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)
365_03_001-
Hamlin, Charles S., Scrap Book — Volume 219, FRBoard Members
205.001 - Hamlin Charles S
Scrap Book - Volume 219
FRBoard Members
BOARD OF GOVERNORS
OF THE
•
FEDERAL RESERVE SYSTEM
Office Correspondence
To
The Files
From
Mr. Coe
Date
A rust 5, 19/,1
Subject:
f\li41?"After 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 219 of Mr. Hamlin's scrap book and placed in the Board's files:
VOLUMT 219
Page 25
Group Life Insurance at F.R. Banks.
Page 51
Changes in loans and investments of weekly reporting member banks
during the week and year ending October 21, 1931. (Marked
Confidential)
Page 63
Minutes of meeting of Executive Committee of Open Market Policy
Conference in New York, October 26, 1931.
Page 82
Cablegram from Mr. Dulles to Eugene Meyer re financial situation
of foreign countries.
Page 97
Membership applications, procedure for approving.
Page 115
Letter to Mr. Hamlin from W. R. Burgess enclosing a Preliminary
Memorandum on Credit Conditions for the Meeting of the Executive Committee of the Open Market Policy Conference.
Page 121
Memo to Files re Services to be Performed by the F.R. Banks for
National Credit Corporations.
Page 134
Wire from Mr. Crane to Mr. McClelland re renewal agreement of credit
to Bank of England.
Page 155
Letter to Mr. Hamlin from F.R. Agent Wood re Loan of Managing Director Kincheloe held by National Bank of Kentucky.
•-•
tv.A
•
FEDERAL RESERVE BOARD
WASH1 NGTON
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
X-7002
October 23, 1931.
SUBJECT:
Group Life Insurance at Federal
Reserve Banks.
Dear Sir:
Referring to the Boardls letter of September 3 on the above subject, there is attached
hereto for your further information, copy of a
memorandum prepared by the Division of Bank
Operations under date of September 25 on the cost
of group life insurance at Federal reserve banks.
Very truly yours,
E. M. McClelland,
Assistant Secretary.
Enclosure.
TO GOVERNORS AND CHAIRMEN OF ALL F. R. BANKS.
VOLUME 219
PAGE 25
)
.
•
X-7002'-a
TOp4p:p.11/terippoarclaciiik
-.47- -
September 25, 1931.
DATE:
I
TOM-4
. 1
1
.
.Jan
*„
FO8E an
'
l tV
•
Group Life Insurance
SUBJECT:
ice
f the preparation of my memorandum of August 12 on the above subject,
re have compiled certain information, shown below, on the cost per $1000 of
group life insurance carried by the various Federal reserve banks, which may
be of interest to the Board. In this connection it should be borne in mind
that the cost of group life insurance varies considerably from year to year
at.a given Federal reserve bank, and accordingly only very general conclusions
can be drawn from the table below as to the relative cost of such insurance at
the respective Federal reserve banks. The cost per $1,000 of insurance shown
in the first column below is based on essentially the same scale of rates at
each reserve bank and the relatively high average rates at certain of the
banks are due to a correspondingly high ratio of employees of advanced age.
For example, at Minneapolis and Kansas City 15 per cent of the employees are
over 50 years of age and the cost of insurance on these lives is 52 per cent
of the total cost at Minneapolis and 47 per cent at Kansas City. None of the
other banks, except Philadelphia perhaps, have more than 10 per cent of their
employees in this age group and the cost of insurance on such employees is
but 28 per cent of the total cost at Boston and but little over 30 per cent
at a number of other banks.
Cost per $1,000 of Group Life Insurance carried by Federal reserve banks.
Average
Federal Reserve tabular
Bank
or policy
rate*
Annual Premium
Policies
Philadelphia
Kansas City
San Francisco
Cleveland
Boston
Dallas
Monthly Premium
Policies
New York
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
$11.28
12.29(a)
9.48
8.91
9.27(b)
8.89
9.65(a)
Dividends
Experience
received -discount -per cent of per cent of
tabular rate tabular rate
Actual cost per $1,000
Per cent
of
Amount
tabular rate
36
27
23
15
18.2
12
None
Non-participating
10.7
19.5
2.3
9.7
9.4
16.0
37.6
24.4
7.7
8.5
43.8
None
If
If
44.1
64
73
77
85
81.8
88
55.9
$7.21
8.97
7.30
7.58
7.58
7.82
5.39
51.7
56.1
90.0
81.8
46.8
84.0
5.14
5.86
9.18
8.26
5.08
10.68
4.•
9.95
10.44
10.20
10.10
10.86
12.72
*Slightly higher rates are charged on the monthly premium policies due to
interest on deferred payments. Allowing for this the scale of rates
at each age is identical for all banks, except Cleveland.
(a) After deduction of extra premium for double indemnity for accidental death.
(b) Calculated on the scale of rates charged the other reserve banks.
4.1.%
Confidential
CHANGES 1U LOANS AND INVEST:1;711S OF 7TEMY REPORTING MT.1.1ER. BANKS DURING TH: 1,77EK AND THE YEAR ENDIM OCTOBER 21, 1931
B-538
1
TOTAL LOANS AND INIRST:MITS I
Oct.
21
ALL RORT LIG BALTKS
New York City
cago
ther reoorting banks
ALL 117rORT LTG BANKS
New Yorl- City
icago
Other re Ior tint
;banks
•
ALL REPOaT ING BANKS
New York City
Chicago
Other reporting banks
I
I
Tie ek
Clia
e Year
I
Oct.
21
21 ,289
- 212
- 2,09)4 a
13,5)41
7,351
1,693
- 187
+ 2
-
922 1
333
4,540
1,154
835 i
7,8)47
12,245
-
27
-
TOTAL ST2CUR ITY LOANS
Change
Oct.(
-7e ek I Year
21
i
- 2,229
5,906
- 95
- 1,250
- 103
2,300
261
2
662
718
+ 10
2,s44
BamEas AND
DEALERS
IN NEW YORK CITY
Oct.
Change
ek
Year
21
TO
573
517
- 77
- 91
- 1,317
953
-
+ 14
-
21
35
162
202
TOTAL IlTITE1ST::31ITS
TOTAL LOANS
r39
- 130
7
+
- 16
-
- 3,175
- 1,506
- 386
539 .
4,398
3
CLASSIFICAT ION OF LOANS ON S7.1C URITIES
TO BROKra.S AND MUMS
OUTSIDE NEW YORK CITY
Chanr;e
Oct.
Year
7eek
21
- 280
412
86
- 5
3.
