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The Papers of Eugene Meyer(mss52019) 118_05_001- Subject File, Federal Reserve Board, Glass Bill, Senate Hearings, 1-2/1931 GLASS =SUTTEE HEARINGS. January 19, 1931. Abolish office of Comptroller and transfer to Federal Reserve Board. Modification of Federal Reserve Act and National Bank Act on question of examination. Remedies: Forfeiture of Charter, Special list for examination. Removal of officials an a power of remedial character. Causes of Bank (failures). Saw Pole. - Trend to larger banks. Shrinkage in securities owned. Security loans a factor in bank failures? Glass question? - Are present reserves adequate? Demand and time deposits - Manipulation for. Purpose of reducing reserve requirements. Glass question - Should national banks be allowed to take time deposits? Glass - Have we not amended our national banking laws to meet State weak banking laws in a spirit of competition. (402111f ?5)ri q V441°°4" )7)4/19r '11/N•eYD January ao, 1931. G. L. Harrison. Differentiation: 1. - Violation of Law 2. - Sound principles within the law. What is gro7th of time V3. demand since Federal Reserve System? (Look this up) Savings - Stimulated by law reserves, but also by high rates. January 20, 1931. Would not segregation of security for savings imply division and segre,c7ation of capital? Question of law - Can Federal Reserve Board impose restrictions on percentage of real estate for State banks. Glass says - Par. 3, Section 9, authorizes Federal Reserve Board to restrict and regulate. January 20, 1931. G. L. Harrison and others too disposed to accept status quo because it is troublesome to change. -2- Jan. 20, 1931 - Glass thinks examinations should not be made of affiliates unless to the extent that law requires. Cause of bank failures. IV. What is percentage of member to non-member bank failure. Canadian banking system - Glass asks G. L. Harrison - Is it Sound? 0 )4' \ebne"le --k 3 Pr-n-1 ' vy 1aprAvir ' ,Avigeff4 , .00r 10-.4ferr. VP417/11loYour t11l,A1111 III art 141— 41*\. IPARds - Amp alje 11111,11,1kto A;41%niseri-# tusA 11014- 4, ONO 4111010111116 .400 0 , Ur' 46_,11111 i. - Pow' January 22, 1931. Glass - 15 day loan for purpose of tiding bank over emergency. Has it been used extensively for stock marker purposes? G. L. Harrison disagrees. January 26, 1931. A. H. Wiggin. =Oh Does not favor prohibition in Glass Bill. borrowing from Federal reserve bank Against by large country bank. which has collateral security loans - on ground that legitimate business would be injured. Chase Bank cannot tell why a correspondent bank wants money. A. H. Wiggin favors a higher rate on loans by Federal reserve banks on bonds. A. H. Wiggin - Clearing House certificates should be made eligible. Cities of not less than 500,000 people with not less than ten member banks in Clearing House. A. H. W. says - Control of loans for others is not practicable. Security loans a cause of bank failures? No freeze of loans of Stock Exchange securities. A. H. W. - Makes distinction between unmarketable securities. Invest. - Trend of Security Loans. security loans should be upward. W. - Against short sales. Restrictions on market. W. says normal -2- Jan. 26, 1931. Security affiliates - Wiggin favors them. On Security affiliates - States State institutions can compete directly under law. Comptroller examines Chase Security Corporation. Balance sheet and statement of income of Sec. Co. A. H. W. favors should have supervisory power over tank affiliates. Willis asks - Should portfolio be published with statements of Security Co. - Limit on loans to Security Co.? Amer. Ex. - 18 M M Capital " _Hanover Tr. 9 M M Chase Sec. - 108 M M Capital, Surplus and Res. Wiggin thinks reserve on time deposits Should be the same as demand deposits. Willis speaks of rates in Federal Reserve Districts at 71resent uniform. Actually 2, 2, 3 and 3. Mr. Platt of Marine Midland Trust. Norbeck - Asks cause of numerous bank failures in last ten years. ii nitat eta1.e5 „.enate MEMORANDUM 4-< k )-7.--1,----7- /6 Ar,--t-tc, _L--1--.! /4_4...„.....„ „,......2A...-t..,--f ;--- / .,42 4, 'United, e tates ,,enate MEMORANDUM Cr, 4413444 -444444-0-440, -/6_46 (-1 Z T-tA)144.41 /7 11 4 44---1- ediammigiMPINSIIPMNS.GrPOPIENwommiArewmim 11 , 4 #t" I f niteci ,;$1calt.ex $tixate MEMORANDUM N4t-ze,„ I vie 1611111.3.0.. • a41-1, 0 1 .