cor-Doration, if in the opinion of camissioner pu:olic convenience win be served thereby." (Trust Comany Laws, 1326, sec. 46, p. 24; General Laws of Eass., ch. 172, 46.) MICEIGLT. "Industrial bank" may establish branches: "To establish branch oifices or places of business rithin the city or villace in which its -,rincinal office is located, but not elsewhere." (Banking Laws, 129, sc. 66, -D. 49; Liich. Pub. Acts, 1917, Act No 296, sec. 4; Comp. Laws of Cahill's 1922 Sup-Dlement, sec. 8032 (6) ) • -15- • X-6528 (MichiEan, continued) There is no specific provision in the laws of Michigan with reference to the establishment of braaches by other banks. larESOTA. Branches prohibited: "No bank or trust company orEanized under the laws of this state .shall maintain a branch bank or receive deposits or pay dhedks within this state except at its own bankinE house, and the superintendent of banLs shall take possession of and liquidate the business and affairs of any state bank or trust com-oany violating the previsions of this act in the manner prescribed by law for the liquidation of insolvent state banks and trust companies." (Banking Laws, 1929, sec. 1, D. 24; Laws of 1923, Ch. 170, sec. 1; Masonls Einn. Statutos, 1927, sec. 7693) Branches in same city authorized: "The creation or organization of any branch bank in this State shall be and the sane is prohibited and forbidden, and no branch bank shall be hereafter established in this State, and no parent bank chartered under the laws of this State shall establith any branch bank either within or without the State: ProviLed, however, That when the superintendent of ban11:s shall believe the convenience and interest of the -mblic will be served he :my permit banks in cities of not less than ten thousand po)ulation to establish branch offices within the corporate Units of the city where the bank is domiciled, and such offices shall not be considered branch barLs within the meaning of section 261, code of Mississip?i of 1S06. But an established baak or branch banl: laay with the consent of the superintendent of banks be removed from one munici-oality to any other • IA —16— CAssissisyli, continued) municinality." (Brown's 1:iss. and Federal Banking Statutes, sec. 79, p. 79; Ch. 174., Laws of 1924.) Capital requirements: :Livery parent bank operating one or more branch banks shall set apart and: devote from its capital a sum of not less than ten thousand dollars for the exclusive use of each of said branch banks in its business, and the amount of the capital of the parent bank employed by each branch bank shall never at any time be less than the said amount of ten thousand dollars. (Brown's Miss. and Federal Banking Statutes, sec. 80, D. 8C; Heminway's Code, sec. 3522.) MISSOURI. Branch ban2:s prohibited: " * * * no bank shall maintain in this state a brandh bank, or receive deposits or pay checks e::cent in its own banking house." (taws of :issouri, 1987, sec. I (11737), p. 220.) Branch trust companies prohnited: "* * * no trust comnany eciall maintain in this state a branch trust comnany orreceive deposits or pay checks except in its own banking house." (Banking Laws, 1919, sec. 11799, 98; Rev. Stat. of Mo., 1919, sec. 11799, D. 3702.) MONTANA. Branch banks 2rohibited: "No bank shall maintain any branch bank, receive deposits or Day check, except over tI3 counter of and in its awn banking house. Provided, that nothing in this section shall Drohibit ordinary clearing house transactions between banks." (Banking Laws, 1927, sec. 101, D. 58; • -17- J N-6528 (Font-2.na, conti...:ued) Laws of 192,7, ch. 82, sec. 101) 1773LASYA. 2ranch banl:s --)rohnited: "No bank shall maintain any --ranch tank, receive deposits or pay checks, except over the counter of and in its cwn banking house. Provided, nothing in this section shall prohibit ordinary clearing (Banking Laws, 1929, Sec. 1, house transactions beteen banks." 45; Laws of Nebraska, 1927, 153) YEVADA. Branches nrohibited: " * * * Yo bank in this State shall hereafter open or maintain any branch bank or office * * * !I (Banking Laws, 1937, Sec. 8, p. 6; Rev. Laws of Nevada, 1912, Sec. 623.) "BAnk" defined; "The words 'corporation, 1 'banking corporation, 1 'bank,' 'trust com3any, 1 or coanker, 1 as used in this act, shall refer to and include savings banks, and trust com)anies, individuals, firms, aobociations, and corporations of an character conductinr; the business of re- ceiving money on deposit or otherwise carrying on a banking or trust company business, except as herein specially provided." (Banking Laws, 1927, Sec. 75, D. 23; Rev. Laws of Nevada, 1912, Sec. 690.) NE7; HAMPSHIRE. No provi:don concernin,s. There is no -,rovision in the laws of New Hampshire regarding tne establisent of branches by banks or trust companies. 0 X-65:38 411 -18NEW JERSEY. Bank and trust company branches authorized: "Banks (other tfian savinEs banks) and tru:_t co,Ipanies, organized under the laws of this State, may estallish and maintain branch offices or agencies for the transaction of their business, with the approval in writing, of the Commissioner of Banking and Insurance, which approval shall be given by him only if it shall a-Dpear to him that the establishment of such branch office or agency will be of public service; (Banking Laws, 1928, sec. 13, p. 136; Laws of 1925, Ch. 27, P. 85, aS amended by Laws of 1927, Ch. 20, p. 54.) Detailed provision is also made for obtaining the consent of the Commissioner of Banking and Insurance to establish branches. (1929 Laws Relating to Banks and Trust Companies, p. 20; Laws of 1929, Ch. 294, Capital requirements: The Commissioner of Banking and Insurance shall not give his approval to the establishment of brandh offices or agencies "umless the capital of such bank actually paid in in cash shall exceed the amount required by law for the incorporatlon of a bank, to the extent of fifty thousand dollars and the capital of such trust company actually paid in in cash shall exceed the amount required by taw for the incorporation of a trust company, to the extent of one hundred thousand dollars for each branch office or agency so established; * * * ." (Banking Laws, 1928, sec. 15, D. 137; Laws of 1925, Ch. 27,.p. 85, as ozionded by Laws of 1927, Ch 20, D. 54.) Establis.hiaent and number of brandhes restricted: The approval of the Commissioner of Banking and Insurance shall not "be given for the establishment of any oadh brandh office or agency -19- 0 5528 (Yew Jersey, continueS) outside the city, torn, township, borough or village in rhich such IS or trust com.)aay is located, nor shall any bank or trust company maintain and operate a branch office or agency rithin the corporate limits of a city, town, townshi-,), borough or village where the population by the last decennial census is less than twenty-five thousand; nor more than one such branch rhere such population by said census is more than t7enty-five thousand and not more than fifty thousand; nor more than two such branches where sudh pop.aation by said census is more than fifty thousand and not more than one hundred thousand, and rhere such population by said census is more than one hundred thousaad the number of such branches shall be such as may be determined by the Commissioner of Banking and Insurance; provided, that nothing in this act contained shall prevent the maintenance of any branch office or agency heretofore larfully established." (Banking Laws, 1928, sec.Lars of 1925, p. 85, as amended by Laws of 1927, Ch. 20, p. 54.) Merger of banks and trust companies: Banks and trust comoanies may merge eadh with the other and branches resulting from sudh merger may be continued under certain conons. (Ba:11-ing Lars, 1928, sec. 11, p.55; sec.19, p.59; sec.19, D. 108; sec.27, p.112; sec.18(1), p.139; sec.18(9), p.143; Laws of 1925, Chapters 197, 198 and 203; Lars of 1927, ch.14, p.39; ch.21, p.55.) Savings bank branches authorized: "Any savings bank incorporated under the laws of this State may establish, with the rritten approval of eIsmssone of Banking and Insurance, and maintain branch offices or agencies for the transaction of tsSusne provided, that the approval of the Commissioner of Bank ing and Insurance shall be given by him only if he shall be of the • 0-6528 (7e- Jersey, continued) opinion that the establishment of sudh branch office or ac;ency 7111 be beneficial to the public; * * *." (Act an.)roved March 7, 1927; La,,s of 1927, Gh. Canital reauirements: "And Drovided, that any savings bank establishing such branch office or a.ency shall have, according to its last annual report, a surplus of not less tha.n five per centum of the amount of its deposits, and, in aUdtion, fifty thousand dollars of surplus for each branch office or agency established, over and above said five per centum of the awant of daposits;(Act approved March 7, 1927; Laws of 1927, Ch. 34, D.75, Establishment and nunber of branches restricted: and provided further, that such branch office or agency shall be established only within the corporate limits of eIIunca (other than county) in which sudh savinL.s baak is located; and nrovided, further, that no such branch office or agency shall be established in any municiDality (other than county) if the population thereof be less than twenty-five thausand, according to the latest decennial, State or Federal census, and not more than one such branch office or agency shall I- by any such savings bank if the population of the municipality wherein the same is located be, according to such census, less than fifty thIusand, and no more than two such branch offices or agencies shall be establisheS by sudh savings bank if