73
- 173
2
182
34
-
73
57
5
2,811
SECURIT TES
ClaanFe
'.7eek I Year
- 41
+ 1,099
- 42
+
609
123
2
Oct. 7
-
Year
.7,748
- 1,283
ALL. OTH= LOANS
Change
Year
21
I -:e ek
- 946
- 14)47,635
- 256
- 27
2,240
- 124
+ 9
)492
- 566
- 26
4,903
144
Claan.:•;e
Oct.
21
'e
IgaI-la 1..,
1
Year
'.7e ek
-
+
367
11
OTH32 SECO-P.1T IES
Chan{_e
Oct.
77e ek
Year
21
- 18
- 32
3,589
- 25
- 15
1,072
-6
3
222
+ 76
- 14
2, 295
TO OTI-r-MS
Oct.
21
Change
7e ek
.
14,921
1,697
1497
- 10
- 7
- 1
2,727
2
DIVISION OF BAI:K 0P72ATIONS
FEDERAL RSS=VE BOARD
youna 2.1.9
PAGE 51
Year
- 632
- 263
26
- 3)43
.14-4 444
,
410
ctober 29, 1931. --"-41
"
Meeting of Executive Committee of Open Market Policy
Conference in New York.
October 26, 1931.
Governor Harrison stated two ouestions:
1.
Whether to buy or sell Governments, or to maintain the
present holdings unchanged.
2.
The question of distribution of Governments and bills
between individnal reserve banks to help banks maintain
their reserve percentage or their amount of free gold.
Governor McDougal recommended a reduction of System security holdings
by the amount of the maturities through next March.
Governor Harrison reviewed the situation, saying that the free gold
position of the System was not a consideration at this time, because,
although having lost 700 millions in gold, there remains over 800 ndllions
of free gold, practically as large as before; that a sale of Govermnents
would not in fact strengthen the Systan's gold position. Its only effect
would be to provide additional collateral for Federal reserve notes; that
there is ample collateral now; that at the present time only 300 millions
of Treasury notes out of 2 billion 700 million outstanding are not
collateraled to 60 of value by eligible paper; that the most important
question today are bank failures and hoarding of currency. A decrease in
System holdings of Governments might affect the situation adversely, first, psychologically. Second, as tending to increase member bank discounts
and thus -aking than someWhat less wng to lend freely to help banks
actually In need; that he had advised New York banks to lend freely; that
liquidity should be used rather than preserved at the present ttne; that
nothing should be done unnecessarily to discourage the use of this liquidity
in rendering aid to banks in need.
All agreed everything should be done to persuade banks to adopt a
liberal policy and to borrow freely from the Federal Reserve System when
necessary.
Governor Norris said although recently opposed to purchases of governments, and feeling that Systan holdings should be reduced, he did not think
this a proDer time to sell securities, as many banks under the easy money
policy had bought governments at low yields, and any action now tending to
accentuate the losses of banks on governments would be most unpopular.
Governor Meyer pointed out that the Corrmittee had no authority to
sell govermments, but could, if desired, request permission fran the Board,
and ask* that the Board approve the recommendation of the last Open Market
VOLUME 219
PAGE 63
6'3
•
2
Policy Conference that the executive committee be given authority to sell
up to 120 millions of governments.
Governor Young felt it would not be wise at this time to sell
governments, or to let the total run off except possibly to the extent
that it might be desirable to offset purchases of Intermediate Credit
Bank debentures and municipal warrants.
Governor McDou&I moved that unless conditions changed, System
maturities of governments in November be allowed to run off.
Governor Meyer reported telegrams from Governor Calkins recommending
letting maturities of governments run off for the balance of the year
at least, and also recommending some plan for a more equitable
distribution
of holdings between the reserve banks to provide a more
ample free gold
position and reserve position for some of the banks.
Governor McDougalls motion was defeated 4 to 1.
It was moved and carried that while at the moment there is no occasi
on
for a reduction in Systan holdings of governments, yet in view
of the wish
of some governors for a sale of governments, and in view of the possib
ility
of a change in the credit situation which might make sales
desirable, the
Committee ask the Board to give it the same authority with respec
t to
sales of governments as it now possesses with respect to
purchases.
It was voted to send a copy of these proceedings to each bank, and
it was agreed there should be a meeting of the full Confer
ence as soon as
conditions appeared to make it wise and practicable for the governors
to
leave their own institutions for such a meeting.
It was agreed that a bank short in reserves should ask for relief
through the sale of bills to other reserve banks, whenever its
situation
could be relieved by that method. Secondly, that Where the
difficulty was
lack of free gold, it should offer its government securi
ties to other reserve
banks through the committee, and should only make this reques
t When
absolutely necessary, and the amount of the request should be limite
d to
that necessary to meet the usual fluctuation of its gold
holdings; that the
committee would then offer participation in these bills and securi
ties to
the other banks, with the understanding that those whose
reserve position
enabled them , should take bills or securities to the fulles
t extent
possible.
The question was then taken up of the policy followed by
the banks
as to lending on government bonds. New York, Chicago, Minnea
polis, and
Atlanta were lending at their par value; Philadelphia
was loaning at par
when the market price was 95 or better; Boston was loanin
g on values at
market.
3.
It was brought out that the reserve banks were vigorously suppor
ting
the Comptroller's ruling under which prime bonds were to
be listed at
par, and it was felt that the acceptance of governments
at something less
than par would appear to be inconsistent with this
position. It was also
felt it would create disturbance among member banks and
the recent decline
in governments would be accentuated if the res rye banks
took these bands
at less than par. It was believed that no considerable
risk was taken
at lending at par, in view of the limited amount of govern
ments selling
below par and the additional protection the reserve banks
possessed.
Governor Young raised the question Whether there was any way
of
distributing earnings or losses on open market holdin
gs in a more equitable
manner, but after discussion no motion was made.
Reference was made to payments of gold coin into circulation,
and it
was agreed that payments should be made with complete freedo
m, and that
the amounts of such payments made thus far have not been import
ant.
Governor Harrison reported that at the New York bank gold
certificates
were being paid out only on request, but that there was
no hesitation in
making such payments when asked; that as a result considerable
aciounts of
gold certificates were being retired from circulation.
COPY
WAR5
LCD
163
CABLE
ENT
MP
PARIS
•
26 163
E MEYER (DELVR 214 TREASURY DEPT.)
(EUG:o2TE MEYER 1624 CRESCENT PLACE WASHINGTON, D.C.)
