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Federal Reserve Bank of St. Louis
SIXTH C O N F E R E N C E
OF
GOVERNORS O F FEDERAL RESERVE BANKS
WASHINGTON, D. C.
SHOREHAM HOTEL
Wednesday, January 19, 1916
Thursday, January 20, 1916
Friday, January 23, 1916
WALTER
S. COX
SHORTHAND REPORTER
GOLUMBIAN BUILDING—TEL.
WASHINGTON,
D . C.
M . 8324
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Federal Reserve Bank of St. Louis
Sr
5 G
C O M P R A R CRN “ O P C
O
C eR6
B as
OF
Se
e k
P
e
B E R VE
B A D ES
Shoreham Hotel,
Washington,
D . C.,
January 19, 1916.
The Sixth Conference o f Governors o f the Federal R e serve B a n k s w a s c a l l e d
t o order b y Governor B e n j a m i n
Strong, Jr., Chairman,
a t the Shoreham Hotel, Washington,
D. C., a t 10:30 o'clock a. m e o n Wednesday, January 19,
EL.
Present :
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Federal Reserve Bank of St. Louis
Governor Benjamin Strong, Jr., Federal Reserve B a n k
of New York.
Governor J . B, MeDeugal, Federal Reserve B a n k o f
Chicago.
Governor A. L. Aiken, Federal Reserve B a n k o f Boston.
Governor C . J. Rhoads, Federal Reserve B a n k o f
Philadelphia.
Governor A. C. Kains, Federal Reserve Bank o f San
Francisco,
Governor Geo. J. Seay, Federal Reserve Bank o f Richmond.
Governor R . L. V a n Zandt, Federal Reserve Bank o f
Dallas,
2
Governor L . R . Fancher,
c f t h e Federal R e s e r v e B a n k
of Cleveland.
Governor Theo. Wold, o f the Federal Reserve Bank o f
Minneapolis.
Governor J . C . McCord,
o f t h e Federal R e s e r v e B a n k
of Atlanta.
Governor Rollo Wells,
o f the Federal Reserve B a n k o f
st. Louie,
Governor J . Z . Miller, J r . ,
o f t h e Federal R e s e r v e
Bank c f Kansas City.
J. F . Curtis, C o u n s e l f o r t h e F e d e r a l R e s e r v e B a n k
of New York, Secretary o f the Canference o f
Governors.
The Chairman:
Gentlenen,
i f y o u will c o m e t o order
we w i l l o p e n t h e s i x t h c o n f e r e n c e
o f Governors
o f the
Federal Reserve Banks.
I would l i k e ,
h y unanimous c o n s e n t ,
t o omit consider-
ation o f t h e f i r s t i t e m o n o u r p r o g r a m u n t i l t h e o t h e r
members o f the meeting a r e i n attendance. I
eur
t o make a
brief statement,
would a l s o
f o r t h e benefit o f t h e
one o r t w o m e m b e r s w h o h a v e n o t b é e n a t r e c e n t m e e t i n g s ,
and f o r t h e b e n e f i t
o f o u r n e w member, M r . M i l l e r ,
of
Kansas C i t y .
The procedure a t these meetings h a s always b e e n i n formal, b u t every effort h a s b e e n made t o make progress
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Federal Reserve Bank of St. Louis
3
by eliminating,
cussion,
s o far a s possible, repetition i n the dis-
o r unnecessary discussion, a n d I have endeavored,
by mutual consent o f all present,
t o keep o u r record a s
short
a s possible
jects
o n t h e p r o g r a m w i t h w h i c h w e a r e dealing.
Also,
a n d hold t h e discussion
b y mutual c o n s e n t ,
down
t o the Sub-
t h e C h a i r m a n h a s b e e n per-—
mitted t h e privilege o f offering resolutions a t these
meetings.
T h i s i s not customary, but, s o far, i t has
been a g r e e . b l e
t o those
i n attandance.
ELECTION O F OFFICERS O F THE CONFERENCE
POR THE; YEAR 1916.
The f i r s t b u s i n e s s
o n o u r progra,
i s “election o f
officers o f the Conference for the year 1916." I
going t o a s k t h a t w e d e f e r c o n s i d e r a t i o n
am
o f that subject
until some o f those w h o a r e n o t here y e t are i n attendance.
Topic No. 2 on the program i s "Minutes o f the Fifth
Conferences o f Governors,"
MINUTES O F T H E FIFTH CONFERENCE.
What i s your pleasure w i t h regard t o the minutes o f
the Fifth Conference o f Governors, h e l d i n Minneapolis.
Governor
V a n Zandt:
W
e all have copies
o f the
minutes o f that meeting, a n d I move that t h e minutes b e
approved without reading.
Governor Fancher: I
The Chairman:
second that motion.
I s there a n y discussion o f that motion?
(There was n o discussion, a n d the motion, being duly
seconded, w a s carried.)
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Federal Reserve Bank of St. Louis
4
COMMITTEE TO WALT UPON FinvERAL RESERVL
BOARD.
The Chairman:
@ u r standing committee t o wait u p o n
the F e d e r a l R e s e r v e B o a r d a n d a d v i s é t h e m t h a t w e a r e i n
sesSion i n Washington,
i s not present.
has generally attended t o that.
word b e c o n v e y e d
in session.
G o v e r n o r Wold
I t i s desirable that
t o the Federal Reserve B o a r d t h a t w e are
W h a t i s your pleasure
a s t o the method w e
should follow?
Governor A i k e n : I
ed a
m o v e t h a t G o v e r n o r S e a y b e appoint:
committee o f o n e t o c o m m u n i c a t e w i t h t h e F e d e r a l R e ~
serve Board.
Governor McCord: I
The Chairman:
second that motion.
A r e there a n y remarks?
(There w a s n o d i s c u s s i o n a n d t h e m o t i o n w a s carried.)
The Chairman:
G o v e r n o r Seay, I
find myself charged
with t h e d u t y o f i n f o r m i n g y o u o f y o u r appointment,
Governor S e a y : I
will b e v e r y p l e a s e d
t o discharge
inet duty; e l i m
Mr- Curtis:
B e f o r e Governor S e a y leaves t h e room,
perhaps i t would b e well t o discuss T o p i c No- 6 .
JOINT CONFERENCES:
(a) W i t h Federal Reserve Board
(b)
W i t h A.
The Chairman:
B s 2 . C o m m ttvees.
W i t h regard t o this topic 1 would like
to report that following o u t t h e program discussed a t
the J o i n t M e e t i n g o f t h e E x e c u t i v e C o m m i t t e e
o f this Con-
ference a n d t h e National B a n k Section o f t h e American
Bankers' Association, held i n Washington, I extended a n
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Federal Reserve Bank of St. Louis
5
invitation t o that committee t o hold a joint meeting with
us f o r a part o f a day i n Washington a t the time o f this
meeting.
In t h e c o u r s e o f a r r a n g i n g t h a t m e e t i n g 1
discovered
that t h e Federal Legislative Committee o f the American
Bankers' Association, o f which Mr» Hinch, o f Cincinnati,
is t h e Chairman, h a d developed a
little feeling that t h e
Executive Committee o f the National B a n k Section o f the
American Bankers' Association had possibly undertaken to
deal with matters which the legislative committee o f the
whole organization should properly handle. I
refer t o
M r . Hinseh, the Chair-
matters o f Federal legislation.
man o f t h e F e d e r a l L e g i s l a t i v e C o m m i t t e e ,
w a s quite urgent
that that matter b e adjusted a n d that t h e y should n o t b e
working a t c r o s s purposes. I
municate w i t h t h e G o v e r n o r s
had n o opportunity
t o com-
o f t h e t w e l v e banks; t h e r e w a s
not time t o arrange for a third meeting, a n d + took the
liberty o f suggesting o r agreeing finally with Mr.
Fernsworth, t h e General Secretary, t h a t i t would b e desirable t o eliminate a l l possibility o f friction b y inviting
Mr.
n
d that w e w o u l d b e v e r y g l a d t o h a v e h i s
Hinsch, a
committee also attend this meeting:
arranged for tomorrow, the 20th.
T h e meeting w a s
S o , without really
having t h e authority o f this meeting, 1
have arranged
that the Executive Committee o f the National Bank Section,
together w i t h the Federal Lesiglative Committee o f the
American Bankers' Association, s h o u l d hold a
ing w i t h u s h e r e tomorrow.
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Federal Reserve Bank of St. Louis
joint meet-
Those t w o committees a r e holding a
in the hotel h e r e today.
is unwise,
joint meeting
I f y o u feel that that procedure
o r that a n y change i n the program should b e
made, a n d y o u will s a y s o now, I
morning a n d a r r a n g e
will s e e Mr: C o x this
t o side-step it.
O
n t h e other hand,
I would like t o recommend, i n the interest o f harmony
with our o w n members, a n d t o promote g o o d feeling w i t h
the American Bankers! Association that w e hold a joint
meeting w i t h those t w o committees tomorrow. I
would b e a
think i t
desirable thing.
@overnor Rhoads: I
agree with y o u that w e ought t o
meet w i t h t h e m i n t h e i n t e r e s t s
o f harmony,
the feelings o f the National Bank Section?
b u t h o w about
H a v e you
seen a n y representatives o f that committee?
The Chairman:
T h e Lxecutive Committee
o f t h e Nation—-
al Bank Section o f the American Bankers' Association felt,
I think, t h a t i t might b e considered a s something o f a n
intrusion i f t h e C o m m i t t e e
members
o f t h e whole association,
o f which a r e officers
o f state banks
three
n o t members
of the Federal Reserve System, should insist u p o n holding
a meeting w i t h us.
by Mr. Hinseh:
T h a t w a S Somewhat t h e attitude taken
I t i s a very small thing f o r u s t o swallow,
and after discussion w i t h Colonel Farnsworth a n d some
communication with Mr. Hyde, who i s President o f the
National B a n k Section,
i t seems t o m e t o b e a great deal
better t o ignore t h e fact that there were some state
banks represented o n this Federal Legislative Committee
and t o just meet t h e m man-fashion here a n d t a l k things
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Federal Reserve Bank of St. Louis
7
over frankly a n d t r y t o develop a
workin; understanding
with that committee o f the American Banker's Association.
if there i s a n y different v i e w a s t o that polidy, I
wooever h o j d s 1 ¢ o u g h t t o express
meeting,
I
think
1 f Trankiy e t this
t sheuld t h e n b e explained
t o Mr. H y d e a n d Mr.
Cox, w h o are here a s president a n d chairman, respectively,
of the National Bank Section and the *xecutive Committee,
and whatever arrangement seems wise effected,
Governor Rhoads: I
think w e a r e w o r k i n g
i n the
interest o f General banking o f this country a n d sheuld
disregard a n y technical, m i n o r points,
Gevernor Seay: I
think w e c a n afford t o accede t e
anything t o which they agree.
I f they are o f one mind
en t h e s u b j e c t w e c a n w e l l a f f o r d t o a c c e d e t c it,
The Chairman:
T h e y thought i t weuld b e desirable
and would relieve everybody o f embarrassment i f we had
this m e e t i n g w i t h t h i s E x e c u t i v e C o m m i t t e e ,
a n d i t was
really i n order t o relieve t h a t embarrassment t h a t w e
acceded t o t h e arrangement.
Governor Fancher:
D e y o u understand that t h e y a r e
having their meeting today and that they will come before
us a S @
joint c o m m i t t e e a n d a g r e e u p o n c e r t a i n t h i n g s
that t h e y want t o take u p with u s a s a joint committee?
The Chairman: Yes, Let me explain thet I have
also stated t o them that the Federal Reserve Board was
very b u s y a t t h i s s e a s o n o f t h e year, t h a t I
could g i v e
them no assurance o f a meeting with the Federal Reserve
Board,
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Federal Reserve Bank of St. Louis
a n d i n fact I
did n e t t h i n k i t was feasible
to
”
expect t o have a
at this time.
meting w i t h t h e Federal Reserve Board
T h e y expect t o explain that t o Mr- Hinsch
this morning a n d make s u c h arrangements a s they c a n i n
regard t o this meeting.
T h e y may be satisfied with the
Suggestion t h a t t h e y s h o u l d n o t e x p e c t
t o meet w i t h t h e
Federal Reserve Board.
Governor McCord:
I f I remember correctly, a
reso-
lution was passed a t the annual meeting o f the American
Bankers! A s s o c i a t i o n
t o the effect that a l l legislation
Should come through theirleczislative committee, a n d very
naturally t h e y w a n t t o h a r m o n i z e t h o s e t h i n g s .
t h i n k
we ought t o recognize t h e m here because w e have state
bank members a s well a s national b a s k members.
The Chairman:
T h a t i s a fact, Governor McCord,
and i t was because o f that provision i n the organization
of the American Bankers' Association that Mr. Hinseh was
80 i n s i s t e n t t h a t o u r m e e t i n g w i t h t h e N a t i o n a l B a n k S e c -
tion should not result i n the Federal Legislative Committee being p u t upon t h e shelf.
It seems
t o b e t h e sense o f this m e e t i n g t h a t i t i s
wise t o h o l d t h i s j o i n t m e e t i n g w i t h t h e A m e r i c a n Bankers’
Association C o m m i t t e e s ,
the suggestion.
I
a s n o objection h a s been made t o
t n o w devolved u p o n Governor S e a y t o
arrange w i t h t h e Federal Reserve Board f o r a meeting,
if t h e y d e s i r e o n e , w h i c h w i l l n o t c o n f l i c t w i t h o u r
engagement with these two committees,
desires a
I f the Board
meeting tomorrow morning o r tomorrow afternoon,
we will simply have t o convey word t o that cffect t o the
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Federal Reserve Bank of St. Louis
)
a n d arrange o u r program accord-
other t w o organizations,
ingly.
Governor ~eay?t
O u r meeting w i t h these t w o commit-
tees i s scheduled for ten o'clock tomorrow morning?
Yes.
The Chairman:
W i l l t h i s b o d y h a v e a n y occasion,
Governor Seay:
o r
t o meet w i t h t h e Hederal Reserve
has i t a n y d e s i r e ,
Board today?
W e have quite a program, Governor
The Chairman:
Seay, b u t w e c a n s u b o r d i n a t e t h a t t o t h e c o n v e n i e n c e
the Board,
i f they want u s t o meet w i t h them.
desire a meeting I
of
I f they
certainly think w e ought t o have it-
there a n y objection?