the population of such municipality, according to suCh census, be less than one hundred thausand." (Act approved March 7, 1927; Laws of Savis bank branches resulting from mergers or consolidations: It The merEed or consolidated savings bank may contime to maintain branch offices or agencies for the transaction of sIusne estab- • -21- X-6528 (7ew Jersey, continued) lished nursuant to la- by either or both of the merging or consolidating savings banks." (Yer 0.. /..sey Laws of 1929, Ch. 1, Sec. Savings -oranch office buildings may be aecuired: "Any savings bank may accuire and hold a lot or lots whereon are erected or may be erected TJuilding or Juildings reauisite for the convenient transaction of the business of any such branch offices or agencies and from portions of which, not recuired for its own use, revenue may be deriv-d, subject, however, to the restriction and limitations contained in section thirty-three of an act entitled 'An act concerning savings bank,' ap)roved May second, nineteen hundred and six; or may lease space for the transaction of such business." (2ank- ing Laws, 1925, sec. 81, p. 28; Laws of 1925, Ch. 228, sec. 2, p. 552.) Savings brandh office may be discontinued: "Any savings bank may discontinue any such branch office or agency rrith the written approval of the commissioner of banking ani insurance, and unon such prior public notice as he shall prescribe." (Banking Laws, 1925, sec. a2, p. 28; La--s of 1925, Ch. 228, sec. 3, p.552. HETI LIEXICO. Branches prohibited: "Every bank shall be conducted at a single place of business, aad no branch thereof shall be maintained elsewherq; provided, however, that nothing herein contained shall be co:Istrued to prohibit any merc,antile corporation which maintains a banking department in accordance 7ith the Drovisions of this Act, from receivimg deposits and buying • X-6528 -22- (707 Mexico, continued) and selling exchange it any of its branch stores." (Bank Code, 1929, sec. 47, p. 18; Laws of 1915, Ch. 57, sec. 47.) "Bank" defined: The word 1BaAkt as used in this act includes every Jerson, firm, company, co-partnership or cornoration, except national banks, engaged in the business of banking in the State of New Mexico. Banks are divided into the following classes: (a) Commercial Banks; (b) Savings Banks; and (c) Trust Comoanios." (Bak Code, 1929, sec. 2, p. 5; Laws of 1915, Ch. 67, sec. 2.) "JEW YORK. Branch offices of State banks authorized within city limits: bank, or any officer or director thereof, shall transact its usual business of banking at any place other than its principal place of business, except that a bank in a city which has a population of more than fifty thousand may open and occupy in such city one or .aore branch offices for the receipt and payment of deposits and for making loans and discounts to customers of such respective branch offices only, provided that before any such branch or branches shall be o-Jened or occupied: a "1. The superintendent shall have given his written approval, as provided in section fifty-one of this chapter: "2. The actual paid in capital of such bank shall ex- ceed by the sum of one hundred thousand dollars the amount required by section one hundred of this article for each branch opened since the twenty-seventh day of April, nine- S 411 X-6528 (iTe-7 York, continued) teen hundred and eight; and by the sum of fifty thousand dollars for each branch onened previous to said 6_ate and hereafter maintained." (Banking Law, Sec. 110.) The approval of the moerintendent of banks of an application by a state bank for leave to onen a branch office is made de,)endent upon whether or not he considers that "the granting of such application is expedient and desirable" after he has .a.de "such investigation as he may deem necessary to ascertain whether the public convenience and advantage will be promoted by the onening of such branch office." (Banking Law, Sec. 51.) Ca-Atal requirements: Before any branch or branches may be established by a state bank the actual paid in aanital of an ap7?lying bank must exceed by the amounts as set out in the provision ouoted above, for each branch opened, the following amounts. (Bank- ing Law, sec. 110.) "(a) T7enty-five thousand dollars, if the place where its business is to be transacted is an incorporated or unincor,. porated village the population of which does not exceed two thousand; "(b) Fifty thousand dollars, if the place where its business is to be transacted is an incorporated or unincorporated village or a city the population of rh-ch exceeds two thousand but does not exceed thirty thousand; X-3528 -24(Yew York, continued) "(c) One hundred thausaad dollars, if the place 7here its business is to be transacted is a city the population of which exceeds thirty thousand." (Banking Law, sec. 100.) Trust comnany branch offices authorized within citx limits: "No trust compaay or any officer or director thereof, shall transact its usual business at any )1ace other then its principal place of business, except that a trust comnany may apen and occupy in the city in which its Iprincipal place of business is located one or more branch offices, provided that before any such branch or branches shall be opened or occupied: "1. The superintendent shall have given his written ap2roval, as provided in section fifty-one of this dhapter; "2. m_le actual paid ia canital of such trust company shall exceed by the sixm of one hundred thousand dollars the amount required by section one hundred and eighty of this article for each branch opened." (Banking Law, sec. 195.) The approval of the su7erintendent of banks of an application by a trust company for leave to open a branch office is made dependent upon whether or not he considers that "the granting of such anplication is expedient and desirable" after he has made "such investigation as he may deem necessary to ascertain whether the public convenience and advantaEe 7ill be promoted by the opening of such branch office." ( Banking Law, Sec. 51.) -25- X-6528 (New York, continued) Capital requirements: Before branches may be established by a trust company, its actual paid in capital must exceed by $100,000 for each branch opened, the followin maants (Banking Law, sec. 195.): "(a) One hundred thousand dollars, if the place -phere its business is to be transacted is an incorporated or unincorporated village or city the population of which does not exceed twenty-five thousand. "(b) One hundred and fifty thousand dollars, if the place where its business is to be transacted is a city the population of which exceeds twenty-five thousand but does not exceed one hundred thousand. "(c) Two hundred thousand dollars, if the place where its business is to be transacted is a city the population of which exceeds one hundred thousand but does not exceed two hundred and fifty thousand. "(d) Five hundred thousand dollars, if the place where its business is to be transacted is a city the population of which exceeds two hundred and fifty thousand." (Banking Law, sec. 180 ) Savings bank branches authorized in cities of "first class": "2. Yo savings bank, or any officer or director thereof, shall transact its usual business at any place other than its principal place of business without the written permission of the superintendent of banks. • -26- 411X-6528 (-fEew York, continued) given as provided in subdivision three of this section, except that it may, provided the merger agreement so provides, continue to occupy and maintain as a branch office, thelace of business occupied and maintained at the time of the mercer by any savings bank which it has received into itself by merger pursuant to article twelve of this chapter. 11 3. Upon written apnroval of the superintendent of banks, given as provided in this subdivision, a savings bank, located in a city of the first class, (city of 175,000 or more inhabitants) may open and ocauny within said city one branch office, and if such city comprises more than one county or borough, such branch office may be located only in the same county or borough in which its main office is located. * * * The superintendent shall ascertain by such investigation as he may deem necessary, whether or not -public convenienceand advantage will be promoted_ b7 the opening of such branch office. * * * " (Banking Law, sec. 245) Provision is made for obtaining the authorization of the superintendent of banks to establish branch offices of savings banks. (Banking Law, sec. 245.) Savings and loan associations authorized to establish one "station": "A savings and loan association located in a city which has a population of more than thirty thousand may open and maintain in said city one station for the payment of dues and withdrawals and the payment of interest, premium, fees and fines by its members and payments u?on the principal of loans by its borrowing members, provided that before any such station shall be opened or maintained: "1. Its board of directors shall submit to the superintendent a -ritten application setting forth the reasons therefor and the location of such station. -27- p6528 (New York, continued) 2. The superintendent shall have given his written approval thereto." (Banking Law, sec. 403 ) NORTH akROLLTA. Branches authorized: IT A Any bank doing business under this act may establish branches in the cities in which they are located, or elsewhere, after having first obtained the written approval of the Corporation Commission, which approval may be given or withheld by the Corporation Commission, in its discretion, and shall not be given until it shall have ascertained to its satisfaction that the public convenience and