SEM LAST WEEK PRAGUE AND TODAY HAD EXTENDED CONFERINCE WITH IMPORT
ANT
MMBER POLISH FINANCE MINISTRY WITH WHOM AM WELL ACQUAINT). MY
GENERAL
CONCLUSIONS WHICH ARE APPLICABLE TO GERMANY AS WELL AS CZECHO
SLOVAKIA
AND POLAND ARE THAT IN EACH COUNTRY THE SITUATION IS DOMINA
TED BY
APPREHENSION AS TO MAINTENANCE STABILITY OF THEIR CURRENCIES
AND STRONG
INTERNAL PRESSURE IS EXERTED FROM CENTRAL BANKS AND OTHER BANIM
S TO
RESTRICT SHORT TERM DOLLAR COBMITMENTS TO ABSOLUTE MINIMT
.E.
APART FROM
GENERAL IMPROVEMENT THE SPECIAL MEASURES WHICH MIGHT STIMUL
ATE OUR
EXPORTS OF AGRICULTURAL PRODUCTS PARTICULARLY COTTON
WOULD BE LONGER.
CREDIT TERMS WHICH WOULD ATTRACT BUYING AND SALES IN
TERMS OF FOREIGN
CURRENCIES.
AM CONSIDERING THIS LATTESPbSSIBILITY FURTHE
R AND WILL
ELABORATE ALL MY VIEWS IN REPORT WHICH I 7ILL MAKE
ON RETURN.
AM PLANNING
t1 •
SHORT VACATION TRIP TO THE SOUTH RETURNING PARIS NEXT
WEEK AND PROBABLY
SAILING FROM ENGLAND ON BREMEN NOVEMBER ELEVENTH.
THROUGH PARIS OHFICE.
DULLES.
VOLUME 219
PAGE 82
CAN ALWAYS BE REACHED
MEM.
.s_tc 114.
FEDERAL RESERVE BOARD
WASHINGTON
X-7009
ADDRESS OFFICIAL CORRESPONDENCE TO
THE FEDERAL RESERVE BOARD
October 30, 1931.
SUBJECT:
Procedure in Approving Applications cf State
Banks for Membership.
Dear Sir:
The procedure followed by the Federal Reserve Board in
the past in connection with the approval of applications of State
banks fcr membership in the Federal Reserve System has involved,
what is believed to be, an unnecessary exchange of telegrams between the Board and the Federal reserve agent, and, in order not
tS.elay
e.i•mission to the System of banks whose applications
have been approved by the Board, it has been decided to sioplify
the procedure, as set out below.
In the past the Board has advised the Federal reserve
agent by wire of its approval cf an application fer membership,
subject to the regular conditions of membership contained in
Section IV of Regulation H, and any special conditions considered
necessary (code wcrd "anchoring"). This 7as follo7ed by a letter
to the Federal reserve agent, enclosing a letter to the applicant
bank, to be transmitted by him, advicing formally of the approval
of the application, setting forth in detail the conditions prescribed by the Board, and instructing the bank to advise the
Board of its acceptance of such conditions. Upon receipt of
notice of acceptance from-the applicant bank, either directly or
through the Federal reserve agent, the Board dispatched a second
wire to the Federal reserve agent authorizing him to proceed with
the final arrangements for the admission of the State bank (code
word "anchoress"). Membership was considered as being effective
from the date payment was made on the Federal reserve bank stock,
the Federal reserve agent advising the Board of such payment by
wire (code word "narratell").
Hereafter, u-oon approval of an application of a State
bank for membership in the System, the Board will rire you
VOLUME 219
PAGE 97
AA
•
X-7009
- 2advising of such approval and authorizing you, when notice of
acceptance of the conditions of membership has been received
from the applicant bank, to arrange for the issuance of the
necessary Federal reserve bank stock, upon receipt of payment
therefor, and for acceptance of the transfer of the required
reserves (code word "anchoring"). The usual letter to the
bank, setting forth the conditions of membership, will be
sent to your office as at present, but will instruct the bank
to file with you, instead of the Federal Reserve Board, a
certified copy of a resolution of its Board of Directors accepting such conditions of membership. The Board's letter
will state that you have been authorized, upon receipt of
notice of acceptance, to proceed with arrangements for its
admission to the System, all of which must be accomplished
within thirty days from the date of the Board's letter, unless, on the bank's application, the time is extended by the
Board for good cause. Upon completion of all arrangements for
the membership of the bank, you are requested to wire advice
to the Board (code word unarratell"), and to forward promptly,
for the Board's files, the certified copy of the resolution
of the Board of Directors of the applicant bank accepting the
conditions of membership. Upon receipt of this advice from
you, a formal certificate of membership will be mailed to the
bank.
Whenever special conditions of membership are involved which are to be complied with prior to admission, you
are requested to assure yourself that such conditions have been
met in every respect before proceeding with arrangements for
the completion of membership. In any case where acceptance of
conditions is qualified, or there is question as to whether the
bank has complied properly with any special conditions, the
matter should be taken up with the Federal Reserve Board before
arrangements for the admission of the bank are completed.
The coda words to be used under the new procedure arc
set out below:
1.
Anchoring. The application of (name and location
of applying bank) for membership in the Federal
Reserve System has been approved by the Federal
Reserve Board, subject to the conditions contained
in Section IV, Regulation H, Series of 1930, numbered 1 to 7 inclusive (special conditions, if
any, to be quoted). When notice of acceptance of
these conditions by the applicant bank has been
received, you arc authorized to arrange for the
•
X-7009
3
issuance of Federal.
payment ther3for, al
' required reservos.
the date upon which t'
comes effel ve.
2.
oank stock, upon
.eptance of the
dvise the Board
membership be-
Narrat ell.
'oari:) has ,coml-i1Lted arrship, effecO.lie (date).
tifi4p.pp1Ng
"J4 2- mL3m
The code word "anchorele 1, uncle,
'
cedure, become obsolete an'l 7ill be discontinu
By order of '
rederal X.e&erve 3
1,
Sec
TO AGENTS OF ALL F. R. BANKS.
sit ;ir,
t.
C.•
FEDERAL RESERVE BANK
OF NEWYORK
jovember 21 1931.
Dear lair. aamlin:
in accordance with your request of uctober 291 I am
pleased to send you herewith a copy of tne Preliminary Memorandum
on Credit Conditions presented at the meeting of the Executive
Committee of the upen .darket Policy Conference on uctober 261
together with the minutes of the meeting.
Very truly yours,
.,.'Randolph burgess
Deputy Governor
0/7
re.
/45--
•
Preliminary Memorandum on Credit Conditions for the Meeting
of the Executive Committee of the Open Market Policy Conference,
October 26, 1931.
