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June 25, 1937 Board of Governors Hearings on H*R* 71<i6 hSr% Cherry, Assistant Counsel ?ursuaut be the request of Mr* fyatt, I attended hearing8 this morning; conducted by the banking and Currency Committee of the 3a on the bill B«&« 7136 which extends for two yoars after August 23, 1937, the authority of member banks and insured banks to pay interest on demand deposits of public funds and trust funds in cases where the payment of interest is required by State law. The hearings on this bill ooirrrvencec yesterday, but this office was not advised of suoh hearings until this morning* '.'ihmx I arrived, Jud£;e ;3irdzell, General Counsel of the FDIC, was concluding his testimony which had ui yesterday, and it appeared from his summation that the DIG was in favor of the enactment of the bill, principally for the reason that after August 25, 1937, insured banks in a number of States, which still require the payment of interest on demand deposits of publio funds, would either have to refuse to accept such deposits or stand in violation of the applicable sections of the Federal Reserve Act which prohibit the payment of interest on such deposit!, in which case severe penalties or termination of deposit insurance would have to be invoked, fhile it was not definitely stated, it is believed that the FDIC'B position is that hose obates which have not enacted legislation repealing the requirements for the payment of interest on damand deposits of public funds would do so within the next two years* Congressman Pierce of Oregon appeared and testified in favor of the bill* He suggested that the bill be amended so as to permit payment of interest on all publio and trust funds during the next two years, regardless of the requirements of ^tate lair* Mr* Daniel Hoy, Comptroller of the City of Los An^;elea# and a r« Graves* Secretary of the League of Municipalities of Californiaf urged the enactment of the bill but, felt that there should be no prohibition at any time in the future upon the payment of interest on demand deposits of publio funds* Hearings upon this bill will be resumed tomorrow and I will keep the Board advised as to further developments in connection with this matter< •speotfully, AJ/red K* Cherry9 Assistant Counsel«
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