advantage will be promoted by the opening of such branch." (Banking Laws, 1927, sec. 220 (r), p. 26; North Carolina Code, Annotated Edition, 1927, sec. 220 (r)) Capital requirements: "Provided, that the Corporation Commission shall not authorize the establishment of any branch, the paid-in capital stock of whose IDarent bank is not sufficient in an amount to provide for the capital of at least twenty-five thousand dollars for the parent bank, and at least twenty-five thousand dollars for each branch which it is proposed to establish in cities or towns of three thousand population or less; nor less than thirty thousand dollars Ln cities and towns whose population exceeds three thousand but does not exceed ten thousand; nor less than fifty thousand dollars in cities and towns whose population exceeds ten thousand but does not exceed twenty-five thousand; nor less than one hundred thousand dollars in cities and towns whose population exceeds twenty-five thousand. All banks operat ing branches prior to February 18, 1921, shall, within a time limit tobe pre- • X7-6528 (North Carolina, continued) scribed by the Corporation Commission, cause saLl branch bank to conform to the provisions of this section." (Banking Laws, 1927, sec. 220(r), p. 26, forth Carolina Code, AI:notated Edition, 1927, sec. 220(r) ) "Bank" defined: "The term tbankt when used in this act shall be construed to mean any corporation, --)artnership, firm, or individual receiving, solicitinn, or accepting money or its equivalent on deposit as a business; Pro- vided, however, this definition shall not be construed to include building and loan associations, Horris plan companies, industrial barks or trust companies not receiving money on deposit." (Banking Laws, 1327, sec. 216(a) p. 3; 71Orth Carolina Code, Annotated 7dition, 1927, sec. 216(c,) "Industrial bank" branches authoried: Ever7 industrial bank is f;iven the power "To establish branch offices or 7,1ace,, of business within the county in which its ?rincipal office is located, and elsewhere in the State, after having first obtained the written approval of the Corporation Commission, which approval may be given or withheld by the Corporation Commission in its discretion: Provided, that the Corporation Commission shall not authorize the establishment of any branch the paid-in capital of whose parent bank is not sufficient in an amount to provide for the capital of at least $25,000 for the parent bank and at least twenty-five thousand dollars ($25,000) for each branch which it is proposed to be established in cities or towns of fifteen thousand population or less; nor less than fifty thousand dollars ($50,000) in cities or towns whose population exceeds fifteen thousand but does not exceed twenty-five thousand; nor less than one hundred thousand dollars ($100,000) in towns whose population exceeds twenty-five thousand." (lanking Laws, -29- X-E528 (North Carolina, continued) 1927, sec. 225(f) p. 42; North Carolina Code, Annotated Edition, 1927,sec.2a5M "Industrial Bank" defined: "The term 'Industrial 3ank.f, as used in this act, shall be construed to :Jean any corporation organized, or which may hereafter be organized under the general corporation laws of this State, which is engaged in lending money to be re-aid in weekly or monthly or other periodical installments, or principal sums, a. a business: Provided, however, this definition shall not be construed to include building and loan associations or commercial or savings banks." (Banking Laws, 1)27, sec. 225(a), o. 41; North Carolina Code, Annotated 2dition, 1927, sec. 225(a) TORTH DAKCTA. No provision concerning branches: There is no specific orovision La the laws of North Dakota regarding the establishment of branches: Branch banks authorized: "Uo branch bank shall be established until the consent and the approval of the superintendent of banks has been first obtained, and no bank shall establish a branch bank in any -place other than that designated in its articles of incorlioration, exce)t in a city or village contiguous thereto. If such consent and approval is refused, an appeal may be taken therefrom in the same manner as is provided in section 45 of this act." (Banking Laws, 1928, sec. 710-73, p. 28.) "Bank" defined: "The term 'banks shall include any person, firm, association, or corporation soliciting, receiving or accepting money, or its equivalent, • -30-.X-6528 (Ohio, continued) on deposit as a business, illether such deposit is made su'Dject to cheer: or is evidenced ty a certi-Cicate of de-Posit, as oassbook, a note, a receipt, or other writing, and unlesf:, the conte::t otherwise requires used in this act includes commercial banks, savings banks, trust com-?anies and unincor)orated banks; )rovided that nothinc herein shall apoly to * * * buildin,; and loan associations or title guarantee and trust com2anies incorporated under the laws of this State." (Banking Laws, 1928, sec. 710-2, p• 5.) OKLAHOliiA. No provision concerning branches: Mere is no specific Provision in the laws of Oklahoma regarding the establishment of branch banks. Branches prohibited: "No bank or trust com-?any or any officer or director, agent or employee thereof, shall open or maintain any branch in this State or receive deposits or pay checks other than at its principal place of business; provided, that this section shnll not apply to branch banks or trust comnanies now existent or authorized to do business in this State as a foreign bank or trust company, under the provisions of this act; provided further, th_t every such foreign branch bank or trust comany Shall hereafter in every respect be governed by and comply with the provisions of this act to the same extent as other State banks or trust companies now organized and doing business in this State; -provided, that any State bank may effect a consolidation on the same terms and conditions now or hereafter permitted to national banks." (Banking Laws, 1925, Sec. 113, p. 44; General • • -31- X-6528 • (Oregon, continued) Laws of Orecon, 1925, Oh. 207, Sec. 113.) General establishment of branches prohibited: "Yo bank, banking company, banking institution, savings bank, trust company, title insurance company, or other corporation now or hereafter authorized to receive deposits or to carry on a banking or trust business, whotner incorporated under the laws of Pennsylvania or of any other State or of the United States of America, * * * shall establish, maintain, or operate, either directly or indirectly, any branch bank, brench office, agency, sub-office, sub-agency, or branch place of business, within the Commonwealth of Pennsylvania, for the transaction of any part of its * * * business, but all of the business of such corporation, * * * Shall be carried on solely and exclusively at its * * * principal - lace of business." (Act ap9roved April 27, 1927, Laws of Pennsylvania, 1927, sec. 1, 400). Exception - Establishment Permitted Yithin corporate limits of places where national banks were operating branches on March 1, 1927: "This act Shall not ap9ly to any bank, banking company, banking institution, savings bank, trust comany, title insurance company, or other corporation, now or hereafter authorized to receive deposits or carry on a banking or trust business, whether incorporated uncer the laws of Pennsylvania or of any other State or of the United States of America, * * * which has its * * * principal place of business in a city, borough, or township rithin th,: Commonwealth of Pennsylvania, in which one or more national banking associations, * * * was, on March 1, 1927, operating one or more branch banks, branch offices, agencies, suboffices, subagencies, • -32- • X-6528 (Pennsylvania, continued) or branch Places of business, for the transaction of any part of. its business; and any such corporations * * * may hereafter establish, subject to the approval of the Secretary cf Banking, and thereafter maintain and operate branch banks, branch offices, agencies, suboffices, subagencies, and branch places of business for the transaction of any part of its * * * business, but only within the corporate limits of the city, borough, or township in which its principal office is located and in which such national banking association was, on March 1, 1927, operating one or more branch banks, branch offices, agencies, guboffices, subagencies, or branch places of business. The right to establish and maintain branch banks, branch offices, agencies, guboffices, subagencies, or branch places of business, under the provisions of this section, shall be limited to the territory included within the corporate limits on March 1, 1927, of the respective cities, boroughs, or townships in which such national banking associations were on that date operating one or more branch banks, branch offices, agencies, guboffices, subagencies, or branch places of business as aforesaid; and such right shall not extend to additional territory which may, after March 1, 1927, be added to such cities, boroughs, or townships, by annexation, consolidation with one or more municipal corporations or otherwise, nor shall it extend to other portions or divisions of municipal corporations to which such cities, boroughs, or townships may be annexed, or with which they may be consolidated after that date; the intention being to limit to the respective corporate limits of such cities, boroughs, or townships as they existed on March 1, 1927, the right to establish and maintain the branch banks, branch offices, agencies, suboffices, subagencies, and branch places of business authorized 111 rzr:: X-E528 (Pennsylvania,continued) in this section.") Act