A number of developments of unusual importance have occurred
since the last meeting of the Open Market Policy Conference on August 11:
Continued withdrawals of funds from Lundon led to suspension of i:,;old payments by Great Britain; this has been
followed by similar action in a number of other countries;
Subsequent strengthening of foreign central bank gold
holdings and a "run on the dollar" have led to heavy purchases of gold from the United States by foreigners;
Currency hoarding has resulted in further heavy withdrawals
of deposit3from the banks;
As a result the demand for Federal Reserve Credit has increased at an extraordinary rate;
Federal Reserve Bank discount rates and open market money
rates have risen;
Security prices have declined further; prices of United
States Government securities have dropped precipitately within a few weeks from approximately the highest levels in recent years to levels even lower than were reached in 1929;
Bank failures have increased considerably in number;
Liquidation of member bank credit has been resumed at an unprecedented rate, with consequent shrinkage in the supply of
money available for business use;
The emphasis of banks on liquidity has increased and the financing of business either by investors or by banks has become
increasingly difficult;
Business activity and employment after seasonal adjustment have
declined further, and commodity prices are lower;
Efforts toward the restoration of confidence in the banks have
been undertaken chief of which has been the organization of
the National Credit Corporation.
System Gold Position
The effects of gold losses and currency hoarding on the System gold
1)osition arc shown in the attached diagrams and the following table.
Recent
gold losses of about .700,000,000 have not yet entirely offset the gain to the
country's gold stock since early 1929 when it was generally considered that the
gold supply was well in excess of thc country's needs.
The "free gold" of the Federal Reserve System has shown little change
during the recent outflow, as the second diagram indicates.
This is due to the
fact, which is also illustrated by the diagram, that the amount of gold required
as collateral for Federal Reserve notes has. diminished about as rapidly as have
the gold reserves of the System.
The foreign demand for gold, together with the
domestic demand for currency, have brought into the Reserve Banks a large volume
of eligible paper in the form of discounts and acceptances, which has been
pledged as collateral for Federal Reserve notes, so that a large part of the
gold used until recently as collateral has been released.
The following table
summarizes the demands on the reserves of the Federal Reserve System between
3cptember 16 and October 21, and shows the position of the System with respect
to gold after meeting these C.cmands.
Demand for Gold and Other Reserves between September 16 and October 21,
and Effect on Reserve Position of the Federal Reserve System
(In millions of dollars)
Demand for Gold (and other reserve cash):
418
261
For earmarking
For gold exports (net)
679
Total
Reduction in required reserve against F.R. deposits
Increase in required reserve against Z.R. notes
- -
Total
Estimated increase in gold certificate and coin circulation
Total demand from all sources
- 49
151
102
41
822
•
Effect on Reserve Position of Federal Reserve System:
Sept.. 16,
1931
Total reserves
Excess reser-gas over minimum requirements
Gold required as collateral
for F. R. notes
Oct. 21,
l3l
Change
3647
2927*
-720
1919
1097*
-822
1037
231
7756
882
816*
- 66
"Free Gold"
*The issuance of Federal Reserve Notes in place of gold certificates
will tend to increase the reserves of Federal Pcserve Banks and
eventually to increase the amount of "free gold"; this process is
already under way.
As this indicates, the System on October 21 still had excess reserves
totaling about
1,100,000,000, either in the form of "free gold," or in the
form of gold collateral which will be released when further needs for funds
bring in additional bills or discounts.
Recently dollar exchange has strength-
ened relative to the exchanges of European countries which have been taking gold,
and there are indications that the outflow of gold is subsiding.
Net Change in Monetary Gold Stock
of the United States
Week ended:
September 26
October
/I
4173,000,000
3
- 168,000,000
10
- 153,000,000
17
24 (Preliminary)
- 151,000,000
-
58,000,000
- anking Position
The i
Fr,m the viewpoint of the business of this country, the (evelopments
relating to the position of commercial banks - the great numbers of bank failures, the continued noarding of currency, and the consequent excessive ca'ution on
the part of bankers which has been instilled by these occurrences - have been
of more importance than the gold outflow.
Security markets have become almost
completely closed to nrw financing; banks are more reluctant than ever to employ
4
their funds in any but the most liquid forms of loans or investments; the supply
of credit available for business has been shrinking rapidly.
The following table
shows changes in the loans and investments and in the deposits of weekly reportin4
member banks during 3ctober and since the beginning of July.
(In millions of dollars)
Security loans - - All other loans
U. S. securities
Other securities
Total loans and investments Net demand deposits
Time deposits
Total
Oct. 21t
1931
July 1,
1931
Sept. 30,
1931
6,746
7,945
4,129
3,666
6,346
7,845
4,223
3,693
5,873
7,681
4,158
3,606
22,486
22,107
21,314
13,688
7,172
13,227
6,775
12,532
6,459
20,860
20,002
18,;/91
*Estimated largely on basis of October 21 figures for New York City bunks.
During the past three weeks the loans and investments of reporting banks
have been reduced nearly $800,000,000.
To the effect of this on deposits has been
added the effeot of gold and currency withdrawals, partly offset
by the Reserve Banks through bill purchases.
funds paid out
Consequently the deposits of these
banks have shown a decline of about $1,000,000,000 during the three-week period
and a decline of nearly $1,900,000,000 since the first of July.
This constitutes
by far the most rapid shrinkage in member bank deposits during the life of the
System.
The closing of banks has proceeded at an accelerated rate.
In July
the number of closed banks was 93, in .august 158, in September 298, and in the
first three weeks of October 386.
This brings the number of banks closed since
the beginning of the year to a total of more than 1,600.
Depreciation in the market value of bond holdings is probably responsible for the difficulties of more banks tiu,n an
other cause.
Until recently
the depreciation was confined largely to the lower grades of bonds, but within
the past few months prices of even the highest grade corporation bonds have delined considerably, especially railroad bonds the status of which with respect
to "legal lists" has been enf,angered by the continued decline in railroad earnins.
Since the beginlAng of September there has been an extraordinary severe
decline in the market prices of United States Government securities - the only
class of bank assets which up to that time had maintained an unimpaired market
value.
Between September 16 and October 19 the market value of long-term Govern-
ment bonds declined about 8 per cent on the average, representing a "paper" loss
to all member banks in the neighborhood of
00,000,000.
Thus altogether, present banking conditions are such as to constitute
a serious obstacle, rather than an aid, to business recovery.
Some improvement
in this situation may be hoped for from the operations of the National Credit
Corporation.
shown.
Sentiment is already better though no definite results have been
•
aid/
Federal Reaerve Bank
of 14:411, York
Reports Dopartuont
Ac.)4r P 193/4
)4
BILLIONS OF DOLLARS
5
4
2.