---19 • - e. „ (71-j nitat c tatex enat 111 MEMORANDUM -t •-•-• 4 Oar ctnital ,tat.ez 4.eilatz (11 nited 5tates ,,,etxate MEMORANDUM (7) 9'1A..4 \Ad A/V(1- January 29, 1931. Edge Act. - Trafford of First National. Willis - Difference between English and American acceptance business. Willis - Is domestic acceptance business sound or unsound? Willis - Is accept. against commodity security sound or unsound? Willis - What can be done to put acceptance business on its feet? Has there been a great incresse in acceptance against commodity in warehouse abroad, especially in Germany? Trafford of First National of Boston advises complete examination of Security affiliates. Examinations of Edge Act Corporation by FederalReserve Board. Trafford says Security affil. necessary to maintain National System against State Bank System. Fred W. - Is it safer to lend on security collateral direct to individuals or to brokers? First National - Now lending three times as much direct as to brokers. Instructions by Comptroller under McFadden Act as to buying of bonds. Look up McFadden Law - Security Section. January 29, 1931. -2- Trafford:- I wouldn't do anything to hurt the National Banks in their ability to compete with State Banks. Trafford: - Serious thing is dropping out of National System. Trafford: - Says hardly a National Bank left in Maine. Trafford asks: - Is there any way to reach State bank reserves. Question by F. W. - Have grozen investments been responsible for bank failures? T: - Sees no need of branch banking in New England. H. P. W. - Would country wide branch banking be good? Trafford says: - Great distinction to be made between time and savings deposits. 1 1 a.' tett 5tatts 5znate - MEMORANDUM " *21*11°61"(''..MI.M g 111.°°' "°.°"°1.""lvaiu • tf#14)(f 4' 77T' nitat 53tate,s 55.enate laoy iJ tett c tates 5znate EMORAN UM cr1'4 1111110.- 444, e?‹- c 4-et z c2,70 (11 nitea 5thetdes 55.enate wse.4 • 1 January 30, 1931. Geo. Davison: 1. Can't make good banking by legislation. 2. Too liberal Chartering of banks. 3. Rivalry between State and National System. 4. Two banks where can be prosperous. 5. Larger centers brought nearer by good roads. G: How by legislation to adjust competition between State and National? G. W. D. - Ans.: Only by more cooperation. G; - No way to correct bad banking by legislation? D: - Great difficulty to correct abuses, he finds. G: - Comptroller of Currency suggests suspension or removal of bank official D: - Danger to O.K. would result from removal. D: - No good bank has failed in 1930. G: - Haven't good banks failed because of bad management? G: - Did Federal Reserve System have anything to do with trouble in 1929. D: - Possibly many reasons. Capital gains tax. D: - Easy money in 1927 may have been carried on too long. Gall loans are as good a secondary reserve as a bank can have. G: - Why did we forbid securities as eligible? D: - To make preferential rates for commercial business. January 30, 1931. -2- G: - Abuse in loans for others. G: - Do you think it wise to have open market operations submerge rediscount provisions? D: - Both are necessary. G: - Origin of open market never was intended to enable control of money rates. Discount rate was supposed to react to reserves and to help business. Says all money gets into one stream. G: - Either Federal Reserve controls money market or money market controls bank. G: - Only thing we have done, -seems to he to prevent currency famine. G: -It seems we're back to a bank secured currency. D: - Investment forms an important part of our banking system. G: - Yes, C. K., but not intended to form an important Dart of Federal R. B. System. G: - Many hundreds of millions issued under Vreeland Aldrich Act in 1914. Emergency Currency. D: - Am not opposed to Brancn Banking within narrow limits, but is opposed to group and chain banking in any form. Is opposed to state wide branch banking. G: Isn't unit system carried to an undesirable extreme? January 30, 1931. -3- D: - Shouldn't have banks that can be supported? D: - Would like to have uniform banking law. D: - The beginning of security affiliates was inability to compete under national bank law with State institutions. Willis: - Earmarking purposes of loans. Invest. - % of Commercial agricultural paper. W: - Were Trust Companies more engaged more deeply in Security loans. D: - Our loans on security loans were lower in 1929. G: - Reserve requirements on savings or thrift accounts. D: - No interest to pay on less than 1,000 deposits would solve savings account problem. G: - How about limiting deposits of banks with other banks. Towns. asks how to define limits of branch banking. County lines - trade areas? D says trade areas too wide. G says never any objection to branch banking from borrowers always from Banks. ..1141111111 I. A., nitett 5tates 55.enatz MEMORANDUM 7-1-4 ‘.