approved April ?,7, 1927, Laws of Pennsylvania, 1927, sec. 3, p. 401.) V. Other exceptions are that the act does not apply to branches establisheli‘ for which locations had been secured ?rior to March 1, 1927, or to branches resulting from consolidations of banks effective prior to April 1, 1927; "and uuch corporations * * * shall have the right to relocate the same within the corporate limits of the city, borough, or township in which the principal place of business is located at the time of such relocation, uubject to the approval of the Secretary of Banking." (Act approved April 27, 1927, Laws of Pennsylvania, 1927, sec. 2, p. 400.) RHODE ISLAND. Branche s authorized: "Amy bank or trust company may establish a branch or branches within this State at any other place than its principal place of business upon obtaining the consent of the board of bank incorporation thereto. (Banking Laws, 1929, Sec. 9, p. 6). Detailed provision is also made for obtaining the consent of the board of bank incorporation to establish branches. (Banking Laws, 1929, Sec. 9, p. 6; General Laws, 1909, Ch. 229, Sec. 9.) SOUTH CAROLINA. Branch banks authorized by implication: " * * * for each branch bank that is established the parent bank must have a total unimpaired capital of at least Twenty-five Thousand ($25,000.00) Dollars above the minimum requirements herein set forth." (Banking Laws, 1928, sec. 20, p. 117 1,cts of 1928, Ch. 701, sec. 2) Provision is also made for the publication of statements of the assets and liabilities of branch banks or offices, for the examination of X-5528 (South Carolina, continued) branch barks, and for the taxation of banks having branches. (Banking Laws, 1928, sec. Si, p. 29; sec. 86, p. 45; sec. 106, p, 54; Code of 1922, sections 3984, 3989; Act approved March 21, 1924, p. 1116, Acts of 1924.) SOUTH DAKC7,.. No provision regarding branches: There is no specific provision in the laws of South Dakota regarding the establishment of branch banks. TENNESSEE. Branches authorized in county where located: "That no corporation, firm or individual now or hereafter doing or carrying on a banking business in the State of Tennessee shall have, maintain, create or operate any branch bank, office or agency, for the purpose of receiving deposits, paying checks, making loans or receiving or discounting bills or notes in any place whatsoever other than the county of this State wherein such banking business is carried on." (Act approved April 6, 1925, sec. 3.) TEXAS. Branch banks prohibited: "No banking corporation organized under the laws of this State shall ever engage in business at more than one place, which shall be designated in its charter. No such corporation shall maintain a branch bank, receive deposits or pay checks except in its awn banking house. County or State depositories or county depositories not located at the county seat, and ordinary clearing house transactions between banks, are not affected by this article." (Banking Laws, 1929, Art. 538, p. 51.) I " X-6528 UTAH. Branches prohibited: "The business of every bankinc, institution shall be conducted only at its banking house, and no bank in -.Lis State or any loan, trust, or guaranty company or trust company conducting a banking business, or any officer, director, or agent thereof, hall open, establish, or main- tain any branch bank or office, and shall receive deposits and pay checks only at its banking house; provided, that all branch banks or offices in operation at the time of the approval of this chapter Shall be closed and discontinued within one year from the date this chapter goes into effect." (Banking Laws, 1927, sec. 1005, p. 12; Comp. Laws of Utah, 1917, Title 19, Ch. 6, sec. 1005). VERM072. No provision regarding branches but "agencies" authorized: "Section 1. Before a savings bank, trust company or a savings bank and trust company opens an agency of such corporation it shall petition the bank commissioner to hold a public hearing in the town where the proposed agency is to be located, to determine whether the establishment and maintenance thereof will promote the general good of the State. * * * If after the hearing said commissioner finds and adjudges that the establishment and maintenance of the proposed agency will promote the general good of the State, he shall give said bank a certificate to that effect under his seal. A savings bank, trust company or savings bank and trust company shall not operate any agency not certified by said commissioner as herein provided." "Section 2. An Agency of a bank in operation prior to Feb- ruary 1, 1929, permission to operate such agency having been procured 0/) (Vermont, continued) rance, shall be permitted to from the commissioner of banking and insu continue." (Act of March 13, 1929.) Branches authorized: re or hereafter incorpo7ted "No bank or trust company heretofo orized to engage in business under the laws of this State shall be auth its discretion the State Corin more than one place, except that, in s having a paid-up and unimpaired poration Commission may authorize bank dollars or over to establish capital and surplus of fifty thousand , town or village in which the branches within the limits of the city es having a population of not less parent bank is located or in other citi than fifty thousand inhabitants. y This section, however, shall not appl this section shall not be conto branch banks already established, and s in the same or adjoining strued to prohibit the merger of two bank ed company of the two banks. counties ad the operation by the merg But r established shall not be operated any branch bank heretofore or hereafte that of the identical name of the or advertised under any other name than and obtained from the State Corhome bank, unless permission be first had erent name shall contain or have poration Commission, and unless such diff of ng that it is a branch bank and added thereto language clearing indicati trust company violating the prowhat bank it is a branch. Any bank or to a fine of one thousand dollars, visions of this section shall be liable efor by the State Corporation Comto be imposed and judgment entered ther (Banking Laws, 1929, sec. mission, and enforced by its process." (14), p. 30; Acts of 1923, Ch. 507, sec. 13) 7;ASHIUGTOU. X-5526 Branches prohibited: " * * * nor shall any ban k or trust company establish any branch. The practice of col lecting or receiving deposi ts or cashing checks at any place or pla ces other than the place where the usual business of a bank or tru st company and its operation s of discount and deposits are carried on shall be held and constr ued to be establishing a branch: * * ." (Banking Laws, 1929, sec. 25, p. 12; Laws 1919, Sec. 7, p. 730.) Definition of "bank": "The term 'bank', where use d in this act, unless a differ ent meaning appears from the context, means any corporati on organized under the laws of this State eng aged in banking, other than a trust company or a mutual savings bank.“ (Banking Laws, 1929, sec. 24, p. 11; Laws 1917, sec. 14, D. 275.) Definition of "branch": "The term 'branch bankt, whe re used in this act, means any office of deposit or discou nt maintained by any bank or trust company, domestic or otherwise, oth er than its principal place of business, regardless of whether it be in the same city or locality." (Ba nking Laws, 1929, sec. 24, p. 11; Laws 1917, sec. 14, D. 275.) Mutual savings bank branch es: "No (mutual) savings bank or any officer or director therilof shall receive de-posits or transact any of its usual bus iness at any place other than its principal place of business." (Banki ng Laws, 1929, snc. 181, p. 84; Laws 1925, Ex. Ses., Sec. 10, p. 107). 1 " 7 O Branch banking prohibited: "No banking institution chartered and authorized to engage in business hereunder shall hereafter install any branch bank, or engage in business at any place other than at its principal office in the State of West Virginia; * * * II (1929 S.L., Ch. 23, sec. 5, p• 113.) WISCOFSI:T. Branch banks -)rohibited: It * * * but no bank shall establish more than one office of deposit and discount or establish branch offices or branch banks, Provided that this prohibition shall not apply to any branch office or bank established prior to May 14, 1909." (Banking Laws, 1927, sec. 221.04 (1-f), p. 28; Wisconsin Statutes, 1S4?7, SQC. 221.04 (1-f) ) Branch trust companies prohibited: " * * * nor shall such corporrtion (trust company bank) establish more than one office of deposit nor establish nor maintain branches." (Banking Laws, 1927, sec. 223.06, p. 59; Wisconsin Statutes, Ch. 223). WYOMING. No provision covering branches: There is no specific provision in the laws of Wyoming in regard to the establishment of branch banks. 4A. 4.0 Form No: 131 Office Correspontence To Mr. Hamlin FEDERAL RESERVE BOARD Date Ifiw 16. 1030 Subject: From _jar. 14E11011 and. 4PO 2-8495 At the meeting of the 2ederal Reserve Board yesterday, discussion was had with regard to the procedure to be followed by the New York Bank in conneo.. tion Tata tie pendine issue of reilaratlins bonds in tills country, as outlined by Gow:rn.x2. Harrison at the meeting on !ay 14. Tao propo.sed letter to the Attornoy aenerul of the United states, roil questing an opinion as to the responsibility of the Beard in the matter, on which no action was taken ut the mooting on A-dril 22nd, wen a:ain brouitt before the Board, and Pr. James submitted the following motion: mllarie-.e, the Rank for International Settlemeats has come into existence since the enactment of the Federal Reserve Act and obviously longres::, has not •-Ivan any consideration to its relationships .;it A:larimm inntitutions, partteularly, the Federal 2eserve yste;a; "la It Resolved., Thnt the Federnl Reaerve 3oard ank the Attornay General of tit, lnited States for an opinion as to what its responsibility is in the premises.