1919 '20 '21 '22 '23 '24 25 '26 '27 28 '29 '30 31--
Monetary Gold Stock of thu United States
(End of month figures,
latest figure Oct.21)
oci.23
MILLIONS OF DOLLARS
4000-
3500
3000
TOTAL RESERVES
2500
Vie
1500
GOLD REQUIRED
AS COLLATERAL
FOR F. R. NOTES
500
MI
1500
1000
500
FREE GOLD
2
9
16
23
30
SEPT.
7
14
21
28
OCT.
1 931
Gold required as collateral for Federal Reserve notes has been replaced
by eligible paper as total reserves have been drawn down by gold
exports
and earmarkings, leaving the System's free gold virtually
unchanged
•
• MINUTES OF MEETING OF THE EXECUTIVE COICTITEE
OF 711E OPEN MARKET POLICY COPIJ'ERENCE MD AT THE
OFFICE OF THE FEDERAL RESERVE BANK OF NEW YORK
OCTOBER 26 1 1931
The members of the committee arrived at about 10:30 a. m., and report
of operations and memorandum on credit conditions were distributed and read.
The meeting was formally called to order at 11:25, there being present
the following:
Governor Harrison, chairman, and Governor3Young, Norris, Black, and
McDougal, Governor Meyer of the Federal Reserve Board, and Mr. Burgess, secretary.
The report of operations and memorandum on credit conditions were
ordered received and placed on file.
Governor Harrison stated that there appeared to be two important problems
to consider, the first relating itself to system general policy, whether to buy
governments / sell governments, or to maintain present holdings unchanged, and
second, the question of the distribution of governments and bills between individual reserve banks to take care of needs which might arise for banks to maintain
their reserve percentage or their amount of free gold.
He proposed discussing the
first question first and separately from the other question.
Governor McDougal made a statem(nt as to the position of the Chicago
Bunk with regard to government securities citing the changes w!lich had taken place
in Federal Rescrve credit and recommending the reduction of system security holdings by the amount of the maturities through next March.
Governor Harrison reviewed the considerations affecting open market
policy
indicating, first, that the free gold position
f the System was not a
consideration at this time first because there is now, even after a loss of over
.00,000,000 of gold over c800,000,000 free gold in the System) practically as
large as before the outward gold movement started and second because a sale of
government securities would not in fact really strengthen the System's gold position.
Its only effect would be to provide additional collateral for Federal
reserve notes, whereas there is an ample amount of collateral either now on hand
or in sight so that a shortage of collateral would not be a limiting factor on
the amount of gold which could be exported or the amount of Federal reserve notes
which could be issued.
out of
At the present time only ,300,000,000 of Treasury notes
2,700,000,000 outstanding are not collateraled to 60% of value by eligible
paper.
The most important question which the System feces at present is the
problem of bank failures and hoarding of currency.
Failures had been increasing
at a rapid rate and are exercising a terrific pressure on the credit situation.
Every action of the System should be considered in the liht of its possible
effect on these failures and on the willingness of banks to help out their correspondents in time of difficulty.
A decrease in the System's holdings of govern-
ment securities might affect the situation adversely, first, by its psychological
influence as indicating a policy of pressure, and second, as tending to increase
the amount of member bank discounts and so making them somewhat less willing to
lend freely to help banks actually in need.
Governor Harrison reported his conversations with New York bankers in
hich he had recommended that a policy of very liberal lending be followed, particularly to out-ofetown banks which had need.
should be used rather than preserved.
The present was a time when liquidity
He felt it desirable that nothing should be
done by voluntary System action unnecessarily to discourage the usc of this liquidity in rendering aid to banks in need.
There ensued a general discussion of the attitude taken by city banks
toward assisting banks in difficulty, the general sentiment of the meeting being
that everything should be done to persuade banks to adopt a liberal policy in
this regard and to borrow freely from the Federal Reserve System when that was
necessary to meet the needs of th
situation.
•
•
3
•
Governor Norris stated that while he had recently been opposed to pur—
chases of government securities and would like to see system holdings reduced,
he did not think the present was a time when we could wisely sell securities.
The System had cooperated in the movement toward easy money as a result of which
many banks had bought government bonds at low yields, and any action novi which
tended to accentuate the losses of banks on governments would be most unpopular.
Governor Meyer indicated that the committee at present had no authority
to sell governments, but that it could, if desired, request the Federal Reserve
Board to approve the recommendation of the last Oren Market Policy Conference
that the executive comdittee be given authority to sell up to 0.20,000,000 of
governments.
Governor Young summarized the advantages and disadvantages of a decrease
in holding of government securities, and concluded that it would not be wise at
this time to sell government securities or to let the total run off except possibly
to the extent that it might be desirable to offset purchases of Intermediate Credit
Bank debentures and municipal warrants.
Governor McDougal moved that unless conditions changed System ma'Lurities
of government securities in November be allowed to run off.
The meeting adjourned at l2:50 without action having been taken on this
motion.
The members of the committee attended the meeting of the executive com—
mittee of the Federal Reserve Bank of New York and resumed their own meeting at
3:25 p. m., there being present all of those who were present at the morning
meeting.
Governor Harrison reported the probable plans of the Bank of France with
respect to its i,merican balances.
Governor ieyer reported a series of telegrams from Governor Calkins of
the Federal Reserve Bank of San Francisco recommending letting mPturities of govern—
ment securities run off for the balance of this year at least, and recommending some
•
4
plan for a more equitable distribution of holdings between the Reserve banks to
provide a more ample free gold position and reserve position for some of the banks.
The motion made by Governor McDougal at the conclusion of the morning's
meeting was secondea and onmotion defeated by a vote of 4 to 1.
It was moved and tarried that while for the moment there is no occasion
for a reduction in System holdings of government securities, that by reason of
the views expresser by a number of governors favorable to a sale of government
securities, and because of the possibility of changes in the credit situation
which might make sales desirablei the committee ask the Federal Reserve Board to
give the executive committee the same leeway with res.rect to sales of government
securities as it now possesses with respect to purchases as recommended
by
the
resolution of the Open Market Policy Conference on August 11.
With regard to the desirability of a meeting of the Open Market Policy
Conference it was agreed that the results of the day's meeting should be sent to
the other Federal reserve banks by telegram and letter as early as possible, and
it was the sense of the committee that there should be a meeting of the Conference
as soon as conditions appeared to make it wise and practicable for the governors
to leave their own institutions for such a meeting.
There ensued a discussion of the distribution of government securities
between individual Reserve banks with special reference to a number of requests
which have been received recently to take over securities from Reserve banks whose
7,osition required strengthening.