Governor McDougal:
M a y I inquire, M r + Chairman,
your judgment a s t o whether this i s going t o b e a long
session, t w o days, three days o r four days?
M y judgment i s that w e will b e here
The Chairman:
until Saturday without question, Governor McDougal.
Mr-+ Curtis: I
want t o suggest t h a t I have learned
confidentially f r o m the hotel management that t h e two
A m e r i c a n Bankers!’
Association committees
p l a n entertain-
ing this Conference a t lunch tomorrow, together with
some members
o f t h e Board.
The Chairman. I
that I
will r e a d i n a
have a
letter
o n that subject
moment.
Is there a n y further discussion w i t h respect t o
these joint meetings, t h a t would affect Governor Seay's
mission t o the Federal Reserve Board? ( A f t e r a pause)
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Federal Reserve Bank of St. Louis
I s
The Chairman hears nons.
Governor Seay: I
will explain t a them what o u r
program will b e with reference t o meeting with these
gentlemen and leave the whole matter i n the hands of tie
Federal Reserve Board.
enoe,
- T h a t i s the desire o f the Confer-
i 6 1 0 nets
The Chairman:
Y e s .
M a y I
suggest,
i n your dis-
cussion o f t h i s j o i n t m e e t i n g w i t h t h e Board,
i n order
that t h e y m a y get t h e right impression o f what w e are
doing, t h a t their attention b e called t o the fact that this
joint n e e t i n g
i s t o b e h e l d a t t h e r e q u e s t o f t h e Federal-
Legislative Committee o f the American Bankers! Association.
I have e x p l a i n e d t h a t f a c t t o o n e o r t w o m e m b e r s
c f the
Board, but ! do not think they appreciate that i t was not
a meeting t h a t w e s o u g h t
o r endeavored
i n a n y w a y t o ar-
range, b u t that i t was really forced o n us, although,
of
course, t h e r e w a s n o r e a s o n w h y w e s h o u l d n o t h o l d i t .
(Governor S e a y t h e r e u p o n r e t i r e d f r o m t h e C o n f e r e n c e
room t o c a l l u p o n t h e F e d e r a l R e s e r v e B o a r d i n c o m p l i a n c e
with t h e i n s t r u c t i o n s f
o t h e Conference.)
The Chairman:
adhering
F o l l e w i n g o u r usual custom o f not
t o t h e o r d e r o f t h e progmam, I
you t o c o n s i d e r I t e m No. 1 4 .
ter,’ r e c e n t l y received,
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Federal Reserve Bank of St. Louis
a m going t o a s k
M r e Curtis will read a
t h a t e x p l a i n s t h a t topic.
PROPOSAL O F NATIONAL BANK SECTION O F T H E AMLRICAN
BANKERS! A S S CIATION F O R A JOINT CONFLRLNCL I N
KANSAS CITY.
Mr. Curtis:
T h i s letter i s from Mr. Farnsworth,
let-
EL
Secretary p r o tem.
o f t h e American Bankers' Association:
"New York, January 3rd, 1916.
Benjamin °trong, Jr., Governor
Federal Reserve Bank c f New York,
New York City, N . x .
My dear Governor Strong:
At t h e recent conference o f the Executive
Committees,
o f the Gonference o f Governors a n d National
Bank Section (American Bankers Association), t h e suggestion w a s m a d e t h a t t h e C o n f e r e n c e
o f Governors m e e t i n
Kansas C i t y during t h e Annual Convention o f our AssociaGLOns
The su;,gestion was most favorably received a n d
I trust t h a t i t will b e p o s s i b l e f o r t h e C o n f e r e n c e
Governors
of
t o b e w i t h u s i n Kansas C i t y , p a r t i c i p a t i n g
in
the meeting o f the National B a n k Section; a t t e n d i n g s u c h
other Association meetings a s occur a t that time a n d m a y
interest y o u ;
a s wellas h o l d i n g a
session
o f your o w n
body.
With this end i n view, I will arrange for
reservations f o r t h e G o v e r n o r s
Banks,
o f t h e Yederal Neserve
a t t h e headquarters h o t e l -
the M u c h l e b a c h -
ject t o the action o f the Conference o f Governors;
sub-
a n d
will later advise you as t o the exact date o f the Annual:
Convention.
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Federal Reserve Bank of St. Louis
With k i n d p e r s o n a l r é g a r d s ,
Sincerely,
T. Ww. Farnsworth,
Secretary p r o tem."
AZ
The Chairman:
y h a t i s your pleasure w i t h regard
to this invitation t o hold a meeting o f the Governors o f
the Federal Reserve Panks a t Kansas C i t y a t t h e time o f
the next annual convention o f the American Bankers Association?
A s a citizen of Sansas City I in-
Governor Miller:
vite y o u a l l t o cnme.
Governor McDougal:
go t o Sansas V i t y ,
W h i l e i t might b e v e r y n i e e t o
w e have n o means
o f k n o w i n g s o far. 1 %
advance w h e t h e r t h e r e w i l l b e a n y o c c a s i o n f o r a
business
meeting o f the Governors at, that p a r t i m l a r time.
Governor McDougal:
Governor,
F o u l d i t not b e a good time,
t o make i t a business meeting?
a m very much opposed t o making
Governor McDougal: I
business
i f i t i s n o t necessary. 3
would l i k e t o v i s i t
you i n Kansas Gity, sometime, a n d perhaps t h i s would b e
a good opportunity.
Governor a e s I
have some doubts a s t o the desir-
ability o f the conference,
a s a n official body, meeting
officially with the American Bankers Association.
The Chairman:
authorizing
conveying
M
r
C o u l d net that point b e m e t b y
e Curtis t o write Mr. Farnsworth,
t o h i m o u r appreciation
o f h i s invitation,
telling h i m t h a t w e a r e n o t y e t a b l e t o determine w h e t h e r
there will b e a n y necessity f o r a business meeting o f the
Governors o f the teserve Banks a t that particular time,
particularly a s the t i m e has n o t b e e n stated i n their
invitation, b u t that t h e invitation h a s b e e n conveyed t o
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Federal Reserve Bank of St. Louis
13
us, a n d i f ndt accepted b y the meeting a s a meeting,
that t h e s e n t i m e n t
o f t h e meeting w a s that w e should b e
very glad t o attend this Convention individually, and that
it will b e the effort o f the Governors t o accept the invitation individually o r a s a body, a n d that w e will later
advise h i m a s t o how many will b e present:
Perhaps it
would b e w e l l t o w r i t e s o m e t h i n g o f t h a t sort. A
little
later on, w h e n w e come t o the question o f organization, I
would like t o explain w h y I think i t would b e desirable t o
have i t take that f o r m right now.
Governor Fancher:
I
t seems t o m e that i f w e held
a meeting o f t h i s b o d y itn Kansas C i t y a t t h e s a m e t i m e
that t h e A m e r i c a n B a n k e r s A s s o c i a t i o n h e l d t h e i r C o n v e n -
tion, t h a t w e would n o t b e able t o see very much, o r
would w s have time t o get around a n d attend t h e meetings
of t h e sections. I
have a
d o not t h i n k i t would b e wise t o
meeting o f t h i s b o d y w i t h t h e Association,
but it
would b e desirable f o r a s many governors a s c a n attend
individually
t o d o so. I
understand t h e q u e s t i o n w a s
whether i t would b e advisable t o have a
business meeting
at t h a t time.
Governor McCord:
i d o not. think i t i s wise f o r u s
to h a v e j o i n t c o n v e n t i o n s w i t h anyone.
are e n g a g e d
T h e business
i n m u s t n o t b e handled c o o r d i n a t e l y w i t h a n y
other o r g a n i z a t i o n ,
e v e n though they m a y have t h e same
dignity t h a t w e have.
i . think o u r -acbions S h o u l d b e
Separate a n d apart.
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Federal Reserve Bank of St. Louis
we
Governor McDougal: I
would move t h a t t h e matter
14
pe disposed o f i n the w a y yom have outlined, wr. Chairman.
As I
understand
i t a s m a n y Governors
a s c a n attend i n d i -
vidually will arrange t o d o so, with t h e understanding
that i f w e h a v e s o m e b u s i n e s s
t o perform a t the t i m e t h a t
Convention i s being held, w e will take t h e matter up.
seems t o m e t h a t w i l l d i s p o s e o f i t s a t i s f a c t o r i l y
I t
t o all
concerned, w i l l i t net, Governor Miller?
W
Governor “filler:
e should b e very g l a d indeed t o
have y o u meet there i n Kansas City.
make t h a t s u g g e s t i o n a s a
Governor MeDougal: I
mo-
tion.
will second Governor “cDeugalls
Governor Fancher: I
motion.
The Chairman:
I
s there a n y further discussion
of
Governor McDougal's motion?
(There w a s n o f u r t h e r d i s c u s s i o n a n d t h e m o t i o n w a s
carried.)
REPORT O F T H E E X E C U T I V E COMMITTEE:
(a) J o i n t meeting w i t h ixecutive Committee o f
Federal Reserve Agents - November 17, 1915.
(bp) M e e t i r g o f November 18-20, 1915.
(ec) M e e t i n g o f Vecember 14-16, 1915.
(a) R e p o r t t o Federal Reserve Board.
(@) A m e n d m e n t s t o Federal Reserve Act.
The Chairman:
W
e a r e r e a d y t o hear t h e report o f
the E x e c u t i v e Committee.
Governor McDougal:
M r . Chairman, 4 + would submit a s
my report t h e minutes o f the Executive Meetings which have
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Federal Reserve Bank of St. Louis
15
been held a t Washington, November 18-20, 1915, inclusive,
and Vecember 14-16, 1915, inclusive, complete compies
of the said minutes having been sent t o the Governor o f
each Federal reserve bank.
While t h e minutes fully indicate t h e action taken
with r e s p e c t
t o the specific matters assigned
t o the Com-
mittee b y the Fifth Conference o f Governors, a n d also s u c h
other matters a s the Committee h a s found i t necessary
or desirable
t o consider,
t h e r e a r e some subjects involved
with r e s p e c t
t o which special comment m a y properly b e
made.
The f i r s t m a t t e r r e f e r r e d
b y the Fifth Conference
of
Governors t o the Executive Committee was "Savings bank
membership."
T h i s subject w a s referred t o the sxecutive
Committee w i t h t h e r e q u e s t t h a t t h e c o m m i t t e e p r e p a r e a
definite suggestion f o r amendment t o the Act.
I t was
given consideration a t t h e joknt conference o f the
Executive Committee o f the Conference o f Governors a n d t h e
Executive Committee o f the "ederal Reserve Agents a t
Washington, D . C., November 17, 1915. I
refer t o page
17 o f the stenoz,raphic report o f that conference, a n d also
to page 4, Topic 5-(a) o f the minutes o f the November
meeting o f the Governors! Executive Committee.
It was voted that t h e subject o f amending t h e federal Keserve A c t s o a s t o p e r m i t m e m b e r s h i p o f mutual s a v i n g s
banks i n the Federal Reserve System b e refsrred t o the
Conference
o f Federal R e s e r v e Agents:
is n o w r e p o r t e d
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Federal Reserve Bank of St. Louis
T h e action taken
t o t h i s C o n f e r e n c e f o r i t s approval.
16
The next m t t e r referred t o the Sxecutive Committee
was the clarification o f Sections 13, 14, 16, 1 8 and 2 2
of the Federal Reserve Act.
T h e status o f this matter i s
fully set forth i n the minutes and i n Mr- Curtis’ memorandum a t t a c h e d
t o t h e minutes
o f t h e N o v e m b e r meeting.
Mr- Curtis forwarded eight copies o f the memorandum t o
the Federal Reserve Board.
The next matter was “expenses i n connection w i t h the
operation o f the Gold Settlement Fund."
At the Fifth Conference o f Governors t h e following
motion w a s passed:
"That the subject o f determining who shall b e liable
for c h a r g e s a n d e x p e n s e s i n c u r r e d
i n connection w i t h t h e
operation o f the Gold Settlement F u n d b e referred t o the
Executive Committee f o r investigation, andthat t h e e d e r a l
Reserve B o a r d b e r e q u e s t e d
t o ascertain informally,
they w e r e a b l e t o d o so, what,
if
i f a m y liability h a s b e e n
created b y reason o f the operation o f the gold f u n d t o
date."
The action o f the Executive Committee w i t h respect
to this subject i s fully s e t forth o n page 6
of the
minutes o f the November meeting.
The next matter was “Check collections.”
The Fifth douiermkee o f Governors voted:
“That this Conference adopt a&’ its recommendation
the s u b s t a n c e
o f Vote 1 2 adopted
b y theTransit Conmittee,
as representing substantially t h e views entertained b y
this c o n f e r e n c e
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Federal Reserve Bank of St. Louis
o f the method t h a t Should
b e used
i n hand-
17
ling t h e collections, a n d that t h e development o f the
details
o f t h e p l a n a n d t h e submission o f i t t o the Feder-
al Reserve Board b e left t o the Lxecutive Committee o f
this Conference w i t h t h e power t o invite s u c h o f the
transit m e n o f t h e d i f f e r e n t b a n k s a s t h e y m a y s e e f i t ,
to attmnd meetings w i t h t h e Federal Reserve Board."
I refer t o m i n u t e s
o f t h e F i f t h Conference,
p a g e 15:
In keeping w i t h this action, t h e modified collection
plan w a s p r o m p t l y s u b m i t t e d
t o t h e F e d e r a l R e s e r v e Board.
Subsequently t h e matter h a s been t h e subject o f Conferences w i t h the Federal Reserve Board, t h e present Status
being t h a t d e f i n i t e a c t i o n h a s b e e n d e f e r r e d p e n d i n g t h e
receipt
o f a n opinion f r o m t h e Attorney General concern-
ing c e r t a i n l e g a l q u e s t i o n s i n v o l v e d .
At o n e o f these conferences t h e Federal Reserve
Board propounded f i v e questions t o your committee, ansvers
to which were prepared a n d filed w i t h t h e Board,
cordance w i t h t h i s request,
and a
copy o f the same h a s
been furnished t o the Governor o f each bank.
taken i n t h e p r e m i s e s
i n ac-
T h e action
i s n o w s u b m i t t e d f o r yourapproval.
The next matter referred t o the Committee was "Telegraphic C o d e f o r t r a n s f e r s
o f gold i n gold settlement
fund between reserve agents a n d reserve banks."
I refer t o page 4
o f the minutes o f the November
meeting.