* Mr. Hamlin submitted the followtng as a substitute for the motion made by Mr. *Whereas, Cloiernor Harrison of the Federal Reserve Bank of New York, on May 14, 1930, stated to the Board that if any request should come fram the Bank for interrationel nettlements asking whothor the Federal Reserve Bank of New York dissents to an offering in the United States of reparations bonds, he would prepare a cable Ezd letter which he would submit to the ?ederal Reserve Board for approval or diesyproval, and that if the Board should disapprove such cable and letter they would not be sent; "Be It Resolved, That the following proposed reply of the Federal Deserve Bank of Vow York to such request, be submitted to the Federal Reserve Bank of Nes York by way of suggestion: "fts Federal Reserve Bank of Yew York has the honor to aeknowledge the receipt of your cableam asking whether it dissents to the proposed offering in the United States markets of the reparations bonds referred to. In reply I 'mid say that the Federal Reserve Bank of New York does not dissent, for the reason that under the Federal Reserve Act it has no power to pass upon sudh securities as a condition precedent to their offering in said United States markets. Its failure to dissent, therefore, should not be construed either as an approval or disapproval of the terms, conditions, or vorth of such sesuritles, or as a waiver of sry of its lawful powers to take neesseary letion at any time to protect the credit stability of the United :tattoo." The two motions were discussed further, but no action was :a,en. f VOLUME 203 PAGE 108 .4.41 (March 20, 1930,) PR:LIMINARY MEMORANDUM FOR THE OPEN MAREIT INVESTMENT CMIITTRE The most Lmportant development in the credit situation since the last meeting of the Open Market Investment Committee on January 28 and 29, is that at that time. business conditions have not improved as rapidly as had been hoped The January figures for business and trade were slightly better than those December, and February in turn was very slightly better than January. for But the producimprovement in both months was so small as to leave the total volume of tion and trade below the corresponding period in any recent year. appears to have been more severe than in either 1924 or 1C;27. The recession Accompanying the than in any business recession unemployment has become serious, probably more so year since 1921. In both 1924 and 1927 business was supported in recessions by months a continued substantial volume of building construction, but in the past few building has continued at a low ebb without any indication yet of substantial recovery. MONEY RATES The trendinoward easier money conditions which was observed at the time anticipated, of the last meeting has continued even more rapidly than was then but more partly due to a reduced demand for credit and currency for business, largely to a heavy flow of gold imports, mostly from Japan and Brazil, which has totaled about 400,000,000 in the period.- In the- past two weeks Treasury opera- important tions in connection with the March 15 tax period have ben an additional factor toward ease. For ten days b6fore the tax period the Treasury balance at funds the Reserve banks was drawn down to exceptionally low figures, thus putting into the market, and at the time of the tax period the excess of funds in the market as a rusult of large Treasury disbursements covered by anoverdraft could not be absorbed in the usual way by a reduction in 2embor banll indebtedness. And in the as a consequence there was a considorablu volume of free funds available VOLUME 203 PAGE 109 • oarket which tended to depress money rates rapidly. On March 19 total bills counted for the Federal Reserve System were :',206,000,000 as compared with A07,000,000 on Januar7 29. Thu decline in money rates in this period is dicated in the accompanying table: March 21, 1930 January 29, 1930 Pates for Commercial paper 4 3/4 - 5 4 90 day bills (offered) 4 2 1/2 Call money (renewal) 41/2 3 Time money 4 1/2 (nominal) 3 3/4 Bank rates to customurs in New York Jan. 15 5.41 Feb. 15 5.09 Mar. lb it 93 4-43/-4 On March 18 the New York Cl aring houso r duced deposit rates by 1/2 of one per cent except for the rate on bank deposits which remained unchanged. In thu early part of this period ratcs tended to move rather sluggishly and to reflect rather slowly the fundamental chang s in the credit position, but during the latter part of the period the decline became precipitous and during th, tax period ev„n moru rapid than the fundamental credit situation appeared to justify. BOND AND STOCK MARKETS The effects of easy money and freely available credit have been in the first place to stimulate a vigorous recovery in the bond market. Bond prices have risen to the highest points in more than a year, and the bond market has been opened to new issues; so that bond financing is now in substantial volume ar.d well absorbed. This is of particular importance with relation to the busi- ness situation because it makes possible the carrying forward of many business undertakings which had been postponed because of the condition of the bond market. The stock ,Iarket remained irrep,ular until the past week when it made a .7:onsiderable recovery with more active trading than for a.)me time. Brokers loans as reported to the Federal reserve banks have risen ',500,000,300 since the last ael 3 • meeting of the committee. • This probably represents in part an increase in loans by banks to replace loans withdrawn because of low rates by lenders whose operations do not appear in the Fecleral reserve reports, but it reflected in part also the recent recovery in stock prices. BANK CREDIT The total volume of bank credit continued to decline until the end of February but since that time has risen about $300,000,000 and is now about as large as at the middle of January. The increase has been mostly in security loans, as so-called commercial loans have remained close to the lowest point of the year. In the week ended March 19 bank investments showed their first sizable increase, part of which r suited from subscription to the new Treasury issue. FEDERAL RESERVE POSITION In the face of continued business depression and a rapid downward movement of money rates changes in Federal reserve bank discount rates have taken place more rapidly than was anticipated at the time of the last meeting. Since that time two changes have been made in the rates of the New York and Cleveland banks and One change in the cases of Boston, khiladelphia, Richmond, Chicago, St. Louis, Minneapolis, Kansas City and Dallas. Duling the early part of the period the Reserve banks wore successful in pursuing the policy adopted at the January meeting of holding their bill portfolio at a level close to thu level of the latter part of January, which was bet-,:een ,45275,000,000 and :300,000,000. Early in March, however, it became clear that, with a decline in the total volume of bills in thc market, and an increasing damand for bills from banks and others sucking short t,2.111 investments, it would he impossible to elaintain the bill portfolio. In these circumstances and in view of the unfavorable business situation the New York reserve bank, after e-.)nsultation with the Federal Reserve Board, undertook to purchase $50,000,000 of Government securities. All reserve banks were advised of this operation 4 and offered participations in the purchase, and eight of the reserve banks took participations. The following table compares system figures for March 19 with those for January 22. overdraft. March 19 figures are distorted somewhat by the Treasury More normal figures for this week will show an increase in bills and discounts, replacing the overdraft. (In millions of dollars) Bills Bills U. S. Other discounted bought securities securities Total bills and securities January 22 March 19 433 298 477 1F) 206 185 561* 9 1,223 961 * Includes 29,000,000 of the ,i44,000,000 special ona-day Treasury certificate participation . of indebtedness to cove overdraft on that date; a .,;15,000,000 bank. M.e.micer York a by New held was in the certificate 1-4A:t r CO"FIDEITTIAL Ra'ORT C.F THE SECRETARY OF ThE OPEN MARKET INVESDITTT COLIMITIEE ON MARCH 24, 1930 1:TETITTG OF THE COLITITTEE AT WASH r:IGTON TO T , t Committee, At the time of the last meeting of the Open Market Investmen holdings of which was held at Washington on January 28 and 29, 1930, the total amounted government securities in the System Special Investment _Account $277,500,000 to There was no change in the total amount of holdings in the System Account during the period January 28 to March 5, 1930. In view a of declines in the bill portfolio of the System and pending meeting of the Open Market Committee, the Federal Reserve Bank of New York, with the approval of the Federal Reserve Board, purchased approximately $50,000,000 of government securities which have been to participate, and made allotted to such reserve banks as d:;sired • These purchases were t part of the special investment account. made during the follaring statament weeks. We3k ending Wednesday, March 12, 1930 19, 1930 " Total amount of holdings close of business Wednesday, March 19, 1930 26,750,000 23,000,000 $327,250,000 The Federal Reserve Bank of San Francisco, at its request, was apportioned a sufficient amount of the new purchases of governments to increase its participation