It was agreed first that a bank which was short
in its reserves should ask for relief through the sale of bills to other Reserve
banks whenever its situation could be relieved by that method; and second, that in
the case of a bank where its difficulty was in its free gold position rather than
simply in its reserve position, it should offer its government securities to other
Reserve banks through the committee, but should only make this request when it was
really necessary to strengthen its position, and the amount of the request should
bc limited to that necessary to meet the usual fi_uctuation in its gold holding.
Digitized
L for FRASER
•
5
The committee would then offer participation in these bills and, securities to
the other banks with the understanding that those whose reserve position is such
as to enable them to take bills or securities should cc.operate to the fullest
extent possible.
There was then some discussion as to the policies followed by the
Reserve banks as to lending on government bonds.
The New York, Chicago,
Minneapolis, and Atlanta banks were reported as lending on government bonds at
their par value.
The Philadelphia bank was lending at DLr value when the market
price wag 95 or better, and the Boston bank was reported as lending on values at
market.
In the discussion it was emphasized that the Reserve banks had been
vigorously supporting the ruling of the Comptroller under which prime bonds Iv're
to be listed at par, and the acceptance of govern_:lents at something less than
-Dar would appear to be inconsistent with this position.
Moreover, there was a
good deal of disturbance among member banks at recent declines in government
bonds which would be accentuated if the P,cserve banks took ;hese bonds at less
than par.
In view of the limited amount of governments selling below par and
the additional protection the Reserve banks possessed it was not believed any
considerable risk was taken.
Governor Young raised the question whether there was any way of distributing earnings or losses on open market holdings in a more equitable manner, but
after discussion no motion was made upon this point.
Reference was made to payments of gold coin into circulation, and it
was agreed that the principle which must be followed was that payments should be
made with complete freedom.
been important.
The amounts of such payments made thus far have not
•
•
6
•
,•ve!rnor Harrison
.„orted thLA at the New York bank r;old certificates
;,ere being paid in d-eircultion only on request, but that there was no hesitation in maldro—such
payments when,
.trit
gold certif
'
.
re., be
key*:
As a result considerable amounts of
t ired from diulation
•
rig adjoUrne'd. a' 44Op...!7irt*.T, •
•
Randolh Burgess,
ccretapy.•
.,tok
-!..
.:
Octob,3r 29
nu.
smorancinta for the Piles.
d by tb...! Ped.eral
3ULJ4CT: 'Services to be oerfortne
‘it Oaelerations.
Iiessysidl link& fa Iliation10. Ore
the meitmindiall covering e. nlan
Mere is attached a final oborl.f. t of
iin by:
or the iLtioa:11 Credit OoriMitti
for
for the services to be
other
York, with the assistant:* Or the
New
of
t
kel
ell
erv
Res
aI
der
Ire
the
siiiiiKtd in Jew York &mini; a oesiri
Federal reserve tritke;--.:atprepare
st
tended. by the folltivint; ptrson
itiemd Credit 43c1rno:,..e.tif
Mr. Alfrekoolzip -Ownsel, las
taidet"
ret.az 'Ctititina)t Credit-ColOosi
'2-r. Nebo* S. Deagisent. See
Tr.lat GO
k
Yor
anl Assiatant Treaetrer tim
'7.1,7,7 •
ernor and General Caunsslo .
7.r. waiter S.40ggis Dewly Gov
'4t44wrgestesia
liederal iles,rveilatik443
ur. J. Roland*, Deputy fkotorm)re
PoftereitetOrti afflielirsoir lar
k.
3ew York
IrneSsrp Pederat alsorre,'Lank or
Gov
t7
l11
-De
i
na
Si
IP.
UT. L.
I.
Seeretttry,
"I* 4111ellarin:Morrtll,
".0
is 78kitririleiiiiifitigatiPkwu;iO4
iiiter wpttt, Glasrai oulisc
the meetiAt 1,1r a $heet timei
Govarnor tarrigon came into
aa .aterrrt
r 2, 1931, tii
Late in Via - )..ftarnoon of c;ctet,-_
C6rporasiaont of the lirtionul OreAlt
2re
re
iims
Itac
`gr.
to
nt
/To
Dew
*IA he het receivelit;:vor&•
Mr.
zil
o7m
inf
er
Lit
t
tioiy and A*.
drrmal
liticrStereiipaia , a tel
that it was satiefactoil to
alo
eVipz:141resarQeb4drite
-Sitiiiski tit Vistikitirsi'ltifs
ir cooperation.
Bar* of New York requesting the
mak trihmist** mow be
VOLUME 219
PAGE 121
!toneObilee glesfteg
•
r,,
411Z2
wemll 4-on Vlat (11 it -0er
411).,747c
tbe above confarand 1,;r. 'Oat
17:44t .cautance of Mr. Morrill.
as posof obtainint; as undh information
se
=po
thy
Yor
ely
mer
1Jas
e
onc
satin,.
out of a plan ulach woula be
sible and asziaing in tho woztinL;
underuto)d by u.L. partio3 that '!.r.
factory to .111 wrtier.; ana it was
Board
aking for the Federal Esserve
Morrill and Mr. Watt were not spe
71,1
.4.41
I•
.
erve Board be the plan la amy emir
or cort:itting the Pad
, aral Ras
.;1t ,111 =ee :Luitted to the.
It is not coatear4ati.1 that til
ti
roval; but ifit is auLmittoa to
Federal Reserve Board for for...al app
funcmiss to the effect tat the
Beard, saficeprred to render an op
vinco
reserve balks are 'within the pro
tions to be periorea by the federal
of the laderalt lieserve Acts
o which is organised under t .a
Cle4rly, the New TorkCorporation
1
New York, Amy lawfully open-a'
invest4eat beikioig lees of Cie State of
,;: ..i it,
-P'tfef.'0 444411-:- , ro,ii:t.. t‘tent7,0 •,,:!,""zs' ,
.4 L. :.iediX7 t..
40)
aommenber .
. .,,•,...,L, ,,I•tik s..
m4y dollesit with %
)a
..:. i• i.:•!:'..'
i
ttim1:
_1
144P 1.
:
of New le* eau
40count with ihr *Arial aesiorte
..-..-_ ..:-., -, -!f.. , - ,,!:,- r;14-,-.--,•• ,.