"A brief discussion o f this matter developed the fact
that under t h e present practice i t i s possible f o r either
the Federal reserve agent o r the Governor o f a Federal
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Federal Reserve Bank of St. Louis
18
reserve b a n k t o direct traesfers t o b e made i n the Gold
Settlement F u n d o f the amount standing t o the credit o f
o r consent o f t h e Ovner
the o t h e r w i t h o u t t h e k n o w l e d g e
officer.
W h e r e u p o n i t was:
"Voted,that the Federal reserve bank c f Chicago b e
requested
t o take t h i s matter u p w i t h t h e Federal R e s e r v e
Board a n d proceed t o a completion o f a plan f o r remedying t h e situation."
This m t t e r h a s r e c e i v e d a t t e n t i o n a n d i t i s under—stood t h a t e a c h b a n k a n d e a c h Federal r e s e r v e a g e n t h a s
been supphied w i t h a set o f test words t o b e used i n
connection w i t h a l l t e l e g r a m s o r d e r i n g t r a n s f e r s
o f funds
in the Gold Settlement Fund.
The n e x t m a t t e r r e f e r r e d
t o the Executive Committee
was "Plan b y which the operation o f the Gold Settlement
Fund m a y not b e the instrument f o r a considerable loss o f
gold t o the Federal reserve system."
The r e p o r t s
o f Messrs.
subject appears o n pages 8
graphic r e p o r t
M c K a y a n d Hendricks
o n this
t o 1 1 inclusive o f the steno—
o f t h e meeting o f t h e Lxecutive Committee.
That m e e t i n g v o t e d t h a t t h e r e p o r t b e r e c e i v e d
a m refer-
T h i s report
rea t o t h e n e x t c o n f e r e n c e
o f Governors.
may p r o p e r l y b e c o n s i d e r e d
i n c o n n e c t i o n w i t h T o p i c 6=-(b)
on the program f o r this Conference.
The n e x t m a t t e r r e f e r r e d
was " J o i n t C o n f e r e n c e
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Federal Reserve Bank of St. Louis
t o t h e Executive Committee
o f kxecutive Committees
o f Federal
Conference."
Reserve Agents! C o n f e r e n c e a n d Governors!
As y o u were a l l advised, a
joint meeting o f t h e
zg
Federal Reserve Agents! ixecutive Committee a n d the
Governors!
Washington
Lxecutive Gommittee w a s arranged
o n November 1 7 , 1915.
t o b e held a t
T h i s meeting w a s f a r
the p u r p o s e o f d i s c u s s i n g t h e p r a c t i c a b i l i t y
o f inaugura-
ting h e l p f u l c o o p e r a t i o n b e t w e e n t h e c o n f e r c n c e s
agents a n d Governors.
T
h
I assume t h a t e a c h Governor
agent h a s r e c e i v e d a
o f reserve
e meeting was duly held, a n d
a n d e a c h Federal
reserve
copy o f t h e stenographic r e c o r d o f
the proceedings.
This report, a n d the minutes o f the meetings, w i l l
form m y report
t o this conference
a s Chairman o f the
Executive C o m m i t t e e .
The Chairman:
in regard
W h a t i s your pleasure, gentlemen,
t o t h e report submitted
b y the Chairman o f t h e
Executive Committee, Governor McDougal.
Governor V a n Zandt: I
move i t b e received a n d filed.
Governor Fancher: G o v e r n o r McDougal, have w e not
some m a t t e r s t h e r e t h a t a r e t o b e p a s s e d
Governor McDougal:
T h e r e a r e some matters that l
think w i l l c o m e u p o n t h e program.
mind, Governor Fancher?
must b e a p p r o v e d
Mr. Curtis:
where a m e n d m e n t s
discussion
b y t h i s Conference.
T h i s i s the only place o n the program
t o the A c t a n d t h e report
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Federal Reserve Bank of St. Louis
t o the Board
s o this i s t h e proper t i m e
o f t h o s e things.
Governor Fancher:
five q u e s t i o n s ?
W h a t have you i n
A l l t h e actions w e have taken
on t h e T r a n s i t p l a n appears,
for a
o n b y this b o d y ?
Y o u refer t e theanswers t o the
20
Mr- Curtis:
said t h e r e p o r t
T h a t i s what I had i n mind when I
t o t h e Board.
Governor McDougal:
ther attention,
A l l t h e matters requiring fur-
o r a t least t h e approval
ence, h a v e b e e n t o u c h e d u p o n here. i
o f this Confer-
h a n k ona: e d e O f
the G o v e r n o r s a r e p r e t t y w e l l i n f o r m e d n o w a s t o w h a t t h o s e
five questions w e r e , a n d t h e y h a v e b e e n g i v e n a
copy o f
the r e p l y made.
The Chairman:
I
by G o v e r n o r McDougal, I
n regard
t o the report submitted
think i t i s o n l y p r o p e r
t o say
that t h i s s o - c a l l e d c o m m i t t e e h a s n e v e r undertaken,
dealing w i t h the Federal Reserve Board;
i t has never a s -
sumed t o t a k e a n y a c t i o n t h a t w o u l d a p p e a r
the v i e w s
the a n s w e r s
o n that
T h a t w a s particularly t r u e w i t h reference
t o the f i v e questions t h a t w e r e submitted
the C o m m i t t e e
b y t h e Federal R e s e r v e B o a r d - I
Board w a s notified, e i t h e r
itself,
t o represent
o f the banks t h a t a r e n o t represented
committee.
i n
to
to
think t h e
i n the b o d y o f t h e statement
o r i n the letter o f transmittal, t h a t those a n s w e r s
represented s i m p l y t h e v i e w s o f t h o s e m e n w h o h a d p r e p a r e d
the m e m o r a n d u m a n d s h o u l d n o t b e reteived
b y the Board a s
an expression o f the.views o f those w h o h a d nothing t o d o
with t h e preparation o f it.
randum,
I n consequence,
o r a n y other action proposed
not a g r e e a b l e
i f the memo-
b y t h e Committee,
is
t o a n y o f y o u w h o h a d n o hand i n the actions
or t h e p r e p a r a t i o n
o f t h e report, t h i s i s t h e t i m e t o g e t
it o n our record a n d t o make i t clear that that i s the fact.
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Federal Reserve Bank of St. Louis
I should say, Governor Miller, that w e have had n o
21
reservation w h a t e v e r
these meetings,
i n discussing frankly o u r views a t
a n d there i s n o reason w h y a
report, s u c h
as Governor MeDougal h a s just made, should n o t b e discussed with t h e utmost frankness,
ment a s t o w h a t i t contains,
i f there i s a n y disagree-
o r what i t refers t o ,
a n d I
refer particularly t o the memorandum filed w i t h the, Board
on the subject o f collections.
Governor MeDougal: I
might a d d t o your statement
the remark that i t was understood b y this committee that
we would n o t originate a n y work, b u t w e would handle o n l y
such q u e s t i o n s
us-
a s the Conference
o f Governors r e f e r r e d
to
I t happened, however, t h a t t h e last meeting o f
Governcrs w a s n o t h e l d a t t h e t i m e called, b u t i n l i e u
thereof--- o r a t least a t the same time--- a n executive
committee m e e t i n g w a s held.
A
sary, u n d e r t h e c i r c u m s t a n c e s ,
jects,
s I
remember,
i t was neces—
f o r u s t o a c t o n Some s u b -
o n e o f which i s the matter y o u a r e n o w referring
to, -the:- five: questions.
W
e h a d t o t a k e t h a t u p then,
although i t h a d b e e n o u r i n t e n t i o n
t o submit
t o the Gon-
ference o f Governors, f o r their approval, t h e answers t o
the f i v e questions.
The Chairman:
B e f o r e anything w a s done with that?
Governor McDougal:
Y e s ; before anything w a s done
with i t .
Mr-e Curtis:
T h e Board called f o r i t prior t o the
Conference b e i n g held.
Governor V a n Zandt:
A s one o f the members o f the
Conference w h o was n o t present a t that committee meeting,
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Federal Reserve Bank of St. Louis
ee
t o t h e Federal R e s e r v e Board,
I move t h a t t h e report
b e approved
t o t h e f i v e questions,
giving t h e a n s w e r s
by
this b o d y .
M a y I make this point o f order, Gover-
The Chairman:
nor V a n Zandt?
Y o u r m o t i o n h a s b e e n offered, w i t h o u t a
second, however, a n d would have t h e effect c f receiving
the report o f t h e E x e c u t i v e C o m m i t t e e w i t h o u t a n y c o m m e n t
or without a p p r o v i n g i t .
first
I
f y o u would e l a b o r a t e y o u r
m o t i o n
Governor V a n Zandt: I
motion i n this f o r m :
Committee
will m a k e i t a s a n original
T h a t t h e report o f t h e Executive
b e r e c e i v e d a n d filed,
a n d that r e take u p i n
order t h e v a r i o u s m a t t e r s a c t e d u p o n b y t h e L x e c u t i v e
Committee f o r a p p r o v a l
o r comment.
Governor Fancher: I
will s e c o n d t h a t motion.
T h e motion i s seconded:
The Chairman:
A r e you
ready f o r t h e q u e s t i o n ?
(There were calls for the question, a n d the motion
was d u l y carried.)
G o v e r n o r McDougal,
The Chairman:
agreeable
would i t b e
t o y o u i f w e should g o through t h e report now?
Governor McDrugal: I
think i t would b e advisable.
I think w e should t a k e i t u p a s i t comes.
F o r instance
the first t o p i c i s s a v i n g s b a n k memberships:
get t h e a p p r o v a l
matter.
o f this Conference
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Federal Reserve Bank of St. Louis
e should
o f o u r a c t i o n i n that
I s that your idea, Governor Strong?
The Chairman:
Governor
w
V a n Zandt?
Y e s -
. I s that satisfactory t o you,
jen
Governor V a n Zandt:
Y e s , Mr-e Chairman, t h a t i s the
point exactly.
The Chairman: R e f e r r i n g t o the first matter reported
b y t h e Executive Committee,
t h a t matter having t o
do with t h e membership o f savings banks i n the Federal
Reserve System, a
definite recommendation w a s made a t
the M i n n e a p o l i s C o n f e r e n c e
to t h e F e d e r a l R e s e r v e Act.
as to a
proposed a m e n d m e n t
T h e preparation o f t h e
language o f the amendment w a s referred t o the bxecutive
Committee.
T h e next meeting o f the Lxecutive Committee
was a joint meeting w i t h t h e Executive Committee o f the
Federal R e s e r v e A g e n t s ,
a n d a t that meeting,
b y mutual
agreement, t h e subject o f a n amendment t o the Federal R e serve A c t t o provide f o r t h e membership o f savings banks
in the Federal Reserve System was referred t o the Federal
Reserve A g e n t s f o r p r e p a r a t i o n a n d handling.
of t h a t action,
i f approved
T h e effect
b y this m e e t i n g , w o u l d b e t o
discharge t h a t i t e m f r o m o u r p r o g r a m a n d t u r n i t o v e r t o
them t o d e a l with.
What i s y o u r p l e a s u r e
i n r e g a r d t o approval
o r dis-
approval o f the action taken b y the Executive Committee
on that subject?
Governor V a n Zandt; I
Governor Wold: I
The Chairman:
I
move t h a t i t b e approved.
second t h e motion.
s there a n y further discussion?
(There w a s n o f u r t h e r d i s c u s s i o n a n d t h e m o t i o n w a s
carried.)
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Federal Reserve Bank of St. Louis
The C h a i r m a n :
T h e next matter dealt with
i n the
24
report i s "Clerification o f Sections 1 5 , 14, 16, 18: and
22 o f the Federal Reserve Act."
Before taking u p this topic Mr. Curtis suggests that
I should report t h e action taken a t that joint conference o f the Executive Committee o f the Conference o f
Governors a n d t h e L x e c u t i v e C o n m i t t e e
o f the kederal
Reserve Agents w i t h reference t o the handling o f the program, a n d 1 would l i k e t o report o n that subject f o r the
approval
o f t h i s meeting.
The Executive Committee agreed w i t h t h e Federal R e serve Agents t h a t t h e fcllowing topics sheuld b e dealt
with b y t h e a g e n t s a n d n o t b y t h i s Conference:
The f i r s t w a s t h e q u e s t i o n o f ‘the Federal R e s e r v e
note issue i n all i t s phases, t h a t is, t h e machinery f o r
issuing,
t h e r e d e m p t i o n o f t h e notes,
the notes,
a n d t h e division
t h e mutilaticen o f
o f the expense
o f t h e various
phases o f the note issue, w h i c h h a s been a tcpic o n our
program e v e r s i n c e w e s t a r t e d
t o h o l d t h e s e meetings:
The object o f this arrangement o f the program was o f
course t o save duplication o f work a n d make progress.
The next i t e m was the «.. .
Subject o f statistics a n d
information for the Federal Reserve Board.
The n e x t i t e m w a s t h e s u b j e c t
o f state b a n k member-
ship.
The next was t h e i t e m o f savings b a n k membership.
The next w a s practices a n d fiduciary powers o f
national b a n k s ,
a n d t h e last t h e general s u b j e c t o f rela-
tion o f t h e F e d e r a l R e s e r v e B a n k s t o t h e F e d e r a l R e s e r v e
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Federal Reserve Bank of St. Louis
System a n d t h e public.
These topics w e r e definitely assigned, subject t o
your approval,
f o r discussinn a n d treatment
b y t h e Pedcral
reserve agents.
What i s your pleasure i n regard t o this recommendation
of our committee?
Governor V a n Zandt:
b i d they appear
position t h a t w e h a d n o t h i n g w h a t e v e r
t o take t h e
t o d o with state
bank memberships o r savings b a n k menberships?
The Chairman:
N o t at all
of the meeting a t all. I
T h a t w a s n e t t h e spirit
think t h e feeling developed,
Governor V a n Zandt, t h a t m a n y o f these matters that w e
discussed a t our meetings w e r e a l s o referred t o t h e Federal
reserve agents b y the Federal i i eserve Board f o r discussion;
t h a t t h e y developed
sion a n d w e d i d l i k e w i s e ;
a n extended program f o r discus—
t h a t w e were really duplicatdng
our efforts a n d energy i n handling work that ought t o b e
fairly divided u p with a view t o the respective duties o f
the d i f f e r e n t o f f i c e r s
o f t h e organizations:
Naturally
some o f those things. f e l l within t h e department,
speak,
o f the Fedural Reserve Agents,
s o to
a m t h o s e subjects
were assigned t o their organization.