in the System Account to approximately its proportionate share of the total holdings in the Account. The reserve banks that expressed a desire to as participate in those purchases and the amount that each bank received were follows: Boston New York Philadelphia Cleveland Richmond Minneapolis Kansas City San Francisco Total VOLUME 203 PAGE 113 $ 3,482,500 6,219,000 3,234,000 4,726,000 2,736,000 1,617,000 2,860,500 24,875,000 $49,750,000 • •• The principal changes in the make-up of the government securities in the System Account since Tanuary 28, 1930, none of which affected the total amount of holdings, ware as follows: February On February 10, the Federal Reserve Bank of Dallas asked to be relieved temporarily of $5,000,t00 of its participation of government securities in the System Account. Those securities were taken over temporarily by the Federal Reserve Bank of New York on February 18 and apportioned on February 19 to the other reserve banks which cared to participate, with the understanding that the Federal Reserve Brulk of Dallas would repurchase these securities within sixty days. February Exchange in the market of $15,000,000 5 1/8% Treasury certificates due March 15, 1930, for a like amount of 3 1/2% Treasury notes due 1930-32, anticipating the maturity of the certificates. February Exchange in the market of25,250,000 of the 50,250,000 Treasury Bills due March 17, 1930, held in the Account for a like amount of 3 1/2% Treasury notes due 1930-32, in anticipation of the bill maturity. March 15 Exchange of ?14,000,000 - 5 1/8% Treasury certificates due March 15, 1930, for a like amount of the new Treasury 3 1/4% certificates, pursuant to the terms of the Treasury's offering, March 17 Redemption of the balance of $25,000,000 Treasury Bills due March 17, 19.30, which was offset by purchase in the market of a like amount of Short-term governments. There were also changes in the issues of governments which have had the effect of decreasing the amount of the longer maturities and increasing the amount of the shorter maturities. The Federal Reserve Bank of Yew York is still holding in its invest- =t account approximately $112,000,000 of short-term governments which were purchased in the market last fall as previously reported. these securities consist of the following issues: At the present time III u. 3 III S. Treasury Bills due May 15, 1930 4 7/8% Cert. of Ind. " June 16, 1930 y, " Sept.15, 1930 1930 1930-32 3 1/2% Treasury Notes " Mar* 15, n Sept.15, 1930-32 $ 11,000,000 10,301,000 28,463,000 1,615,000 30,941,900 29,851,750 3112,172,650 Total purchased In addition to the foregoing the Federal Reserve Bank of New York has $50,000,000 short-term governments, consisting principally of June, September and December 15 certificates, to replace a sale to be made to the Treasury, account SinkinE iund, during the latter part of March and early part of .April of $50,000,000 3 1/2% Treasury notes, Series A-1930-32, ,(1$25,000,000 of which notes are in the System Account nnd the balance of $25,000,000 in the investment account of the Federal Reserve Bank of New York. TRAYSACTIONS RELATING TO SYSTEM PURCHASES OF BANEERS ACCEPTANCES On February 21, the Federal Reserve Bank of Kansas City resumed participation in System purchases of bills and asked to be allotted $5,000,000 additional bills. At its requestf 45,000,000 of bills were sold to the Kansas again on City Reserve Bank from the portfolio of tte New York Reserve BEInk, and March 15, by request, a similar snle was made in the amount of $3,000,000. On March 4, owing to its low earnings, the Federal Reserve Bank of Minne'Tolis asked for a larger allotment of bills. As it seemed unlikely that the System's purchases of bills would be sufficient in the near future to increase the Kansas City Reserve Bank's allotment, it was sold $5,000f000 of bills from the portfolio of the New York Reserve Bank. The Federal reserve banks that are participating at present in the System purchases of bills are as follows: *Boston New York *Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco * Participations at present confined .to purchases in own district. 4 Attached are statements showing: Exhibit "A" - Outright holdings of government securities by individual Federal reserve banks, also their participation in the System Special Investment Account, and classification of issues held in the System Account by maturities, all as of close of business March 19, 1930. Exhibit "B" - Bills purchased outright by the System by weeks from January 3, 1929 to March 19, 1930. Exhibit "C" - Earning asset holdings of all Federal reserve banks March 19, 1930, as compared with previous week and March 20, 1929, also weekly average of earning assets from January 2, 1930 to March 19, 1930, as compared with corresponding period 1929 and entire year 1929. Exhibit "P" - Actual net earnings of all Federal reserve banks for the months of January and February 1930. • • EXHIBIT "A" STATEMENT SHOWING HOLDINGS OF GOVL,.RNMENT SECURITIES HY FEDERAL RESERV: BANKS (Excluding Sales Contracts) Outright Holdings of Government Securities by Federal reserve banks as at the close of business March 19, 1930 $ Boston New York 706,600 116,402,600* Participation by Federal reserve banks in System Special Investment Acct. Government Securities as at the close of Business March 19, 1930 Total $ 3D,162,500 $ 30,869,100 105,571,000 221,973,600 Philadelphia 15,010,100 31,697,500 46,707,600 Clevuland 10,164,800 25,251,000 35,415,800 Richmond 1,152,100 11,670,000 12,822,100 Atlanta 2,599,500 6,226,000 8,825,500 Chicago 19,927,400 51,412,000 71,339,400 St. Louis 8,625,000 10,641,000 19,266,000 Minneapolis 7,790,250 10,957,000 18,747,250 Kansas City 3,000 5,920,500 5,923,500 Dallas 9,987,800 10,647,500 20,635,300 San Francisco 9,642,650 27,094,000 36,736,650 $202,011,800 4327,250,000 $529,261,800 Totals Exclusive of Special one-day Certificate of Indebtedness issued to cover the overdraft, and includes $4,000,000 held temporarily for resale to Treasury. CLASSIFICATION OF ISSUES OF GOVERNMENT SECURITIES HELD IN THE SYSTEM SPECIAL INVESTMENT ACCOUNT CLOSE OF BUSINESS MARCH 19, 1930 U. S. Treas. Bills due May 19, 1930 4 7/8% C/I due June 16, 1930 " Sept. 15, 1930 3 1/8% " 11 Dec. 15, 1930 3 1/4% " March 15, 1932 3 1/2% T/N If Sept. 15, 1932 3 1/2% " It Duc. 15, 1932 3 1/2% ft 4 1/4% 4th L/L bonds Oct. 15, 1938 Total S 60,610,000 80,075,00G 36,000,000 37,555,000 31,635,000 34,925,000 20,450,000 $327,250,000 EXHIBIT "B" (a) CLASSIFICATION BY MATURITIES OF BILLS PURCHASED BY FEDERAL RESERVE BANKS IN THEIR RESPECTIV] DISTRICTS DURING THE PERIOD FROM JANUARY 3 TO DECEMBER 31, 1929 AND FROM JANUARY 2 TO MARCH 19, 1930 (EXCLUDING SALES CONTRACTS) (000 Omitted) 1-30 days January 3 to December 31, 1929 Over 90-days 61-90 days 31-60 days Total Boston New York Philadelphia Cleveland Richmond Atlanta Chicago Dallas San Francisco $ 24,461 362,675 28,019 6,065 2,858 29.939 21,690 13,254 17,275 $ 27,309 178,190 19,535 3,848 4,222 5,387 12,838 14,709 34,343 $ 45,645 261,554 33,063 7,440 5,573 7,356 7,381 7,035 34,454 $ 3,059 19,993 0 0 0 374 0 4,432 2,778 100,474 822,412 80,617 17,353 12,653 43,056 41,909 39,430 88,850 Totals $506,236 $300,381 $409,501 00,636 $1,246,754 1-30 days January 2 to March 19, 1930 Over 90-days 61-90 days 31-60 days Total Boston New York Philadelphia nleveland Richmond Atlanta Chicago Minneapolis Dallas San Francisco $ 2,512 182,869 1,778 0 949 3,621 2,551 625 2,524 4,702 $ 4,593 103,884 5,267 0 1,038 1,147 6,300 1,005 1,682 14,211 $ 4,306 44,623 6,893 0 1,085 1,565 203 479 543 7,639 $ 743 1,063 0 0 0 0 0 0 340 285 12,154 332,439 13,938 0 3,072 6,333 9,054 2,109 5,089 26,837 Totals $202,131 $139,127 $67,336 $2,431 411,025 sail; 44 4 ; .14111 0 ki Exhibit "p.7 STATE:-ENT SHOVIING EARNMGS OF A.LL FEDE-it2LL RESERVE BLNI:2 FOR J4NUARY AND FEBRUARY 1930 Ratios Based on Each Bank's Expenses and dends for Year 1929 Boston 7 Gross -Earnings January and February 1930 Actual. Net Earnings Percentage of Available for DeEach Bank's Gross preciation Alloviances, Earnings to _Total 'Reserves, Surplus and Gross T]arnings Franchise Tax 445,949 5.21 20 1/2% 2,807,262 32.78 1,048,797 Philadelphia 6 1/2% 738,354 8.62 224,09-0 Cleveland 9 1,/2% 897,052 10.48 279,050 Richmond 5 1/2% 361,695 4.22 19,431 _Itlanta 7 3/4% 406,830 4.75 136,796 1,253,816 14.64 354,478 St. Louis 368,754 4.31 76,380 :ann3apolis 216,516 2.53 18,810 Kansas City 287,316 3.36 61,488 (_,) 335,257 3.91 71,816 444,679 5.19 71 793 (...L) 27ow York Chicago Dallas 13 5 San Francisco Totals (2-..) Deficit 100 $ % % ,8,563,480 38,553 (A) S. .4,2,057,811 Total for same period 1929 '5,623,183 - *•04„ STATELOTT SHOWING APPROXIMATE AMOUNT OF NET PROFIT THAT WAS REALID ON VARIOUS SALES OF UNITED STATES GOVERMENT SECURITIES HELD IN THE SYSTEM ACCOUNT AND IN ME FEDERAL RESERVE BANK OF TIEVi YORK ENVESTMaTT ACCOUNT DURING PERIOD OCTOBER 31, 1929, TO MARCH 20, 1930? System Account Net Profit on Sales During Period Oct. 31, 1929, to Mar. 20, 1930 on Various Amount of Holdings Approximate Amount of Profit to be Realized on Sale to Treasury in the Near Future of ,',50,000,000 - 3 1/2% Treasury Notes at Par $180,126.83* 97,460.85 Investment Account F.R.B. N. Y. 3540,204.06 113,962.50 * '.174,403.53 of this amount is being held by the Federal Reserve Bank of New York in Suspense Account, to be distributed at the end of the current year. COPY • F=MAL RES ICU BANK OF NEW YORK April 28, 1930. Dear Governor Young: At the meeting of our directors last Thursday,recent developments in credit and business conditions were reviewed at some length in their relation to the rate and credit policies