..4
'et:7
.1",
n notes
Reserve Bank of New Tork natnri
a
arl
Pod
. ,
lection circular.
tion, nArsnant to the non-eash col
and bills forcetleo
be forwarded to
ls
Cle 17, sudh maturing notes and bil saw
Arsuant to the tdrcis of
other tedemA reserve banks for coil otiose
sassmts any oth,)r mtur
the non-c., 41 collection circular I..4t the
&epos
by a member
or n
a Federal Reserve Banks
If sue* notes are to be collected 4,
/
vice for amh notes to be
It would seen olearly incidental to this ser
ks, in order to sLplifj their
made payable It fete Federal reserve ban
collection.
alamaro
.
to ihather the ..il
WiLyke awe question aer be rain&s
;ç.
rinE; account with the
rIj epee a asimassiber elee
Corporation ea*, pe
'344"_
_
.
Federal Reserve l'ank of gew York, it Nould seen that (1) it may
pur-
reasonably be deemed to be a bank, since it is oronised for the
pose of making loans, not out of its oln ca'itala but with the fund'
borrowed for this purpose, and therefore comas within the
fi-
nition of a Thane: (2) although its erincipal office is nominally
in Delaware, since it Is incorporated under the laws of eelowszes
York;
as an actual fact its principal office will be it the City of New
n eni the New fork
(3) moreover, in aulostance the )oir_4mare Corporatio
and
006:)oration constitute a single institution located in New York
engaiged Is a Leaking buainess.
Is an analogy to the existinb practice enereby :member banks
districts
in one diatriet send dheelcs to 'Aderal reserve banks in other
for t' account
the :3'ederal reserve henk of their own district, it
by benks ecottered
would uses that, where remittances wee to be mele
banie, end are to
all over the United States to a noveeber clearina
lieeerve _Al* of hew
be credited to that bankls aceaant tet the Federal
to simplify the
Yorks it would be reasonable to hold tee% in order
ox:oase,
urecedere cud aid:late ule1ace,esar7 delay and
.511a
remittances
distrietein which
could be made to the ?ederal reserve banka of the
mission to the - dera Reserve
the remitting bAecee are leeltad for trans
tanees leoeld.beientered I Al the
Bank of New York. Normally,. such ranit
the credit of the Fe4
books of the receiving 7ederel reserve bank to
ed daily through the
Aral eserve Bankof New 'York and. 'moult.% bye settl
4ela Settlement Fund; but there would
46= to
no
legal,reascn why
Federal reserve Lank which
each amounts could not be hold in the
ve eeenk of New York
.
al .4eser
receives them to the credit of the Peder
until the :Federal
requests that they be
eserve Bank of New York
transferred
to it through the Gold Settlawent Fund.
Moreover, tlia performance of service of this character by
one Federal reeerwe - bank for another Federal reserve banks would seam
to be within thr: incidental powers of all Federal reserve banks.
It was understood tliat the Inularstanding embodied in the
plait described in the attached mamorandam would be confirmed in writino
by the Federal Reserve Bank of New York asd the lational credit Cor- s
porationsso as to indicate clearly the contract:MI relation
between
the ,lifferent parties,
/he procedure in making disbureeeents of the -,?r:Aceeds of a
the
ioni4.1 Credit dor—
by-riat
tion
associa
credit
local
a
to
granted
loan
poration ot We, York las lutlined in lore detail as follows:
t far the loan woad 1.aquest that
1. /he association applyin;
7-hen t-13 loam ip cranted the funds be paid to a bank desiignated by
such rn3ocifttions Which we will call Bae4 XS
4.4
Upon ap2roval of the loan, the Mew York Corporation will
insl.zuct the Fadqral Reserve Bank of New York to traasfer the reads
by wire to Bank X for the account of the association applyinc for the
10;44
J. Upon tele6ralihie advice from the 141edsra1 lifIserve Bank
of New York, the Vedaral reserve bank of the dis,trict in waidh Bank X
is lcofIttA vill credit the ac ount of lank
ior 114 soc.:ouat of the
association .NpplyinG for tie loan.
4. Mask X will make the fools erailable to the borrowing
bank on the order of the association applying for the loan.
- 5-
Duri.lg the course of the divcas6ion the question of the
enstody of collateral underlying the origival loan was discussed
at:a Messrs. Cook anti :)earront
distivctly stted that the Feaeral
reserve banks would not be requested to take custody of any collateral but would only be requested to handle the receipt and
-
transmission of funds and the collection of maturiLe notes arid
oill;; under the usuul terms and orbbedure of non-cash collections.
Mr. Dearmont further stated that 14t desireu checxs rectived in
payment of subscriptions to be handled on a non-cash basis instead
01' a cash basis, in order thAt the corporation might be protected
against the possibility of issuing its gold,notes before the
receipt or payment in actuali, an& finally collected funds and
/
also in order that comolete- acmice as to the source of payment
*clad be available to the Federal Reserve Bank and could be ;i7,de
avililable by it to the National 17,rodlt 'orporation. -All col lateral will be held by a local cuiTtotilail designated by the leo
York corporation and may be tt--1
true bank as "I" in the foresail'
outlined procedure.
'Walter %yatt,
lieseral Counsel.
Telegrem.
221 bmr
New YoAc Nov 4 409p
McClelland
Washington.
Referring our wire October 30 we have advised Bank of England we are
willing to waive opening commission on renewal of credit in view of
substantial increase in rate of discount for purchase of bills it
being our understaxiding that Bank of France has omitted commission on
the renewal.
Rate of discount fixed for the renewal is six percent and
opening commission was 1/16 percent flat.
We will send Board copy of
renewal agreement when received.
Crane.
414 p.m.
VOLUME 219
PAGE 134
slAA
FEDERAL RESERVE BANK
OF
ST. Louis
June 4, 1931
Hon. Charles S. Hamlin
c/o Federal deserve Board
4ashington, D. C.
Dear Mr. Hamlin:
I am sending you as a member of the L;t. Louis
Committee a copy of a report submitted by me
to the :Yederal .Leserve Board in connection with
the matter of the loan of ::anagins Director
Kincheloe, held by the lational Bank of Kentucky.
with best regards, I am
Yours very truly
deral Reserve _,gent,
re 47
VOLUME 219
PAGE 155
June 4, 1931
Federal Reserve Board
Vlashington, D. C.
Gentlemen:I desire to sahmit the following facts relating to the matter
William P. Kincleloe, Managing Director, Louisville
of the loan of
Branch, Federal Reserve Bank of LA. Louis, held by the National Bank of
Kentucky, Louisville, Kentucky,
An excerpt from the minutes of the meetinr; of Board of Jirectors held on A3dnesday, May 6, 1931, is as follows:
"Governor Martin reported a mmtter brought to his attention by a member of the Federal Reserve Board while last in
Viashington and coneerning the Louisville Branch. -fter a full
discussion, the Chairman of the Board and the Governor were
instructed to go into the question fully with the Managing
Director of the Louisville Branch preparatory to making a report to the next meeting and to have the T'anaging Director
available if the Board desired his presence at the meeting."