Governor McDougal:
T h e r e was n o objection whatever
to the suggested p l a n that questions pertaining t o the
operation o f the banks b e left t o the Governors’ Conference.
I s not that true, Mr. Chairman?
The Chairman:
Wes.
Governor McDougal: I
think that w a s about where w e
drew t h e l i n e a s w e w e n t along.
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Federal Reserve Bank of St. Louis
Yes.
The Chairman:
I s not the question o f state bank
Governor Wold:
memberships a
to a
o f operation
matter
o f a
b a n k w h e n it, c o m e s
bank making examinations?
O
The Chairman:
f c o u r s e i t depends a
little b i t ,
Governor Wold, u p o n what type o f erganization c a c h bank
develops.
T h e tendency n o w is, a n d I think i t i s due t o
the i n f l u c n c e
o f t h e Federal Reserve Board,
t o place t h e
matter c f examinations m o r e largely i n the hands o f the
Federal Reserve Agents, because i t meets t o some extent
the objection that h a s been made a s t o the confidential
character
o f infermation
i n the hands o f t r Comptroller
of the Currency; a n d a s t h e Federal reserve agent i s a
Government a p p o i n t e e ,
partly. N a t u r a l l y ,
t o meet t h a t objection
i t sccms
i f the Federal reserve agents a r e t o
work
have m o r e p a r t i c u l a r c h a r g e o f t h a t d i v i s i o n o f t h e
of the Fcderal reserve banks, t h e subject o f state b a n k
membersiip, w h e r e e x a m i n a t i o n
i s a n important matter,
would c o m e w i t h i n t h e i r f i e l d o f operations.
Governor Wold:
examinations
b y the Federal reserve agent?
N o ,
The Chairman:
Governor Wold:
Orbs
I
D o e s the Act i n any way provide for
t refers
i t d o e s not.
T h a t i s what I
t o t h e Federal
was going t o bring
Reserve Bank.
T h e Feder-
al reserve agent, under t h e act, h a s n o authority t c examine a n y bank.
Mr+ Curtis:
Board.
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Federal Reserve Bank of St. Louis
m x c e p t perhaps a s a n agent o f the
Et
The Chairman:
T h e "ederal Reserve Board h a s power
in t h o s e m a t t e r s w h i c h t h e y m a y d e t e r m i n e t h r o u g h t h e i r
agents,
i f y o u please.
Governor Wold:
B u t i t provides that the bank may,
with the cons ent o f t h e agent o r the Federal Reserve Board,
examine -
I t i s contemplated t h a t t h e banks should d o
the examining a n d that t h e banks should have cognizaace
of all those things, a n d rightly So. I
whether
do not know
i t i s a d v i s a b l e f o r u s , a t t h i s time,
t o waive o u r
rights i n the matter.
d o not think w e would waive o u r
The Chairman: I
rights. I
d o not think w e a r e waiving o u r rights-
The
b y this r e p o r t a n d b y t h e a r r a n g e m e n t
action c o n t e m p l a t e d
effected between t h e committees
a
t t h e joint meeting,
was simply t o facilitate t h e work a t these meetings b y
eliminating duplication.
Governor Fancher:
A s I understand it, the results
of t h e i r e f f o r t s w o u l d c o m e u p i n t h e f o r m o f a
recommen-
dation from that committee t o the Governors' Committee and
to t h i s C o n f e r e n c e f o r a p p r o v a l ?
The Chairman:
Yes.
Governor Fancher:
right.
W e are not relinquishing a n y
I t i s a matter o f working o u t t h e plan o f opera-
tion.
Governor Rhoads:
A s Irecall i t i t was very strong-
ly e m p h a s i z e d t h a t i t w a s d o n e i n a
and,
‘spirit o f cooperation,
a s y o u h a v e already said, M r - Chairman,
duplication o f work.
t o avoid
I t was not that the things would
be segregated s o that w e could n o t keep i n touch with o n e
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Federal Reserve Bank of St. Louis
another.
The Chairman:
T h i s joint meeting o f the t w o com-
mittees really h a d its origin i n what w e regarded--- o r
at l e a s t s o m e o f u s reéegarded--- a s a
been made, a
mistake t h a t h a d
perfectly natural mistake.
W h e n t h e Federal
Reserve B o a r d a s k e d t h e F e d e r a l r e s e r v e a g e n t s
and d i s c u s s a n d e x a m i n e i n t o t h e s u b j e c t
t o take u p
o f collections
and clearings a n d make a report t o the board, s o m e o f u s
felt that a
subject t h a t w a s being dealt w i t h s o exhaus-
tively a s t h a t w a s b e i n g d e a l t w i t h b y t h e G o v e r n o r s
of
the r e s e r v e b a n k s a n d b y t h e i r t r a n s i t m e n , s h o u l d n o t b e
clouded a n d confused b y having another b o d y brought i n t o
make a
report, w h i c h r e p o r t w o u l d p o s s i b l y c o n f l i c t w i t h
our r e c o m m e n d a t i o n s
i n s o m e respects,
confusion a n d wasted effort-
a n d would r e s u l t
in
I n discussing i t with Mr.
Perrin a n d W r . J a y , a n d o n e o r t w o o t h e r s w h o h a p p e n e d
to b e a t our offices i n New York~-- a n d 1
think t h e same
thing o c c u r r e d i n Boston, G o v e r n o r A i k e n , d i d i t n o t - - -
Governor Aiken:
The Chairman:
Yes.
I t resulted i n a suggestion o f this
joint meeting, and they agreed t o wash their hands o f
clearings a n d collections a s far a s possible, together
with o t h e r m a t t e r s ,
and
S h o u l d o n our part t u r n over t o
them certain matters f o r t h e m t o discuss.
ae i n e subjects,
i n detail, t h a t have been sugzested
in the brief report I
have made, y o u m a y not agree that
that diwision i s a wise one, a m i i f that i s so, this i s the
time 106 correct. i t .
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Federal Reserve Bank of St. Louis
O
n t h e o t h e r h a n d , l e t m e say, t
2g
as t o certain topics t h a t w e discussed,
i t was agreed
that they should b e left o n both programs.
Governor Wold: I
should like t o see that list o f
topics again.
(A paper was handed t o Governor Wold.)
Without waiving any o f our rights, I see n o objection
to it.
The Chairman:
W h a t
i s your pleasure w i t h regard
to these topics that I have read, a n d their transfer f r o m
the program, w i t h the understanding that w e are not r e linquishing o u r interest i n the matter?
Goverror Wold: I
move t h a t t h e a c t i o n o f t h e k x e c u -
tive Committee b e approved.
Governor V a n Zandt: I
The Chairman:
second the motion.
I s there a n y further discussion?
(There was n o further discussion and the motion was
carried.)
As t o t h e c l a r i f i c a t i o n
and 2 2 , a
o f Sections 15, 14, 16, 1 8
memorandum h a s b e e n prepared a n d sent t o each
Federal reserve bank, covering t h e first f o u r sections,
put Section 2 2 has m o t been rewritten,
b u t can b e submit-
ted now b y Mr- Gurtis, w h o has drafted something o n it.
Are y o u ready t o consider this matter now? I
would like
to suggest, h o w e v e r , that I do not believe i t i s going
to m a k e a n y d i f f e r e n c e w h a t a c t i o n t h i s b o d y m a y t a k e i n
regard
t o amendments.
considered
T h i s matter i s very actively b e i n g
b y t h e Federal Neserve Board,
and I
have n o
douht that t h e y will a s k f o r o u r views o n some o f these
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Federal Reserve Bank of St. Louis
30
matters.
to
S o m e t h i n g h a s b e e n prepared a n d submitted
you o n four o f the sections, a n d Mr. Eurtis has something
that h e c a n submit o n the fifth one. I
think this i s
really a matter where e a c h individual Governor should e x press h i s v i e w s
t o t h e Board.
I
t i s ,oing t o b e a
very
difficult t h i n g f o r u s t o agree u p o n the exact language
to b e employed a n d recommended f o r amendments t o the a c t
to clarify these five sections.
Governor Fancher:
H a v e y o u a n y knowledge
the B o a r d h a s d o n e w i t h r e g a r d
o f what
t o whipping t h e s e amendments
into shape?
The Chairman:
of a m e n d m e n t s
but I
Board,
N o , I
have not. I
know t h e subject
i s being v e r y actively considered
have
n o idea whatever
b y the
a s t o what their p r o -
cedure w i l l b e .
Governor Miller:
D
o y o u have information t h a t t h e
Board will a s k f o r a n y considerable number o f amendments
at this Congress, Governor Strong?
The Chairman:
A l l that I have heard would indicate
that t h e y believe requests f o r amendments t o t h e Act
should
b e reduced
to a
minimum,
t o those amendments t h a t
they regard a s being absolutely essential, a n d that t h e
less effort m a d e t o amend t h e Act a t the present time,
the b e t t e r o f f w e w i l l a l l b e ;
t h a t t h e y d o n o t want t o
put this whole act into the melting pot again and take
the r i s k o f w h a t m a y c o m e o u t o f C o n g r e s s
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Federal Reserve Bank of St. Louis
Governor Wells:
as a
result.
M y information regarding t h e amend -
31.
ment t o S e c t i o n 2 2 m a k e s
i t appear t h a t it.1s a
very i m -
portant question w i t h some o f t h e large state institutious.
The Chairman: G o v e r n o r Wells' impression i 8 that
this subject o f the amendment o f Section 22, making
clear j u s t w h a t t h e s t a t u t e m e a n s
i n respect
t o the deal-
ings o f directors o f national banks w i t h their o w n banks,
is a
very important o n e w i t h t h e s t a t e banks t h a t m i g h t
be contemplating taking membership w i t h the Federal R e serve System.
However, I
feel that i f this committee
would b e Satisficd t o take these suggestions, s t u d y them,
and e a c h G o v e r n o r e x p r e s s h i s i n d i v i d u a l v i e w s
Federal R e s e r v e B o a r d w i t h r e g a r d
t o the
t o them, t h a t w e w i l l
W e
avoid s o m e d i f f i c u l t i e s t h a t o t h e r w i s e m i g h t a r i s e -
might, f o r instance, encounter t h e suggeStion that this
organization w a s undertaking t o tear this A c t apart a n d
write i t all over again, a n d that the objects w e had i n
mind might n o t b e quite what Congress w o u l d like.
Governor Rhoads:
W
e have already accepted t h e r e -
h e c a n pass this s u b j e c t without taking a n y more
port.
definite action t h a n y o u have suggested.
The Chairman:
quite a
w e have p u t i a
G o v e r n o r Rhoads,
little w o r k o n t h i s matter:
W
e spent t h e whole
day, a
S y o u remember, d e b a t i n g t h e l a n g u a g e
these s u g g e s t i o n s ,
o f four o f
a n d m u c h o f that w o r k i s going t o
cyystalize o u r o w n v i e w s
o f what ought
t o b e done.
£ 2 a o
not like t o think that w e have held these meetings a n d
spent a
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Federal Reserve Bank of St. Louis
lot o f v a l u a b l e t i m e i n d i s c u s s i n g t h e s e m a t t e r s ,
32
and t h a t w e w i l l t h e n p u t t h e s e t h i n g s
let i t g o a t that. I
o n the shelf a n d
am, o n the other hand, convinced
that b y having e a c h o f the officers t a k e t h e matter u p
individually b y correspondence w i t h t h e Federal Reserve
Board, t h a t t h e y will feel t h e pressure,
i n detail, c o n -
stantly being exerted f o r a n improvement i n the language
of these five sections o f the Act.
I
n that w a y i t will
not appear t o b e a n organized effort o n the part o f the
Governors
o f the banks t o r i p this l a w apart a n d p u t i t
together again i n their o w n fashion.
Governor Wold:
M i g h t i t not b e well for Mr. Curtis
to tell u s briefly t h e purpose o f each one o f these
changes that h a s been suggested?
The Chairman:
give a
ments
resume
A r e y o u ready t o have Mr: Curtis t o
o f t h e purposes
o f these five proposed amend-
t a the Act?
Governor McDeugal: I
think i f the members h e r e will
take t h e minutes o f the December meeting o f the Lxecutive
Committee t h e y w i l l f i n d a
complete m e m o r a n d u m t h e r e a n d
it w i l l h e l p t h e m t o f o l l o w M r . Curtis. I
refer
t o Mr.
Curtis! memorandum appended t o those minutes.
Mr. Curtis:
I
n Section 1 3 the language o f the
first paragraph: h a s b e e n c h a n g e d
in a
number o f ways.
One change i s b y eliminating t h e phrase "upon solvent memper" banks.
T h a t was t o prevent t h e situation develop-
ing i n w h i c h a
reserve b a n k m i g h t r e c e i v e c h e c k s u p o n a n
insolvent m e m b e r b a n k t h a t i t
and t h e r e b y c o m m i t a
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Federal Reserve Bank of St. Louis
d i d n o t k n e w w a s insolvent
breach c f t h i s law.
O
f Course T O O n e
33
would receive a
check o n a n insolvent b a n k i f they knew
it was insolvent.
T h a t seemed t o b e a n unne: essary
Limi t a t o n .
We a l s o i n s e r t e d
i n t h e f i r s t t w o lines,
t h e fact that
the reserve banks might receive f r o m other Federal reserve
banks.
T h a t w a s f o r t h e purpose
o f consolidating t h e
powers o f receiving deposits, a n d w e added a t the end, i n
order t o m k e t h a t clear b y positive action i n the statute,
instead o f b y implication, t h e su_gestion that a
bank might
act a s collection agent f o r t h e United States, o t h e r
Federal reserve banks, a n d member banks.
We eliminated t h e phrase “solely for exchange purposes,’ n
i order t o b r o a d e n t h e powers
o f reserve b a n k s t o
receive deposits o f all sorts.
The Chairman:
plete a
and 1
I t i s going t o take some t i m e t o com-
review o f the purposes o f the changes i n language,
a m going t o a s k Mr-+ C u r t i s
rapidly,
and I
t o m o v e through i t rather
a m going t o a s k t h a t c l o s e a t t e n t i o n b e
paid t o what h e says s o that w e can, without m u c h discussion o n this p a r t i c u l a r t o p i c , a c t u p o n it. O t h e r w i s e
will take a
it
great deal o f our time.
Governor V a n Zandt:
W o u l d i t not b e a good thing
to read t h e m all, a n d then, i f anybody h a s a n y criticisms
to make, h e c a n offer then.