„ ) k MEMORANDUM IJI nitat 5tates cfenate MEMORAN UM • ii nitett 5tates c .etxaltt MEMORANDUM t.c.e .....•••••••• vr!'" .4.,,,,, 1 4 .,,„,...,-. ,...., 'LZ ------17-7o nita 5tate,s 5enate MEMORANDUM, Jul „ . 444.001A04_,A1 'yytileep,Y"3"4 - 4 C4,,vokt-ALL , . ---------,zie....1110~11111,111/101/NalarafaMageofi.4 111111!r7111 ( ' Ii uitcI5tates 5,etxate :MEMORANDUM CA.".".....((\..#1,.,„. t•- - .,k f _ e it,,,„,. J-1 nited 5tats 5.enate , MEMORANpUM 7 ,N)/ r n „...--7 „ 1 0 1}1. . ___ -YL—e----(----A----4---4A \‘‘ (-4 Cif frk- '4' 4;1-2 1 C#4.---4---a i nitett c§tate,s EMORANDUM nitett €,Ctat.e,s Aczate MEMORANDUM elk ••••••••••• February 2, 1931. Chas. E. Mitchell. Glass: - Did F. R. Notes exchangeability for gold result in maladjustment of world's gold supply? M: - Thinks it not a factor. M: - Thinks it's useless. M: - We had a great inflation; 1st. Commodities, which was corrected; 2nd. Real Estate 3rd. Securities. - What comment on loans for others? Loans for others a great contrite factor. Loans for account of others - outside of F. R. System. G: - What measures did you advocate and what do you think Should have been done? M: - Loans for others had to really be considered as a part of the total volume of credit. G: - Did not the Act contemplate a differentiation betreen investments and speculation? M: - Vb. M: Oall loans, liquid and no loss of a dollar. safe if we have about 100 M M. We only feel Call loans. G: - What relation has reserve of a F. R. B. to its willingness to discount for member banks. Relation of Res. to attitude of ranks? M: - Ratio so large as to be unimportant. -2_ February 2, 1931. C. E. Mitchell. Glass: - Do you think 15 day borrow - has been abused? M: - No. City Bank never borrowed on Governments in excess of eliaible paner on hand in bank. G: - We emphasized importance of F. R. Agent in the Act and no,v the man is one who is not even mentioned in tbe Act. G: - Do yoa think wise to put a limitation of 15 day loans of M: - Look at my chart. G: - For agencies authorized to be established by ban': with approval of F. R. B. Loss taking. Should trading in shares of bank be forbidden by affiliate. M: - No way to force banks into F. R. System. way to make provision for - say 25 m. liquidity. Therefore no cftates cfenate EMORANDUM 'United 5tats 5.enate MEMORANDUM February 3, 1931. H. M. Robinson. Anything that will help to reduce competition between State and National systems. February 16, 1931. Melvin Traylor. 77ould like to see uniform State banking laws. Give State banks Dower for branches within a county with view to increase to State-wide. Prohitit bank owned outside a state, or branch of bank owned or dominated outside of a State. G. asks what is difference between correspondent banking and branch banking? February 16, 1931. Stephenson - Pres. A. B. A. HPrd roads take farmer into larger towns. Member of Comm. of National Association of Mutual Savings Bank willing to buy F.R.B. stock based upon surplus. want to borrow on bonds. They ii, ., c ,i'Pr t Lok itea SCtaftes cfaxate , iIfl ;f oi MEMORANDUM L. 4,444„ .. € 4.00( 1/1,--' 0,7,1 bbithabfte . 4 'Ate z • 1.,..10,,,a....01,111,,N•ir, 4 t r ea`ci d t • 40;1'.-• • a. p-et ..114) r.‘ - k • 0-'T Y tt......4--41,-.4„k February 17, 1931. Traylor. Commercial Banking Affiliates Glass: Ibnt is your view of use of rediscount rate to control speculation? Initiation of discount rate. Bank or Board has veto power on rate. catuitea ,W,c,t5 „fella February 19, 1931. Bean. Discount Corporation Bills and Acceptances. End January. Banks carrying 130 MM of own acceptances. 433 M. M. Acce7)tances of other banks. Export acceptances declinine in a normal wa7. Low point generally- June, July. Get copy of Acceptance Council Bulletin for December 31, 1930. American !larehousemenls Asso. niteci ,51.atts ,§enate 1MORANDUM J e./ ,.......""' •s,- -\ --,_() . .... , f Y ,, .1) -o-- 4,--\., (\.. #1 r /0. 471t•f(Iff , • le‘' (LAActo C "14-c. / LL . k • . ; 1 41 jirs r' Cific)4.11_ ?,