An exesrpt from the minutes of meetin7 of Board of Directors
on June 3, 1931, is as follows:
•
"The Louisville Branch matter referred to in the Board
Hinutes of nly 6 was taken up and Governor :artin reported
that in compliance with the Board's reruest he and the Chairman had taken it up with 7.r. Kincheloe; that the investigation showed that when the attional Bank of Kentucky was closed and taken over by the Comptroller's Department on November
17, 1930, it hold the unpaid note of the anaging Director of
the Louisville Branch amounting to approximately A0,000.00;
that nti. Kincheloe had frankly admittec: that he had obtained
the original loan in 1918 from a Louisville bank which later
became a part of the National Bank of Kentucky; that this loan
had been carried continuously in the National Bank of Kentucky
since that date, and the same remained unpaid at this tine;
that
Kincheloe claimed that at the timo the ornal loan
was obtaind and at all times up to the closing of tho National Bank of Kentucky th- loan was amply secured by collateral,
the salable value of which at all times was more than sufficient to t3ke c3re o- t1e lean.
S
Page Two
Federal
eservo Board At Ut. Kincheloe's request, he appearo, before the Board
and submitted a transcript of the account from its inception
to the present date. The transcript showed the amount of the
loan at stated periods, together with the collateral, and the
salable value of the collateral on the respective dates; all
of whioh showed, that, taking the value of the securities in
accordance with the statements the sale value of the collateval
was sufficient to pay the loan at all times up to the date of
the closing of the National Bank of Kentucky.
Mt. Kincheloe state that he knew of no law, rule, regulation, suggestion, or ethics he was violating in obtaining the
loan; that ho had no idea that ho was doing anything wrong in
the matter; that it was not a speculative loan, but a plain loan,
properly secure
to take care of a real investment; that the
Receiver of the National Dank of Kentucky had never requested
that the loan be taken up; on tho other hand, it had seemed preferable to the Reeeiver that it be carried for the present. Mr.
Kincheloe then retired from the meting and a fuliBiision
followed.
It was the general concensus of opinion as expresse(1 by the
several directors that oven though no law, rule, regulation, or
suggestion had been violated, nevertheless, under the circumstances surrounding this case, the act of the anaging Director
in borrowing from a mmber bank was not compatible with the aim
of the Federal ..eserve System in maintaining that high standard
of conduct in Its officers and employees so necessary in keeping
evey act above suspicion.
The Board wished furth r information on somc matters in
connection with the case before taking action and, by common
consent, it was carried over to the next meeting an the Governor
and Chair an were requested to obtain the desired information.
Gov° -nor Martin further reported that this is the only
instance he knows of where an officer or am-loyeo of the Parent
Bank or Branches ie borrowing from a member bank; and that the
Managing Director of the Louisville Branch had told him prior to
the closing of the bank that le haa arranged to take
out of the bank.
After a full discussion, it was moved by Director Lonsdale,
seconded and carried, that even though the Federal eserve
Board, under its power to promulgate rules and re-ulations
governing the operation of the .,eserve banks, had not -)romulgated any ru'.cs or regulations or made any suggestions covering the
Page Three
Federal Aeserve Board -
matter, nevertheless, the action of the Uannging Director,
under the circumstances surrounding the case mentioned, was
not compatible with the aim of the Federal Reserve jystam
in maintaining that high standard of cenduct in its officers
and employees so necessary in keeping every act above suspicion; and that the Governor be instructed to notify all
officers and employees of the Parent Bank and Branches that
they must not borrow frcm member banks within Federal Reserve
District No. 8."
An excerpt from the minutes of meeting of Board of Directors
dated June 3, 1931, is as follows:
"Governor ::artin and r, cConkey presented to the Board
information obtained in accordance with the request of the
directors made at the last regular meeting. Managing Director
Kincheloe also appealed before the directors and made statements supplemental to the statements made by him at the last
recular meeting. After considering the information presented
and the statements made, the Board was unable to modify its
criticisms of the action of thc Managing Director as expressed
in the minutes of Board meeting held May -0, 1931. However,
considering all the facts in the case in their relation to the
best interests of the Federal aeserve Bank of JA. Louis, it
was moved by Director Lonsdale, seconded by Director Boehne,
and unanimously carried by a vote of the Board, that the natter
be held in abeyance for the present."
Lir. James G. McConkey, General Counsel for the
On ::ay
Federal Reserve Bank of St. Louis, was in Louisville and investigated
some of the facts stated by Managing Jirector __Ancheloe to the Board of
D'recters at meeting held :ay :(). His c nference with the ,Acceiverrof
the National Ba k of i:entucky disclose the fact that the Receiver held
a different opinion from Managing Director Kincheloe in respect to the
manner in which the loan was to be handled. In fairness to 2.r. Kincheloe,
however, will state that his conferences and discussions with relation to
the loan have been held princinally with ,tesistant Receiver 17oCandless
instead of Receiver Keyes. It seems that Receiver Keyes understood that
the loan was to be kept collatczalled at all tines and th. t it was to be
5) hirth.T secured by a second mort 'age on the home of Mr. Kincheloe,,
Assistant Receiver McCandless understood that Ale loan was to be carried
for two years with pe iodic reuctions. Receiver Keyes was reported as
being disturbed when he learne the manner in which the loan had been
handled.
The general intonation obtained by Mr. McConkey from various
sources seem to suggest Ault President Brown, of the National Bank of
s•
4
•
Page Four
Federal Reserve Board Kentucky, showed Vt. Kincheloe special favor in connection with the loan,
but he receive:, no information that saggested that L:anaging Director
Kincheloe in the dischare of his official duties, showed any favor to
President Brown or the Lational Bank of Kentuky.
The matter has profoundly disturbed the directors of the Federal
Reserve Bank of jt. Louis. The vote Was unanimous on resolutions passed
at 7'oeting of May 0 end June 5. There was a feelin, however, that it
would not be for the best interests of the Fe.eral eserve Bank of St.
Louis to demand the resi[7nation of _flnaging Director Kincheloe at this
time.
t least a pert of the directors felt that it might be best to let
the matter remain in status qadmiintil the regular annual election of
officers in January 1932. The resolution passed yesterday simply holds
the matter in abeyance with ft edam of action on the part of the directors
of the Federal Reserve Bank of t. Louis to take the matter up at any
neeting should the best interests of the Federal 'Reserve Bank of jt. Louis
seem to suggest the advisability offso doing.
Yours very truly
Federal Reserve Agent.
ZSW:111.7S
@FedFRASER