Mr- Curtis:
T h e second p a r a g r a p h o f section 1 3 was
changed t o e l i m i n a t e w a i v e r o f demand, n o t i c e
a m protest.
I think counsel representing a l l t h e banks, except one,
recomuended t h a t change, a n d most o f them very strongly.
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Federal Reserve Bank of St. Louis
34
I belivve that change will facilitate rediscounting w i t h
the member banks very m u c h and make i t conform t o ordinary
panking practice.
The language w a s also changed b y inserting t h e word
"scceptances" s o that i t reads, "May discount notes,
drafts, bills o f exchange a n d acceptances arising o u t o f
actual c o m m e r c i a l t r a n s a c t i o n s . "
W o u l d there b e a n y difference
Governor McDougal:
between the use o f the words “and" a n d “or"?
The Chairman:
I t should b e inclusive.
Governor Van Zandt: 1
The Chairman:
t e foe"
I t gives t h e m power t o d o all o f
these things.
Governor Fancher: I
Mr+ Curtis:
think i t should b e “and”.
Y e s sir, i t should b e "and".
A
s a
resultof t h a t change i n the second paragraph i t was suggested that w e strike o u t the whole o f the third paragraph,
“which i s that a n y Federal reserve b a n k m a y ciscount a c ceptances w h i c h a r e based o n the importation o r exportation O f e n e a e because i f you include acceptances
i n your
general commercial transactions, t h e r e i s n o necessity
for h a v i n g a
third p a r a g r a p h a t all.
The Chairman:
B
y eliminating t h e third paragraph,
by putting t h e word "acceptances"
i n the second paragraph,
it i s g o i n g t o m a k e i t v e r y m u c h s i m p l e r
t o make a
regula—
tion that will cover every operation under Section 13, a n d
another regulation that will cover every operation under
Section 14, because Section 1 3 seems t o b e exclusive o f the
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Federal Reserve Bank of St. Louis
35
discount
o f acceptances w h i c h a r o n o t b a s e d u p o n i m p o r t
and e x p o r t t r a n s a c t i o n s , w h e r e a s S e c t i o n 1 4 permits t h e
purchase o f both domestic a n d foreign acceptances, t h a t is,
as t o origin,
a n d b y j u s t p u t t i n g t h e w o r d "acceptances"
in the second paragraph o f Section 135 i t eliminates a l l
necessity f o r distinguishing, a n d that I
do.
T h e la w
think i t should
i s very incomplete a s i t n o w stands, b e -
cause i t permits u s , u n d e r S e c t i o n 1 4 , t o b a y i n t h e o p e n
market a
certain class o f paper which i t does n o t permit
us t o deal with under section 13, a s i t should.
Mr- Curtis:
F o l l o w i n g o u t that s a m e idea, t h e fifth
paragraph o f S e c t i o n 1 3 , w h i c h i s No. 1 0 1 ,
tion c a p a c i t y book,
i n this corpora-
i s stricken o u t a n d entfrely reframed,
and t h e p u r p o s e o f t h a t w a s t o g i v e p o s i t i v e a u t h o r i z a t i o n
to a
national b a n k t o accept d r a f t s a r i s i n g o u t o f actual
commercial t r a n s a c t i o n s ,
or domestic.
I
w h e t h e r t h e y a r e import, e x p o r t
t also clarified t h e situation w i t h r e -
spect t o t h e d i s t i n c t i o n s b e t w e e n n a t i o n a l b a n k s a n d s t a t e
banks that were members.
T h i s was a distinct grant o f
power t o a national b a n k a n d might have b e e n construed
as a limitation o f power u p o n a state bank a s the l a w originally reads. I
therefore reframed that i n order t o
make i t clear that w e were granting a
al bank, a n d that w e were s t a t i n g a
new power t o a nationfunction o f a state
bank s o far a s i t was authorized b y the laws o f its o w n
state
t o make s u c h acceptances.
This n e w p a r a g r a p h a l s o s t a t e s a
definite a m o u n t a s
to t h e l i m i t o f a c c e p t a n c e s w i t h o u t a n y q u e s t i o n o f r e g u -
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Federal Reserve Bank of St. Louis
36
lations o f t h e Federal Reserve Board, which a r e practically always g r a n t e d ,
SO.
o r a t least w e have .
a l w a y s found i t
W h e n a n y bank has applied f o r permission
t o go up
to 1 0 0 p e r c e n t t h e y h a v e a l w a y s g r a n t e d t h a t permission.
This s i m p l y e l i m i n a t e s t h a t a d m i n i s t r a t i v e q u e s t i o n f r o m
the Board's functions.
Section 1 4 w a s r e c a s t e n t i r e l y f o r t h e r e a s o n that,
aS i t reads a t p r e s e n t - - - r e f e r r i n g n o w t o t h e f i r s t p a r a graphj-it p r o v i d e s t h a t “ a n y F e d e r a l r e s e r v e b a n k may,
under r u l e s a n d r e g u l a t i o n s p r e s c r i b e d
b y t h e federal R e s e r v e
Board", a n d immediately following that i s a paragraph
beginning "Every Federal reserve bank shall have power",
and s o forth.
T h e r e seems t o b e n o reason f o r a dis-
tinction i n p h r a s e o l o g y t h e r e ,
should b e a
a n d that whole section
grant o f p o w e r t o Federal r e s e r v e b a n k s
to
do a variety o f things.
We have therefore changed that t o read "ivery Federal
reserve b a n k s h a l l h a v e power:
#(a)
forth,
T o deal i n gold coin and bullion", a n d so
a n d t h e n putting
graph o f “ e c t i o n 1 4 .
important changes.
in a
paraphrase
o f t h e first para-
T h a t paraphrase contains s o m e fairly
B
y inserting "demand a n d sight e x -
change", a n d b y making i t clear that t h e limitations stated
on paper “of the kind and mat urities b y this Act m d e
eligible f o r rediscount" r e f e r s o n l y t o acceptances,
not,
o f course,
t o c a b l e transfers, d e m a n d o r s i g h t e x -
change, a n d other bills o f exchange. I
out w h a t t h e s t a t u t e r e a l l y m e a n s there.
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Federal Reserve Bank of St. Louis
and
think w e bring
37
In "b" i s inserted the phrase “exchange o r re-exchange".
Governor Wold:
Mr+ Curtis:
W h a t i s the purpose o f that?
T h a t was t o make i t clear that
rewersing t h e pump was a
Governor McCord:
Mre Curtis:
I
legal operation.
M a k i n g o n e process i n s t e a d o f two--t i s j u s t t o simplify t h e process
as
a matter o f bookkeeping, Governor McCord.
i "co", referring t o buying a n d selling a t home o r
abroad, w a s left exactly t h e same.
T h e o l d "c* " t o
purchase f r o m m e m b e r b a n k s a n d t o se&é], w i t h o r without
its endorsement, bills o f exchange arising out o f commer-
cial transactions, a s hereinbefore d e f i n e d } ' s
a
w eliminated,
as that was really covered i n the new "a".
“.
T
o establish f r o m time t o time, subject t o re-
view a n d d e t e r m i n a t i o n
o f t h e federal e s e r v e B o a r d , r a t e s
of discount", a n d s o forth, was left the same.
"e" W a s changed slightly.
W w e left out the words
"for exchange purposes".
The Chairman:
G o v e r n o r S e a y knows w h e t h e r i t i s
necessary t o i n t e r r u p t t h i s d i s c u s s i o n
t o make a
report
with reference t o his visit t o the *ederal Reserve Board.
Governor Seay:
cept f o r a
moment. I
I t i s not necessary t o interrupt e x went t o t h e Board.
Hamlin had not come down. I
Governor
had a very interesting con-
versation w i t h Vice Governor Velano.
H e said that h e
would k e e p i n t o u c h w i t h u s , a n d w e w i t h him, a n d t h e y
would l e t u s know when they desired u s t o meet w i t h then.
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Federal Reserve Bank of St. Louis
38
He s a i d t h a t t h a t w o u l d p o s s i b l y b e F r i d a y morning;
h e
said h e was going t o New York Friday afternoon, a m i suggested t h a t w e m i g h t p o s s i b l y m e e t F r i d a y morning.
The Chairman:
T h a t i s v e r y satisfactory.
T h e meet-
ing will continue w i t h t h e discussion o f this section o f
the report o f the Executive Committee, a n d when w e have c o n -
cluded that 4+ would like t o suggest that before finishing
the Executive Committee's report, w e take u p the first
topic
o n t h e program, w h i c h o u g h t
t o b e disposed
o f early
in our meeting.
ie comer Seay: I
will a d d , M r . C h a i r m a n ,
that the
Board will have t w o subjects t o summit t o u s f o r discussion
and they w i l l b e submitted i n writing later on.
Mr. Gurtis:
A t the last 4yecutive Committee meeting
we t o o k u p S e c t i o n 1 5 , a l t h o u g h t h a t h a d n o t b e e n r e f e r r e d
to t h e C o m m i t t e e
b y the Conference
a t Minneapolis.
i
t
was suggested that the word "may" i n the fourth and ninth
lines, should b e changed t o t e word "shall"
vide t h a t t h e G o v e r n m e n t
Governor V a n Zandt:
of t h e C o n f e r e n c e
Mr. Curtis:
reserve bank.
deposits
A
must
s o a s t o pro-
b e transferred.
t a n y rate that w a s t h e sense
a t Minneapolis.
Y e s .
T h e y must b e transferred
T h e n there w a s a
t o the
tentative suggestion o f
some n e w m a t t e r w h i c h w o u l d p r o v i d e t h a t t h e S e c r e t a r y
of t h e T r e a s u r y S h o u l d c a r r y t h i s i n t o e f f e c t n o t h a t e r
than D e c e m b e r S l s t , 1 9 1 7 , a f t e r w h i c h d a t e i t s h a l l b e
unlawful f o r a n y b a n k o t h e r t h a n a
or r e t a i n d e p o s i t s
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Federal Reserve Bank of St. Louis
reserve b a n k t o r e c e i v e
o r a n y cther funds unless t h e Secretary
39
of the Treasury i s satisfied that the protection o f the
revenues r e q u i r e s t h a t t h e y b e l e f t o r p u t i n some n a t i o n a l
bank.
Governor V a n Zandt:
I s this t h e part o f Section 1 5
where you want the United States Government t o give Boston,
New York, Philadelphia, Chicago, S t - Louis a n d S a n #rancisco a
b i g building?
Mr- Curtis:
T h a t was a n ambitious suggestion that
some o f u s were inclined t o treat w i t h a little light
levity.
(Informal G i s c u s s i o n f o l l o w e d w h i c h i h e r e p o r t e r w a s
directed not t o take.)
Mr- Curtis:
T h e second paragraph o f the new matter
is really susceptible o f being divided i n half-
T h e first
half o f i t i s t o t h e e f f e c t t h a t t h e S e c r e t a r y o f t h e
treasury S h a l l c a u s e t h e f u n c t i o n s a n d o p e r a t i o n s n o w e x e r -
cised a n d conducted b y the Assistant Treasurers o f the
United States t o be transferred t o the Several Federal
reserve b a n k s
expedient;
i n such manner a s ,
a n d there i s t h e n a
upon that transfer,
i n i i s judgment,
may be
limitation o f t i m e p u t
T h e n comes t h e elimination o f t h e
office o f assistant t r e a s u r e r s .
T h e second part o f i t
refers t o the transfer o f the buildings, t o which ! assume
Congress w o u l d p r o b a b l y n o t listen.
T h e first. p a r t o f
it is gradually being done, and ! think that almost all
of the functions o f the Assistant Treasurers o f the
United States c a n sometime b e transferred t o the e d e r a l
Reserve B a n k s .
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Federal Reserve Bank of St. Louis
40
Governor Miller:
W o u l d that d o away with the sub-
treasurtes?
Mr. Curtis:
A
S a
practical m a t t e r i
think i t w o u l d d o
away w i t h them.
That left t h e question, “ W h a t a r e y o u going t o d o with
the sub-treasuries?"
I f you eliminate t h e functions o f
the A s s i s t a n t T r e a s u r e r s , . y
o
u might a s w e l l e l i m i n a t e
their
offices, a n d then eliminate t h e buildings.
Governor Miller:
T u r n t h e buildings o v e r t o the federal
Reserve B a n k s .
Governor Seay:
T h a t would g o far t o remove ownership
of the banks f r o m the stockholders a n d make t h e m Government institutions.
Governor V a n Zandt: I
move t h a t t h e last five lines
of t h e s e c o n d p a r a g r a p h b e eliminated,
a n d that i t end a t
the words "cease anddetermine”.
Governor S e a y :
I s e c o m t h a t motion.
The Chairman:
I
s there a n y discussion
o f Gavernor
Van Zandt's motion?
(There w a s n o d i s c u s s i o n a n d t h e m o t i o n w a s c a r r i e d . )
Mr- Curtis:
O f course this w a s crafted before t h e
Secretary o f the treasury h a d m d e h i s recent transfer.
the o t h e r hand,
o f course,
t h e recent transfer o n l y affects
the banks i n the Federal reserve cities,
banks w a n t e d
O n
s o that i f t h e
t o have that transfer m a d e complete a n d a
time
limit set, this provision would b e appropriate f o r that
purpose.
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Federal Reserve Bank of St. Louis
Governor McDougal:
I
t might b e interesting a t this
41
point t o tell y o u that i f y o u observe o u r published statement f r o m week t o week y o u will notice that there i s o n e
new overdraft there running from $250,000 t o $400,000,
United States Government overdraft.
Governor Miller:
T h a t w a s i n y o u r bank, G o v e r n o r
McDougal?
Gove rnor McDougal:
Yes.
T h a t has been done several
times.
Mr- Curtis:
first paragraph.
S e c t i o n 1 6 was changed somewhat
After a
i n the
great deal o f discussion w e ad-
ded, among t h e purposes f o r which the Mederal Reserve notes
may b e issued, “ f o r t h e other purposes s e t forth i n this
act", instead o f the present wording, " f o r n o other pur-
poses.”
T h a t , I think, arose chiefly because o f the dis-
cussion t h a t h a s a r i s e n i n N e w Y o r k a s t o t h e p r o p r i e t y o f
issuing t h e notes o v e r a m o v e r again against t h e same
pieces
o f p a p e r a n d t h e n j u s t p u t t i n g u p g o l d a g a i n s t them.