of this bank. It may interest you to have the following brief summary of the principal factors in the situation which were considered: (a) Wholesale commodity prices continue to decline so that the last available weekly index indicates a level lower than at any time since the United States entered the war in 1917. (b) March figures for trade and production Show considerable declines from February and on the whole were lower than at any time during the current movement. (c) Such figures as are available for April show that building contract awards continue to ran substantially below last year. On the other hand, car loadings of merchandise show some increase in the first two weeks of April, though this may possibly be due to the late Easter trade. Car loadings of heavy freight show about the usual seasonal decline. (d) Current quarterly reports of many industrial corporations show large declines in volume and profits from a year ago. VOLUME 203 PAGE 117 2 . • (e) Our export trade for the first three months of 1930 shows a decline of about $280,000,000 from the same period of 1929, - a net decline of slightly over 20 per cent. Imports have declined about the same percentage. (f) The bond market has Shown some weakness the past two weeks with a:Light decline in prices and some backing up of new issues. We have felt that the financing of new enternrises and the restoration of purchasing power for commodities Whose prices are still declining, depends in part at least upon the strength and activity of the bond market and that the revival of foreign purchasing power for our exportable surplus is largely dependent upon new capital acquired through the bond max'kets of the world, including the American bond market. (g) Gold continues to move to America- net imports amounting to almost $200,000,000 so far this calendar year. (h) Some of the foreign exchanges, especially the South American exchanges, are weak relative to the dollar. (i) Member bank credit has on the whole shown little expansion in recent weeks and Federal reserve credit continues to decline. On last Thursday total borrowings by all banks in this district were at a low record of recent years - approximately $35,000,000. (j) Our reserve percentage is approximately 82 per cent. (k) The stock market has been irregular and on the Whole weaker during the past few weeks and in all the above circumstances there appears to be less risk of a too rapid expansion of bank credit collateraled by securities. It is, of course, difficult in the scope of a letter to review in any great detail the various matters discussed by the directors or to give the views of individual directors with respect to than. The above summary, however, refers to some of the main facts which were before the directors when they took action with respect to the discount rate at their meeting last Thursday. Very truly yours, GEORGE L. HA1-tRISOIT Governor. Hon. R. A.. Younz7, Governor, Federal Recerve Board, Washington, D. C. 6.NO. 131 4 U. affice Correspontence To_ !r„ Hamlin Mr.\Smead FEDERAL RFSERVE BOARD • Date Subject: _Security April 22, 30 . 9 loans and Federal Reserve Bank Credit. •it 0 2--8495 In reply to your memorandum of April 18 regarding Federal reserve credit, security loans, etc., I beg to advise as follows: For the year ended April 16, 1930, weekly reporting member banks dhow an increase of $885,000,000 in security loans and a decrease in all other, largely commercial, loans of $471,000,000, or a net increase in total loans of $414,000,000. Investments of the weekly reporting member banks declined $162,000,000 with the result that total loans and investments of these banks are now $252,000,000 above the amount reported a year ago. The reserves carried with the Federal reserve banks as reported by weekly reporting member banks were $75,000,000 larger on April 16, 1930, than a year previous. This $75,000,000 increase was partly due to an increase in net demand and time deposits and partly to a change in the excess reserves carried by such banks on the two dates. That there was a decrease during the year of $250,000,000 in reserve bank credit outstanding, notwithstanding an increase of $78,000,000 in reserve balances carried with the Federal reserve banks by all member banks is accounted for by an increase of $202,000,000 in our monetary gold stock, chiefly due to gold imports, and by a decline of $142,000,000 in the amount of money in circulation. The attached table shows chances for the year ended April 16, 1930, in amount of Federal reserve bank credit outstanding, monetary gold stock, money in circulation, member bank reserve balances, etc., and in the loans, investments, deposits and reserves of weekly reporting member banks. VOLUME 203 PAGE 121 • CHANGES DUPING YEAR ENDING APRIL 16, 1930, IN RESERVE BANK CREDIT OUTSTANDING AND IN RELATED ITEMS Bills and Securities held by Federal Reserve Banks: Bills discounted Bills bought United States securities Other reserve bank credit $780,00o,000 • 161,000,000 + 374,000,000 5,000,000 TOTAL RESERVE BANK CREDIT - Increase in Monetary Gold Stock Decrease in Money in Circulation Increase in Treasury Currency Increase in Member Bank Reserve balances Increase in Unexmended capital funds, nonmember deposits,etc - 250,000,000 $202,000,000 142,000,000 13,000,000 $357,000,000 78,000,000 29,000,000 107,000,000 CHANGES DURING YEAR ENDING APRIL 16, 1930, IN CONDITION FIGURES OF WEEKLY REPORTING MEMBER BANKS Loans and investments - total +. 12521000,000 Loans - total On securities to brokers and dealers (a) In New York City (b) Outside New York City + On securities to others 414 000 000 + 927,000,000 208,000,000 + 167,000,000 All other loans 471,000,000 Investments - total 162,000.000 Reserve with Federal reserve banks Net demand deposits Time deposits Government deposits Borrowings from Federal Reserve banks 75,000,000 265,000,000 2g9,o0o,000 24,000,00o 664,000,000 Form No 131 Office Corresponfknce To I.r. Hamlin From 1st.nit FEDERAL RESERVE BOA ctDate g, Subje : . -cr101.1aut. 1,4r 2-8495 Sup.)lasenting the asnertandua furnialked you under date of Lay 16, copy of which la attar:11.4s with riligerd V.) the •9rf..noeed procedure to be followed in cohnectiort vi.th the t>entling lame at re?a.rstiona bovslo in ttie country, thore la also attaetted eopy of a motion uulablitted by lir• riller at tbia reatirz thia oii az.tboti ;Juts the Notiou offered by nr. EssAlln at the rAsetliv,:, ot. the in as 16th. VOLUME 203 PAGE 131 the tailwind observations are nide by the Mara. Reserve board to asolain its position in reply to the natter subnitted, to it by the Goveruir of the Mara liellerve Bank it Now fait with regard to oonteqpiateS, offerbieif altalefettin bends i t Atterionia rik rksts. t law Antrim* aapite14san nerisit Is a free market: An amps. tioa Is the infornal surnsillanse asevelent ever Werth. of sewn's* of foreign angle by the tate Dorttuant sins* INS. The aistien of this responsibility by tho Stato lApartowint appears to have *yea notivated riore4 a oonsideretions cn tion4 ant international polio. Le these oireleestensos it would, bu a grAltitous assumption of responsibility eorttaclo axtra legal, if not aotualty 11,1001 far a Federal Ramon Sant or the Fedoral Deism Board to parfOrai'the falsettos of a Capitol 1010100 Goisintoo irith rogurd to a spoSisl olsole of sossrltlio, es It malt IS It usterteolt to pass on the admissibility of offal*. if beide We by est alt Walt of Its lierst of Intsewitional dattioseete le the ismalilie miritet. as statutes of Us Isuat of Inter. aattsaal flottissoullo Sas set a3$ Ito satheritr or risponsibilitios of okiNdseal Reserve imik or the Moral loserwe Board. gam apt od* to, or lobtruot free thump ler prosoribe ttomow of their *011411480 of the roquestiosie of Us Moral Rua,* ftwik of 20 I am York to the 1114 le S., imed AmdimeetlI, therefore, of the Podsral Reserve Boort. wad Weise Os Balt sat the Most Is as eiteasion of their faustleas sad Us assaptsaso if a aes (miter of roopoasibilIty at the IMetamee of a forsiga bmstituthsig. If tois sould legally imaa pmerly b4, dome at the twitiAft of the3. L to, it oomil* also be toms at the biesease at oar .1ther inetitatien or oar government. tho implisatiens AMU*. eeenesSis Mai flailaidakt if suskt larelieweat are so tuft *s.SJJ P to wee IS Ibjentionahle from a roacrioble polio peke* et' vie,' It IWO* SO the Beard that the twisting arraesemoat oder lilac% q4eitiene ef eleenneco ia ookoneties with tie offering of aeouritiee of forelo *Plain are detestable tip* OS State Sepeartneat weds so sapplemiate. ties at Wm time for the aufazuerting at ear asittiaa interest* This is imepties1ir),7 true in ggenteetipit with offoriege of bestton tonile bemoan fres their irony *Mote thine iiintlems aire politieal rather then eseneale sae fineasial is obaracter* Par the leberel iteserve Mom ant Os is taterhawo to pep wen otterinse at thou lode to as petitteal grevidie *env then her bop** their leigittnato fenetlimmi6 /Or We to giVe gook Ueda elesoisee arevalls *oda Ware theme rim the Malts VieepAnti, in set appeionil of to, feeturities so offend* Ma board feae that it. itself, 'Awl nessive Cooks *bead aniatain firoades toe Nonnitmente that WO* taterf4re 'sok the utlepeaot wow. of their take ia semeetien with the adnialotratlea of tin reeeuroes of lb* Nikita Itaserve apotee• “fter surest owlet/Ur:stile of the giestiens sielset tip tbo statneee anti moloots of the B. I* S*# the SOMA has reaehet the seettmelm that is Wall be issitinmai thut the Peders1',sort* lock of Saw Mac espressos ma we owes* no diamond to this jartosoot issue of neparation Undo in the Ameriont neaket, tor