If that is, a s i t seems t o be, authorized b y other provisions o f t h e Act, i t seems wise t o have a. direct conversion h e r e i n s t e a d o f w h a t a p p e a r s
t o be a
limitation
the u s e o f the words " f o r n o other purposes",
by
i n the first
sentence.
The n e x t c h a n g e
i n p a r a g r a p h 1 6 was:
“Notes s o redeemed which are unfit for further circulation m a y b e c a n c e l l e d a n d d e s t r o y e d
a t t h e point o f r e -
demption a n d reimbursement o f the amount paid i n redemption
therefore S h a l l b e e f f e c t e d
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Federal Reserve Bank of St. Louis
b y t h e filing o f a
certificate
42
to be made under rules and regulations o f the Federal Reserve Board, w h i c h certificate shall b e filed w i t h t h e
bank through which t h e notes were originally issued.”
That e l i m i n a t e s t h e r e q u i r e m e n t
o f having these notes
sent backward a n d forward between t h e banks.
I was going to add that 1 should suggest a t this time
a change
i n the third paragraph o f t h e Section w h i c h would
eliminate t h e requirement t h a t reserve notes issued through
one r e s e r v e b a n k m u s t b e r e t u r n e d w h e n t h e y a r e p r e s e n t e d
to another,
a n d that t h e y cannot
b e p a i d out, u n d e r penalty.
We e l i m i n a t e t h a t a n d t h e n p r o v i d e f o r r e d e m p t i o n a n d c a n c e l lation o f unfits
a t the point
Governor Miller:
o f redemption.
T h a t would p e r m i t federal reserve
banks t o resissue t h e notes o f other Federal reserve banks
without penalty?
Mr- Curtis:
Y e s , i f fit f o r circulation.
Governor McCord:
I s the object o f that t o have c a n -
cellation o f the notes a t the bank o f ‘issue?
Mr. Curtis:
T h e b a n k o f redemption.
Governor McCord:
them.
A n y Federal reserve b a n k m a y redeem
T h a t might b e construed t o cover that- I
would
not w a n t t o f a v o r t h e p r o p o s i t i o n t h a t t h e y c o u l d b e c a n -
celled a t a n y bank o f redemption.
The Chairman:
T h i s o n l y applies
t o notes t h a t a r e
unfit f o r circulation.
Governor McCord:
Mr- C u r t i s :
I
V e r y well, Mr. Chairman.
t h a s t w o points.
T h e first point i s
that y o u m a y p a y o u t t h e f i t o n e s t h a t b e l o n g
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Federal Reserve Bank of St. Louis
t o another
43
Federal R e s e r v e B a n k , a n d t h a t y o u m a y c a n c e l a n d d e s t r o y
and redeem t h e unfit ones.
Governor McCord: I
would never exercise t h e first
right.
Governor Miller:
W h y would y o u not, Governor M c -
Cord?
Governor McCord:
Because 1
for m y o w n notes. I
want t o c r e a t e a
vacuum
d o n o t want t h e other fellow's
notes floating i n m y district.
Governor Wold:
Y o u create a
bigger m a r k e t
b y amend-
ing the A c t s o a s t o prohibit a n y other Federal reserve
bank f r o m paying t h e m out.
The Chairman:
I f you have eleven other federal r e -
serve banks t h a t a r e keeping y o u r notes i n circulation,
instead o f s e n d i n g t h e m i n t o y o u r i g h t along,
y o u are
going t o b e the gainer b y that oprtation.
w o u l d n o t b e t h e g a i n e r a t all.
Governor McCord: I
However,
i t i s not necessary t o discuss t h a t here.
district i s a n agricultural district a n d i t takes a
of money t o handle it.
M y
heap
Y o u r notes would come into m y dis-
trict from the member banks o f New York City, a m t h e n the
duty would b e upon m e t o return those notes a t m y expense.
Governor V a n Zandt:
The Chairman:
W e have eliminated that.
Governor McCord: I
volume.
I
T h a t i s t r u e now.
know, but 1 am speaking o f the
f they are p u t o u t t h e y would f l o a t
i n t o my
district and 1 would have to take care of them. However,
it i s a l l right. I
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Federal Reserve Bank of St. Louis
will work either way.
44
Governor Seay: I
of t h e p r e s e n t l a w .
believe that is a wise f#revision
Y o u would have t h e election o f re-
turning these i n any event.
I b e l i e v e t h e present l a w i s
wise i n t h a t respect.
Governor Wold:
F r o m a purely selfish standpoint I
would rather that they b e returned.
bach t h e better, because
t h e y a r e i n better condition
when t h e y a r e r e t u r n e d q u i c k l y
again.
W
T h e sooner they come
a n d w e c a n reissue
e h a v e f o u m t h a t w e c a n m a k e i t pay.
them
c a g
we put t h e m o u t t w o o r three tines w e get t h e cost o f them
back.
However, under thisplan o f course t h e other banks will
put o u r n o t e s o u t a n d k e e p t h e m i n c i r c u l a t i o n u n t i l t h e y
are w o r n out.
What t
wish t o inquire i s the reason f o r adding " o r a t
any s u b - t r e a s u r y
o f t h e U n i t e d States.
L l think i t s a y s
they shall b e redeemed i n gold o n demand a t the treasury
Department o f the United States i n the City o f Washington,
District
o f Columbia.
Y o u r proposed amendment provides
“or a t any sub-treasury o f the United States."
The Chairman: I
was going t o move t h a t that b e
stricken out.
Governer Wold: T h a t is what 4 would like to know.
The Chairman: I
think i
peas
t o b e left o u t anyway.
In preparing this thing o n e matter was overlooked, I
believe, a n d that i s that t h e provision o f the existing
law,
b y which paper currency,
t h a t is, national b a n k
notes, h a v e r e a l l y b u t o n e p l a c e o f redemption,
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Federal Reserve Bank of St. Louis
which i s
45
in Washington,
D . C . , w a s p u t i n f o r t h e purpose o f provid-
ing that there should n o t b e t e n places o r a dozen o r more
places
i n t h e United States w h e r e demands c a n b e made u p o n
the Government f o r gold payment, w h e r e i t i s impossible t o
anticipate
a t w h a t p o i n t t h e d e m a n d s m a y arise,
and
thereby have enough gold there t o meet it- T h i s enables
the G o v e r n m e n t
t o concentrate i t s g o l d a t t h e p o i n t w h e r e
the demand w i l l t a k e place, because i t only permits i t t o
arise a t that o n e point. I
the p h r a s e w i t h r e f e r e n c e
that t h a t
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Federal Reserve Bank of St. Louis
think
w
e should strike o u t
t o sub-treasuries,
b e done.
Governor Seay: I
s e c o n d t h a t motion.
and I
nove
46
A.
Wilfong
A r e
T h e motion is seconded-
The Chairman:
a
you r e a d y t o v o t e o n i t ?
O n e minute, b e f o r e y o u g o i n t o
Governor McCord:
that, Governor Strong:
you w o u l d h a v e a
T h i s amendment would provide,
right t o demand, p a y m e n t
or
a t m y bank o n
any o f t h e notes.
The Chairman:
T h a t i s in the existing law.
I t does
not c h a n g e that.
N o t i n gold, b u t i n lawful money.
Governor McCord:
The Chairman:
T h i s does n o t give t h e right t o de-
mand g o l d a t y o u r v a n k , G o v e r n e r M c C o r d .
A l l right, t h e n .
Governor McCord:
The Chairman:
A r e y o u r e a d y t o vote.
Governor V a n Zandt:
N o w comes
Chairman, a b o u t t h e d e s t r u c t i o n
u p t h a t point, M r .
o f notes. i
do not
think that i t i s proper that a Federal reserve b a n k
should h a v e t h e d e s t r u c t i o n
of a
note.
E
G mignt t u r n
it into t h e Treasury o f t h e United States f o r destruction,
put they have n o facilities f o r destruction o f notes,
and f o r keeping records.
The Chairman:
D o e s n e t t h i s provide--- I
have n o t
the c o p y o f the amendment before me--- but does i t not
provide t h a t i t shall b e done under regulations o f the
Federal Reserve Board?
Governor Seay:
Y e s sir.
Governer V a n Zandt:
The Chairman:
Yes.
I t was intended,
a s 1 recall t h e dis-
cussion i n t h e f r a m i n g o f t h i s a m e n d m e n t ,
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Federal Reserve Bank of St. Louis
that the Act
47
itself w i l l g i v e t h e u t m o s t l a t i t u d e
i n developing w h a t
is the least expensive a n d t h e most feasible method f o r
declins, w i t h t h e great mass o f currency t h a t w e m s t
some d a y handle, a n d whether t h i s involves t h e absolute
destruction o f t h e n o t e s
o r their mutilation
s o that
they m a y b e shipped a s merchandize t o Washington f o r
final destruction, r e a l l y m a y b e decided,
i f this amend-
ment i s adopted, b y regulation o f the Federal Reserve
Board.
If i t i s your feeling that t h e limit o f power o f the
Board t o regulate t h a t matter should b e fixed b y statute
so t h a t i t would b e i n t u r n l i m i t e d
t o the mutilation o f
the n o t e s a n d t h e i r r e t u r n t o Washington, w h y , a
very
simple change i n this language would h a v e that effect.
On the other hand, s o far a s m y o w n views go, I
think I would b e quite willing t o have o u r notes under
suitable r e g u l a t i o n s a n d s a f e g u a r d s
a s t o record,
and
so on, a c t u a l l y m a c e r a t e d w h e n t h e y a r e f o u n d t o b e u n f i t
for circulation,
s o that t h e expense o f shipping this
vast mass o f currency a l l over t h e United States, f r o m
one Federal r e s e r v e b a n k t o another,
ton, w o u l d b e d i s p e n s e d w i t h .
a n d t h e n t o Wwashing-
T h e r e will come a
time
when we, will have hundreds o f millions o f notes i n circulation, requiring a
great ceal o f labor a n d expense: a
these n o t e s c a n b e s o r t e d
i n e a c h bank a n d those t h a t a r e
unfit f o r circulation mutilated a n d shipped t o Washington
anddestroyed,
redemption,
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Federal Reserve Bank of St. Louis
and a
record e x c h a n g e d f o r p u r p o s e s
a n d then the f i t notes returned
of
t o the bank o f
48
issue, w e are going t o cut o u t a vast part o f the expense
of handling t h e note issue.
Governor V a n Zandt: I
withdravwamy objection.
T h e
rules a n d regulations c f the Fedcral Reserve Board cover
it, anyhow.
O
The Chairman:
reasonableness
f course,
w e a r e dependent u p o n t h e
o f the rules a n d regulations a d o p t e d
by
the Board a n d have n o fear a s t o that, o f course.
Mr. Curtis:
was c h a n g e d
T h e second paragraph o f Section 1 6
o broaden t h e c o l l a t e r a l s e c u r i t y
in order t
to p u t u p f o r a n i s s u e o f r e s e r v e n o t e s w i t h t h e F e d e r a l
Reserve Agent.
W e suggested broadening t h a t section t o
o r bills o f exchange accepted f o r
include n o t e s , d r a f t s ,
rediscount under t h e provisions o f Section 13, w i t h acceptances a n d bills o f exchange besring endorsement o f
the m e m b e r b a n k s - - -
hy not broaden i t a little further
Governor McCord: i
by saying, “ s u c h w a r r a n t s
The Chairman:
a s m a t u r e w i t h i n t h e limitation?”
w e would never g e t t h a t throurn,
Governor McCord:
Mr. Curtis:
T h a t w a s discussed a t the Lxecutive
Committee meeting, a m , I
The Chairman: I
think, unanimously rejectcd.
would b e very m u c h afraid o f that.
The thoughtful people i n this country would n o t stand
for i t , 6 1 ther.
Governcer Rhoads:
nao,tt
S h o u l d y o u u s e t h e w o r d “or” o r
"anda" there?
Gov. rnor McCord:
volcano?
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Federal Reserve Bank of St. Louis
I t i s opening t h e mouth o f a
}
Governor Seay:
A
T h e y did n o t open it; t h e y limited
it t o t h e e n d o r s e m e n t o f
t h e m e m b e r banks.
think that should b e "or".
Governor Wold: I
t h i n k 34: i S F i e o t 36. i t 2a,
Mr- Curtis: i
Governor McCord: I
think that i s ccrrect.
think that i s the o n l y change i n that
Mr. Curtis: I
paragraph.
Paragraph 3
upon;
t h a t i s , t h e elimination
turning n o t e s
have already commented
of this section I
o f the necessity o f re-
t o t h e b a n k o f issue.
The fifth paragraph w a s changed i n order t o make t h e
law c o r r e s p o n d w i t h t h e practice;
a n d w e p u t i n this p r o -
viso, t h a t t h e Federal Reserve Agents Shall return t o the
Federal Reserve B a n k a n amount o f collateral security equal
in face value t o the amount o f such deposit.
when a
deposit
i s m a d e t o r e d u c e liability.
T h a t is
T h a t simply
carries o u t w h a t i s a c t u a l l y b e i n g d o n e today.
A n d coincides w i t h t h e previous
The Chairman:
change suggested,
o f giving t h e reserve banks t h e power t o
exchange a n d r e - e x c h a n g e f e d e r a l n o t e s f o r gold, a n d v i c e
versa.
Mr+ Curtis:
I
n the seventh paragraph, w h i c h i s No.
125 i n this other copy, w e struck out the word "like" before"collateral", s o that the bank would have the privilege o f substituting a n y collateral o f equal amount, whether
it w a s s i m i l a r
t o t h e c o l l a t e r a l a l r e a d y h e l d o r not.
If you a r e going t o broaden t h e different types o f
things t h a t m a y b e put u p a s collateral, y o u have g o t t o
stbike o u t that word "like".
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Federal Reserve Bank of St. Louis
50
Governor V a n Zandt:
W h y d i d n e t t h e Lxecutive C o m -
mittee h a n d l e p a r a g r a p h 1 5 o f that?
T h e Attorney general i s attending t o
Mr. Curtis:
one.
Governor V a n Zandt:
T h a t i s the o n e that =
wanted
clarification o f than all t h e rest p u t together.
Mr- Curtis: I
so
« s e were afraid t o tackle it. T h a t
far a s I know.
question
t h i n k t h a t w a s t h e o n l y reason,
i s now
u p t o the Attorney General,
a n d there
i s
not m u c h u s e i n f o o l i n g w i t h i t u n t i l w e f i n d o u t w h a t i t
means now.
Section 1 8 sugested striking o u t both provisos--137 a n d 138 i n this copy--- a n d making clear just what
the allotment should be.
T h e result o f the change o f
language s u g g e s t e d h e r e w o u l d n o t c h a n g e L h e p r e s e n .
pules o f the Board, b u t t h e rulings o f the Board have
been m a d e o n forced c o n s t r u c t i o n s t h a t h a v e s i m p l y t a k e n
what t h e y felt Congress intended a n d have gone i n one
instance d i r e c t l y c o n t r a r y
Act.
t o the actual language
o f the
T h i s will bring i n harmony t h e actual ruling o f
the Board w i t h the statute a n d what undoubtedly Congress
did intend.
In the fifth paragraph o f Section 18, third line,
strike out the word "four" and substitute the word "fourteen".
Governor McDougal:
was a n error!
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Federal Reserve Bank of St. Louis
H a s i t been decided t h a t that
T h a t w a s s o m e t h i n g t h a t p u z z l e d everybody.
Mr- Curtis:
S e c t i o n four does n o t authorize t h e
apt
purchase
o f these b o n d s a t all.
S e c t i o n 1 4 does.
Governor Wold: T h e r e i s some bearing o n that i n No.
Mr. Curtis:
Y e s , b u t i t does n o t authorize it.
Governor W e l d : I
Mr. Curtis:
know w e d i s c u s s e d t h a t a t o n e time.
I t authorizes the Comptroller t o issue
the circulation, b u t i t does n o t directly authorize t h e
purchase;
a n d f o u r t e e n does.
In t h e s i x t h p a r a g r a p h i t w a s s u g g e s t e d
t o strike o u t
the "thirty" provision and substitute the word "eighteen".
Governor V a n Zanct:
Governor Rhoads:
W h a t i s t h e object o f that?
N e x t y e a r i t will b e seventeen
years.
Mr- Curtis:
T h e object o f t h a t w a s s i m p l y t o pre-
vent t h e statute f r o m requiring a Federal reserve b a n k
to e n t e r i n t o a
contract
t o d o something t h a t lasted b e -
yond its: charter.
Governor Rhoads:
B u t next y e a r there will b e only
seventeen y e a r s o f l i f e f o r t h e c h a r t e r - - - a n d sixteen,
and s o forth.
W
e w i l l d o t h i s e v e r y year.
T h e r e i s nr
point i n making i t eighteen.
The Chairman:
T h e period o f t i m e starts
from t h e d a t e o f t h e e n a c t m e n t
t o run
o f t h e law, a n d i f t h e
statute h a d s a i d o r i g i n a l l y t w e n t y y e a r s i n s t e a d
of
eighteen years, i t would b e concurrent a n d t e r m i n a t e c o n currently;
b u t a s i t stands n o w , t h e c h a r t e r o f e v e r y bank,
the life o f every bank, expires t e n years prior t o the
termination
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Federal Reserve Bank of St. Louis
o f its contract
t o b u y t h e s e bonds.
52
Governor Rhoads:
B u t suppose v e make t h e contract
five years f r o m now, o n a conversion basis;
w e will only
have fifteen years t o run.
O o y o u r u n ageinet a
culty i n putting a n y n u m b e r
i n there.
The Chairman:
difii-
T h a t language c a n b e adjusted a l l
right.
Governor Rhoads:
I s not that so, Mr. Gurtis?
belicve y o u a r e c o r r e c t
Mr- Curtis: I
i n that.
Governer W a n Zandt: " G o n t i n u e i n force f o r a period
not t o exceed the life o f the charter".
Governor McCord:
" T h e obbigation o f the bank t o
redeem said gold notes shall n o t exceed t h e life o f its
charter."
Mr. Curtis:
A S a matter o f fact, a s the phraseology
is "not t o exceed thirty years",
with, u n l e s s C o n g r e s s w a n t s
@oes n o t r e q u i r e a
i t i s not worth fooling
t o c u t d o w n o n it; b e c a u s e
thirty y e a r contract.
As t o Section 22, I
have a
has n o t b e e n a s y e t s u b m i t t c d
draft o f amendment w h i c h
t o t h e L x e c u t i v e Committee.
I will r e a d t h i s o u t a n d t h e n h a n d a
body.
I
it
copy around
t suggests amending t h e second paragraph
t o everyt o read
as follows:
"Other than the usual salary o r director's fee paid
to a n y officer, d i r e c t o r , e m p l o y e e
ber bank, a n d o t h e r t h a n a
the b o a r d o f directors
or, e m p l o y e e
o r attorney o f a
reasonable f e e
mem-
a l l o w e d
by
o f s u c h b a n k t o a n officer, d i r e c t -
o r attorney f o r special services r e n d e r e d
to
such bank, n o officer, director, employee o r attorney o f
a member b a n k s h a l l b e b e n e f i c i a r y
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Federal Reserve Bank of St. Louis
o f o r receive directly
53
or indirectly, c i t h e r f r o m t h e b a n k o r f r o m o t h e r p e r s o n
or persons a n y fee, c o m m i s s i o n ,
tion f o r o r o n account
y i f t o r other considcra-
c f h i s services,
v o t e o r influence
aa such officer, director, employee o r attorney,
nection w i t h o r i n respect
payment, e x c h a n g e
bonds,
i n ¢on—
o f a n y loan, p u r c h a s e , s a l e ,
o r transaction w i t h respect
o r cther investment seturities,
of exchange, a c c e p t a n c e s , b a n k e r s !
t o stocks,
o r motes, b i l l s
bills, c a b l e transfers
or mortgages m a d e b y o r o n behalf o f such bank o f which h e
is a n officer, d i r e c t o r , e m p l o y e e
o r attorney, p r o v i d e d
that t h i s r e s t r i c t i o n s h a l l n o t b e c o n s t r u e d
t o cover
transactions m a d e i n good faith a n d i n the ordinary
course o f business b e t w e e n a
member b a n k a n d a n y o t h e r
person,
i n which t h e compensation
f i r m o r corporation,
is r e c e i v e d
b y s u c h officer, d i r e c t o r , e m p l o y e e
ney f r o m s u c h o t h e r person,
f i r m o r corpération,
which s u c h officer, d i r e c t o r , e m p l o y e e
no p a r t o r h a s n o v o t e i n behalf
examiner, p u b l i c
o r attorand in
o r attorney takes
o f t h e m e m b e r bank.
N o
o r private,shall d i s c l o s e t h e names o f
borrowers o r the collateral f o r loans o f a member b a n k
to o t h e r t h a n t h e p r o p e r o f f i c e r s
o f such bank without
first h a v i n g o b t a i n e d t h e e x p r e s s p e r m i s s i o n
from t h e C o m p t r - l l e r
i n writing
o f t h e Currency o r f r o m t h e board
of directors o f such bank, except w h e n ordered t o d o s o
by a
court o f c o m p e t e n t j u r i s d i c t i o n
the Congress o f the United States,
thereof,
o r a n y committee
o r b y direction
o r o f either House
o f Congress
o r o f cither H o u s e
duly authorized, p r o v i d e d t h a t t h e C o m p t r o l l e r
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Federal Reserve Bank of St. Louis
of
o f the Cur-
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Federal Reserve Bank of St. Louis
rency a n d a n y national b a n k examiner shall give s u c h information concerning a member b a n k t o the Federal reserve b a n k
of which i t i s a member u p o n request o f such Federal reserve
bank.
A n y person violating a n y provision
o f this section
shall b e punished b y a fine o f not exceeding $5,000, o r
by imprisonment not exceeding one year, o r both."
If you have n o t h a d a n opportunity o f following along
the test with t h e existing text, t h e changes provide f o r
taking o u t from t h é prohibition o f the receipt o f fees o r
commissions, transactions m a d e i n good faith i n the w a d s
nary c o u r s e o f b u s i n e s s w i t h a n o u t s i d e p e r s o n o r corpora-—
tion, a n d where t h e officer o r director o r employee o f the
bank h a s n o p a r t
member bank.
I
Board meetings,
i n the transaction
f he is a
director
the b o t t o m a
o f the
h e has n o vote a t
o r i f h e i s a n officer, h e has nothing t o
do w i t h t h e p e r m i t t i n g o f s u c h a
Let h i m m a k e a
i n behalf
profit
o n it.
transaction
t o g o through.
T h e n i t also adds d o w n a t
requirement t h a t t h e C o m p t r o l l e r
o r the bark
examiner s h a l l g i v e t h e i n f o r m a t i o n m e n t i o n e d h e r e t o t h e
reserve b a n k .
The Chairman:
T h e r e are o n e o r two things t h a t occur
to me, h a r i n g this read, a n d I d o not know b u t what Mr.
Gurtis c a n c l e a r 1 t a l l u p w i t h a
word.
It s e e m s t o m e t h a t t h i s c o n t a i n s
n o provision f o r
enfercing t h e criminal feature o f the statute.
that s u c h a
person s h a l l b e p u n i s h e d
onment n o t e x c e e d i n g o n e y e a r ,
by a
L t Baye
fine o r impris-
o r both, b u t d o e s n o t s a y
what p r o c e d u r e S h a l l b e f o l l o w e d
i n order
t o enforce t h o s e
penalties.
n
Mr. Gurtis:
t t h i n k t h a t would
o
b e neces-
Sary.
t makes n o disposition o f the fines
I
The Chairman:
i t dows n o t s a y where t h e y will
or p e n a l t i e s c o l l e c t e d ;
go.
I
Governor McCord:
s not.that provided f o r i n the
Revised Statutes o f the United States, anyway?
Mr- Curtis: I
think i t is, Governor McCord:
think t h e r e a r e p e n a l p r o v i s i o n s
i n the criminal c o d e
that c o v e r a l l c a s e s w h e r e n o s p e c i f i c s t a t e m e n t
Governor V a n Zandt:
i s made.
Y o u have t h e same t h i n g i n the
national b a n k act.
w h a t i s your pleasure
The Chairman:
i n regard t o
these recommended changes i n the l a w that have b e e n prepared w y o r under t h e d i r e c t i o n o f t h e i x e c u t i v e C o m m i t t e e ?
Governor V a n Gandt: I
modified
b y t h e Conference.
Governor Wells: I
Governor e a y :
second t h e motion.
M r . Chairman, I
deal h a s b e e n a c c o m p l i s h e d
form. I
move t h e y b e approved a s
believe t h a t a g r e a t
b y presenting t h i s
i n concrete
think w e have h a d illustration i n going over
them that t h e language needs v e r y carefully t o b e considered.
V
e a r e proposing
a n amendment
t o t h i s Act,
a m
possibly i n discussing i t around t h e Board w e d o not have
that o p p o r t u n i t y
t o give s u c h refloctive consideration a s
we o u g h t t o t h e language. I
a m i n agreement w i t h y o u
that, rather t h a n have these a s the formal recommendations
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Federal Reserve Bank of St. Louis
56
of t h e conference o f Governors a S amendments t o the Act,
that i t would b e better f o r o u r Executive Committee t o
present these t o the Board o f Governors w i t h a sugj;estion
they c o n s i d e r t h e m a n d c o m m u n i c a t e
Reserve B o a r d
tions
t o the "ederal
i n each individual c a s e s u c h recommenda-
a s t h e G o v e r n o r s m a y have.
I
l think t h a t i t m i g h t
perhaps l e a d t o m i s u n d e r s t a n d i n g
i f this conference
of Governors were t o consider i n wholesale amendments t o
the t e d e r a l R e s e r v e A c t a n d t h s p r o p o s e t h e m i n s u c h a
formal manner. I
think t h e y would
b e accepted
better p a r t a n d w o u l d h a v e g r e a t e r i n f l u e n c e
suggest t h e s e t h i n g s i n f o r m a l l y
i n writing
i n much
i f w e would
t o t h e Federal
Reserve B o a r d f o r consideration.
Governor wWeDougal: I
Governor S e a y ,
believe that t h e views o f
a S h e expresses t h e m , a r e i n c o n f o r m i t y
with this, e x c e p t i n g w i t h o u t r e c o m m e n d a t i o n ,
bank shall consider t h e matter,
s o that e a c h
o r each o f the Governors,
individually, a n d make thcir recommendations direct t o the
Board.
A m I right i n that?
Governor S e a y :
Y e s . I
do not think that a
recom-
mendation c o m i n g f r o m t h i s m e e t i n g a s a n e x p r e s s i o n o f
the crystalized views o f the meeting will b e a s effeetive i n b r i n g i n g a b o u t a m e n d m e n t s ,
as s s f e a
course o f p r o c e d u r e
or,
i n fact, w i l l b e
t o effect these amendments
as would b e i n d i v i d u a l c o m m u n i c a t i o n s f r o m t h e d i f f e r e n t
banks.
O n e bank might w a n t t o have this brought t o the
attention o f t h e F e d c r a l R e s e r v e B o a r d a s t h e r e s u l t o f
action b y t h e d i r e c t o r s
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Federal Reserve Bank of St. Louis
o f t h a t bank.
A n o t h e r might n o t
57
consider
i t necessary.
B u t I
believe t h a t d e a l i n g
with i t individually i n that w a y i s a better a n d safer
course.
The Chairman:
Later I
would like t o discuss this
from another point o f view, w h i c h has some bearing o n
this m a t t e r .
Governor Seay: I
think, Mr. Chairman, t h a t i f one
of these things should g e t before Congress a s the formal
recommendation o f a Governor,
i t would subject u s a s a n
executive b o d y t o f i r e a n d c r i t i c i s m ,
w h i c h i s unneces-
sary t o d r a w d o w n u p o n ourselves, s i n c e w e a r e s u p p o s e d
to b e a n a d m i n i s t r a t i v e b o d y s u b j e c t
higher b o d y a p p o i n t e d
t o t h e orders
of a
b y Congress.
Governor MoDougal:
D o y o u not think that t h a t
criticismwould l i k e l y occur i f w e followed literally
the suggestion that y o u have made that t h e matter b e
referred b a c k t o t h e E x e c u t i v e C o m m i t t e e a n d w e r e p o r t
our findings t o the Federal Reserve Board?
Governor Seay: I
would not refer this back t o
the Executive Committee, b u t I would suggest t h a t t h e
Executive Committee l a y before t h e Governors t h e conclusions t h e y h a v e r e a c h e d a n d r e c o m m e n d t h e m t o t h e c o n sideration
o f t h e G o v e r n o r s w i t h t h e v i e w c f taking s u c h
action a s I have indicated.