the roma 014 later timo 1Pettion1 Itseerre ,gust it he, se pour to pee njsta =oh eotaritioll as 0,1teedities preeedeet to their ellerini io erer noMPICete, watt ouct its fuller* to diseont *Weld not be westrout either ea on esservid or disapprora of the Um* seseUtkone as 'worth of 010 seouritios, or ea a waiver of aey of its lesersi powers to •aseesoarst union at *ay tins to protest the *mitt stability of the abed Statoo* (C 0 P Y) May 16, 1930 To Mr. Hamlin From kr. McClelland At the meeting of the Yederal eserve Board yesterday, discussion was had with regard to the procedure to be followed by the New York Bank in con nectian with the pending issue of reparations bonds in this country, as outlined by Governor Harrison at the meeting on May 14. The proposed letter questing an opinion as to which no action was taken before the Board, and Mr. to the Attorney General of the United 3tates, rethe responsibility of the Board in the matter, on at the meeting on April 22nd, was again broug.ht James submitted the following motion: "Whereas, the Jank for International Settlements has come into existence eince the enactment of the Federal eserve Act and obviously Congress has not given any consideration to its relationships with American institutions, particularly, the Yederal eserve System; "Be It qesolved, That the Federal Reserve Board ask the Attorney General of the United States for an opinion as to what its responsibility is in the premises." Mr. Hamlin submitted the following as a substitute for the motion made by Yr. James. "Whereas, Governor Harrison of the Federal Reserve Bank of New York, on May 14, 1930, stated to the Board that if any request should clime from the Bank for International Settlements asking whether the Federal Reserve Bank of New York dissents to an offering in the United states of reparations bonds, he would prepare a cable and letter which he would submit to the Federal eserve Board for approval or disannroval, and that if the Board should disapprove such cable and letter they would not be sent; "Be It - esolved, That the following proposed reply of the Federal 'Aserve Bank of New York to such request, be submitted to the iederal ,eserve Bank of New York by way of suggestion: "'The Federal 2eserve Bank of 1Zew York: has the honor to acknowledge the receipt of your cablegram asking whether it dissents to the proposed offering in the United States markets of the reparations bonds referred to. In reply I would say that the Federal leserve Bank of New York does not dissent, for the reason that under the Federal eserve 2!,ct it has no power to Pass upon such securities asa condition precedent to their offering in said United States markets. Its failure to dissent, therefore, should not be construed either as an approval or disapproval of the terms, conditions, or worth of such securities, or as a waiver of any of its lawful powers to take necessary action at any time to protect the credit stability of the United States.'" The two .!otions were discussed further, but no action was taken. I) Lid k.? 6 J.3 The Governor stated that he called a suecial meeting of the Board because be has been informed by the State Department that inquiry has been made of it as to whether it has any objection to the sale of reparations bonds in the American market, As a matter of courtesy, the State Department advises that it will reply to the effect that it has no objection. The Governor, therefore, anticipated that a cablegram will be received tomorrow by the Federal Reserve Bank of New York from the Bank for International Settlerionts inquiring whether the Federal Reserve Bank of New York would dissent to an offering of the bonds in this market° Be reminded the Board that Governor Harrison of the Federal Reserve Bank of New York on May 14th advised the Board of the procedure that wculd be followed by the New York Bank, namely, that they would prepare a cable reply to the effect that they do not dissent, but before dispatching the sane Board did would refer its contents to the Federal Reserve Board, and if the dissent to the issue the cablegram would not be dispatched. nce to the Bark for The Governor then reviewed the situation with refere the tentative draft International Settlements, stating that in the Young plan Federal reserve bank in the VWprovided for participation by an officer of a Settlements, both directly and through agement of the Bank for International selection. Department, objecting to any He recalled the position of the State in the operation or management of the officer of a reserve bank particdpating inoint of national policy. He further Bank, on what he considered the standp of the Adminstration conferred with formed the Board that representatives departure for Europe to participate Messrs. Traylor and Reynolds before their Bank for International Settlements, in the drafting of the statutes of the that if foreign central banks of issue and informed l'ssrs. Traylor and Reynolds ions a veto power with reference to operat and foreign governments were to be given International the statutes of the Bank for in their own markets by the terms of VOLUME 203 PAGE 135 • .iettlements, some such veto power should be lodged with responsible authorities i this country. BO has been informed by Administration officials, he stated, that Messrs. Traylor and Reynolds had accomplished their object, insofar as the .1.dministration WAS concerned, by giving the veto flower to the Federal Reserve Bank of New York, which is subject to general supervision and regulation by the Federal leserve Board, thus vesting ultimate responsibility in the body uld.oh represents the Federal Reserve 'lye= as a whole and which is responsible for the credit policies of the United States in the sans manner as oentral banks of issue abroad are respectively responsiblo for the credit policies of their countries. The Governor stated that taking all things into consideration he ght it highly desirable that the Federal Reserve Board retain tram veto power, even tho gh it night not be of any particular importance at the moment, as the time might was when it would be of great importance and it should not be nullified by the precedent of a failure to assume or acoept the pow-or at this time. HA also stated and recommended to his colleagues that he thought the best method of procedure for the Board to follow when the inquiry is made by the Federal Reserve Bank of Nev4 Yorkwithreferenoe to their cablegram expressing no dissent to te flotation of reparations bonds in this market would be to take the positiAl that inasmuch as we have a free securities market the question of the flotation of reparations bonds in our market at the moment is one of national policy rather than economic or financial. He, therefore, suggested that the question be referred to the nat. Departatemb 00 seaure)en official statement aer-6.4.4w from them that they do not object to the flotation of the bonds and that A when this is received the Federal Reserve Bank of New York be .3. advise.i that inasnuch as the uestion at the moment is one of national policy rather than oconomic or financial, to which the ':itate Departnent does not object, there are, therefore, no grounds forth* Nord objectin- to the disratoh by the New York Bank of the cablegram that had been preplred, it being ullaetood, howevar,)that suoh failure to dissent shall not be construed either as an zIpproval or aisapproval of tho t.ms, conditions, or worth of seouritios, or au n Naivor of any of the lawful po:ars of the Federal tette appropriate action United :Antes. sserve ,orstem to t 44y tinie to proteot orlait conditions In the !lay ' 1930. Suggested change in Governor Young's Reoort to Board as to Rellaration Bonds. bottom of l'age 2 strike out all of the rest of page 2 and page 3, and substitute the following: It is therefore suggested that the question be referred to the State Department, and an official statement be secured from it to the effect that it does not object tc the flotation of the bonds, and that when this is received, the Federal Reserve Bank of New York be advised that the Board will not interpose objection to a cablegram to the B.I.S. that it does not express dissent to the particular proposed offering of reparz-tion bonds in the markets of the United States, provided it be understood and made clear that the failure to express dissent does not La-Ay approval of the terms, conditions, or worth of such securities, nor does it affect the right of the lederal Reserve System to take aporopriate action at any time called for by credit conditions in the United States. .11•11M......••••.•••••••••• itay L930. Viusted Ohange iv.r.4rowornor Tomes ae-,eort to 7,oari as to Reparation Bonds. At bottom of kage 2 strike ont 41 .Lage 0, nt substitute the folio:wine of owl rest of page 2 and it is therefore snetsstef3. that the -Ite:.,tior. be rfterred to the ztate lie:Artittent, and an official .T.t tement be secured from it to the effect th;..t it does not object to the flot-tion of the bonds, and that inhen this is received, the Irederei Reserve Bank of no-, York be aavised that the Board will not interpose objectiln to a mblesaln to the that it does not espre.::s dissent to the :,- asiticular promisci offering of rtk)ar-tion bonds in the markets of tho United States, provided it be understood nd1„aalit clear th.t the failure to express dissent toes not 1214y approval, of the terms, conditions, or worth of such ,, . -curities, nor aoes it nffeat the right of the ?edr,..m.1 Re-,erve •',4rsten to take apl)ropriate ection at any tile called for by credit ,onditions in the United States.
@FedFRASER