The Chairman:
T h e m o t i o n b e f o r e t h e meeting, m a d e
by G o v e r n o r V a n Zandt,
a n d seconded
b y G o v e r n o r Wells,
is t o approve these recommended changes i n the law.
Governor Seay: I
ment.
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Federal Reserve Bank of St. Louis
offered m y statement a s a n amend-
58
The Chairman:
G o v e r n o r V a n Zandt,
w e h a v e a n amendment
to your motion, t h e substance o f which i s that t h e Executive C o m m i t t e e c o n v e y t h e s e r e c o m m e n d a t i o n s
t o the Govern-
ors o f t h e twelve banks w i t h t h e suggestion that t h e y make
their o w n views k n o w n d i r e c t l y t o t h e F e d e r a l R e s e r v e
Board individually.
Governor McCord:
T h a t would c a r r y with i t the r e =
quirement t h a t t h e y h a d t o m a k e t h e i r v i e w s known.
Governor
a y ’
N o .
Governor I
withdraw
m y s e c o n d t o t h e motion,
Mr- Chairman.
Governor McDougal:
T h e s e changes n o w convey t o t h e
members o f the Conference t h e views o f t h e Executive
Committee,
again.
s o that there i s n o need o f taking that action
T h e y have a
are a t liberty,
copy o f t h e suggestions,
o f course,
a n d they
t o change t h e m t o suit their
own v i e w s - - -
Governor Seay:
the r e s u l t s
mendations
W h a t I
o f t h i s meeting,
desired t o avoid w a s that
a s expressed
i n those recom-
b e formally laid before t h e Federal Reserve
Roard a s t h e r e c o m m e n d a t i o n
think t h a t t h a t w o u l d b e a
The Chairman:
o f t h e Governors. I
d o not
desirable c o u r s e .
I - 8 0 : HOt, S i t h e r .
Governor V a n Zandt:
r a i d n o t “include that:
i n -my
motion.
Governor Seay:
these t h i n g s
I
f w e act upon that a n d adopt
w e a r e accustomed
t o communicate
such t h i n g s a s w e h a v e a g r e e d u p o n here.
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Federal Reserve Bank of St. Louis
t o t h e Board
|
5
D
Governor F a n c h e r :And~ t h a t - i s - w h a
u to
want
.y
to
avoid?
Governor Seay:
The Chairman:
T h a t i s what +
want t o avoid.
G o v e r n o r Wells h a s withdrawn his
second t o Governor Van Zandt's motion.
Governor V a n Zandt: I
Chairman. I
up. I
withdraw m y motion, Mr.
was simply trying t o get t h e record cleaned
did n o t s a y anything i n m y motion about_present—
ing i t t o t h e F e d e r a l R e s e r v e Board.
that w e a s a
M
y motion w a s
body a p p r o v e t h e s u g g e s t i o n s t h a t w e r e o f -
fered t o u s b y the Executive Committee.
would l i k e t o a s k i f w e w e r e
Governor Aiken: I
not r e q u e s t e d
b y t h e Federal R e s e r v e B o a r d t o c o n s i d e r
the A c t a n d s u c h a m e n d m e n t s
a s w e s a w f i t a n d make s u c h
suggestions t o them a s occurred t o us.
The Chairman:
W e were.
make this r e m a r k subject
Governor Aiken: I
t o what
you are going t o S a y later a s t o the situation, b u t i t
seems t o m e perfectly absurd,
i f w e are agreed o n these,
to g o t h r o u g h t h e f i c t i o n o f i n d i v i d u a l c o m m u n i c a t i o n s
which recommend t h e s a m t h i n g which w e are all agreed
upon here, instead o f referring this a s a body t o the
Federal Reserve Board a s t h e ixformal expressiom o f our
opinion a s t o amendments
The Chairman: I
get a
t o this Act.
ean see that w e are n o t going t o
clear, crystallized o p i n i o n o n t h i s s u b j e c t w i t h o u t
laying i t o n the table f o r a few minutes; a n d l e t m e
state t o the Board,
expected
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Federal Reserve Bank of St. Louis
t o this meeting,
a t least, w h a t 1
had
t o d o t h e f i r s t t h i n g t h i s morning, o r , a t a n y
60
rate, after o u r committee h a d waited u p o n the Federal
Reserve Board. I
a m going t o a s k t h e stemographers
if
they w i l l l e a v e t h e r o o m w h i l e w e a r e d i s c u s s i n g t h i s ,
and i f Mr. C u r t i s ,
i m the course
feels disposed t o d o likewise,
to do so.
o f t h e dis¢eussion,
h e i s a t perfect liberty
W e do not want t o have this discussion o n
the r e c o r d .
(The stenographers thereupon left the room, a n d
the c o n f e r e n c e
clusion
o f which session a
o'clock p s me)
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Federal Reserve Bank of St. Louis
w e n t into executive session,
recess
a t the con—
w a s taken until 2 : 5 0
AFTERNCON SESSION.
The C o n f e r e n c e r e a s s e m b l e d ,
pursuant
t o recess,
at
2250 oo cioek D e om.
The Chairman:
T h e meeting will c o m e t o order.
The matter before t h e meeting prior t o our going into
Executive S e s s i o n w a s w i t h r e l a t i o n
sections
t o Clarifying certain
o f t h e Federal R e s e r v e Act. .
These s u g g e s t i o n s
have a l l been reviewd a n d stated t o the meeting.
What i s your wish i n regard t o that subject a s t o
either t h e adoption o f the proposed amendments t o b e recommended t o t h e Board,
o r a s t o dealing w i t h i t b y some o t h e r
method?
Governor Miller:
M r . Chairman, I think this body
would get a great deal o f light o n that matter i f we were
to have this very interview that w e have b e e n talking
about.
T h e Board m a y n o t w a n t u s t o m a k e a n y suggestions
at all, a n d i f they s a y that t o u s w e will n o t make any.
Governor Van Zandt:
B u t they have asked us for sug-
gestions.
The Chairman:
Y e s ; these were made at their sugges-—
tion.
Governor Seay:
I s i t not true that w h i l e they asked
us t o make certain suggestions t h e y intimated t o u s that
they should b e aa@ few a s possible?
The Chairman:
Governor eay:
Y e s .
B u t they did not ask us t o undertake
to clarify t o a n y great extent a n y great portion o f the law,
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Federal Reserve Bank of St. Louis
62
D
did t h e y ?
o y o u think that w a s embraced
i n their
expectation?
a m unable t o say, o f f hand, j u s t
The Chairman: I
what t h e record shows, b u t I
think that request f o r sugges-
tions a s t o amendments w o w made informally, w i t h t h e idea
that i f anything was t o b e done i n the w a y o f amendments
to a
it w o u l d b e c o n f i n e d
matters
few o f t h e m o r e important matters
o f detail b e i n g l e f t o u t .
Governor Seay:
H a v e w e n o t conveyed t h a t t o them?
Did we not d o that i n Minneapolis, giving them the principal h e a d s ?
Tne Chairman:
W e had a
joint meeting w i t h t h e Board
and @ i s c u s s e d a l l o f t h e s e a m e n d m e n t s
Governor S e a y :
a t s o m e length.
H a v e w e n o t complied w i t h their r e -
quest, w i t h o u t g o i n g i n t o t h e m a t t e r a s w e a r e a t t e m p t i n g
to d o here?
Mr. Curtis:
T h i s h a s o n l y been discussed w i t h the
Board b y t h e E x e c u t i v e Committee.
The Chairman:
M r - Curtis
i s right.
has o n l y b e e n d i s c u s s e d w i t h t h e B o a r d
p
O tear this
b y t h e Executive
Committee a n d n o t b y t h e f u l l c o n f e r e n c e -
A
s I
under-
Stand i t the Conference a t Minneapolis finally referred
the whole subject o f amendments t o the tyecutive Committee.
Governor M e C o r d ,
by a
a r e y o u prepared
t o brea
t h e deadlock
resolution?
Governor McCord: I
outlined
think t h e p r o p e r c o u r s e i s t h a t
p y you, V P . Gisirian:
T h a t a
committee consist-—
ing o f three members convey t o the Board o u r attitude i n
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Federal Reserve Bank of St. Louis
63
this matter, leaving t h e matter o p e n f o r t h e m t o suggest
a plan o f working together.
The Chairman:
suggestion,
H o w w o u l d i t do, a s a n a l t e r n a t i v e
t o instruct t h e Secretary
t o convey these
finished suggested amendments t o the Board w i t h the statement t h a t t h e y a r e t h e a m e n d m e n t s d i s c u s s e d
a t this meet-
ing, t h a t t h e y h a v e b e e n d i s t r i b u t e d a m o n g t h e G o v e r n o r s
for e x a m i n a t i o n a n d f o r c o r r e s p o n d e n c e w i t h r e s p e c t t h e r e t o
with t h e Federal Reserve Board:
there.
W e catch t h e m both ways
W e report i t simply i n a n informal manner, a d -
vising t h e m that this i s t h e stuff that h a s been prepared,
and concerning which they will doubtless h e a r i n detail
from the Governors.
Governor Seay: I
cannot help but feel, i n view o f
the situation, t h a t i t would b e a mistake f o r us, a t this
time,
t o l a y before t h e m these detailed discussions.
Governor Van Zandt: I
move that the mtter b e laid
on the table until we have had a meeting with the Federal
Reserve Board.
Governor Fancher: I
Governor Miller: I
it i s a
I
also second t h a t motion. I
think
wise c o u r s e t o pursue.
The Chairman:
put.
second that motion.
T h e n that i s the motion that will b e
g there a n y discussion o f it?
(There w a s n o d i s c u s s i o n a n d t h e m o t i o n w a s c a r r i e d . )
The Chairman:
T h e report o f the “xecutive Committee
refers t o a recommendation b y t h e byecutive Committee a s
to the method o f dealing w i t h t h e expense already incurred
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Federal Reserve Bank of St. Louis
64
in operating t h e Gold Settlement Fund.
G o v e r n o r McDougal,
you will correct m e i f 1 a m not right i n m y memory o f one
or two o f these matters.
Executive Committee.
T h i s was referred t o the
T h e Committee recommended t h a t t h e
expense o f $1,030 odd dollars that had accrued t o date b e
divided i n t o t w e l v e e q u a l p a r t s a m o n g t h e r e s e r v e b a n k s
without a n y discussion o f whether that w a s i n accord w i t h
the proportion o f benefits derived f r o m t h e operation, w i t h out considering t h a t i t estabbishes a
Givision o f expense,
be c o n v e y e d
precedent f o r future
a n d that t h e recommendation should n o w
t o t h e Federal Reserve Board,
this meeting.
I
t is a
very Small matter,
i f adopted
by
a n d rather t h a n
go t o the trouble o f a n analysis o f the accounts a t this
time, t h e e x p e n s e b e i n g s o small, I
think i t w a s t h e v i e w
of t h e E x e c u t i v e C o m m i t t e e t h a t t h e s h o r t e s t d i s p o s i t i o n
of t h e m a t t e r w a s t o d i v i d e i t u p e q u a l l y a m o n g t h e t w e l v e
banks.
Governor Miller:
T h a t Peters
t o the expenses
o f the
meeting?
The Chairman:
N o , Governor Miller, this refers t o
the expense o f operating t h e Gold “ettlement Fund, w h i c h
consists o f the cost o f buying a
safe, stationery, a n d
a few matters o f that kind.
Governor Rhoads: I
will r e m i n d y o u o f t h e f a c t t h a t
the Federal Reserve Board has already put that into their
expense account.
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Federal Reserve Bank of St. Louis
The Chairman: I
d o not know that this will d o a n y
65
B a s e d o n the method adopted b y the Federal Reserve
good:
Board t h e N e w Y o r k B a n k c a r r i e s f o r t y p e r c e n t o f t h e e x -
pense o f the fund, a n d derives t h e least benefit o u t o f it.
(There were calls f o r the question.)
The Chairman:
w e have n o motion yet.
Gentlemen,
thought t h e C h a i r m a n m a d e a
Governor Rhoads: I
mo-
tion.
I
Governor McCord:
the s y s t e m a d o p t e d
the s i s
f y o u a r e going t o change i t from
b y t h e Board,
o f t h e percentage
The Chairman:
y o u h a d b e t t e r p u t it. o n
o f clearings.
W e would p a y i t all, then.
think, M r . C h a i r m a n ,
Governor M c D o u g a l : I
that you
have stated exactly t h e action that w a s taken o n that mat=
ter, e x c e p t t h a t I
though I
d o n o t b e l i e v e t h e m i n u t e s show~--- a l -
may b e mistaken--- that i t was understood t h a t
this w a s n o t t o b e c o n s i d e r e d
as a
precedent. I
was discussed a n d agreed upon, b u t I
know that
a m inclined t o thiak
that t h e minutes d o not s h o w that.
Governor Wold:
I t was i n the minutes a s I read them.
Governor Rhoads: I
The Chairman:
report
move t h a t t h e r e p o r t b e accepted.
I t i s moved a n d seconded that t h e
o f t h e Lyecutive Committee a n d t h e recommendation
as t o t h e m e t h o d o f d e a l i n g w i t h t h i s i t e m o f e x p e n s e b e
accepted a n d approved.
Governor V a n Z a n d t : |
I
s that a n i t e m o f expense
that h a s a l r e a d y b e e n i n c u r r e d ?
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Federal Reserve Bank of St. Louis
The Chairman:
Y e s , about a
Governor McDougal:
thousand dollars.
I t i s administration expense.
66
The Chairman:
I
s there a n y d i s c u s s in
o o f Governor
Rhoads! motion?
(There w a s n o d i s c u s s i o n a n d t h e m o t i o n w a s carried.)
The Chairman: I
would l i k e t o report,
f o r t h e purpos-
es o f the record, a n d 2 s i t bears o n this matter, t h a t I
finally completed t h e inquiry i n regard t o the possible
expense o f s h i f t i n g g o l d , w h i c h m a y b e a s s e s s e d a g a i n s t
us b y the Treasury Department.
Mr. Warburg writes m e confidentially t h a t through Mr.
Allen h e had inquiry made o f Mr. Burke, t h e Treasurer o f
the United States, w h o replicd,
think
a n y expense
b y letter, t h a t h e did n o t
h a d b e e n incurred
t o date;
a n d that
h e
would have a n investigation made a n d advise Mr- Allen i n a
few days i f there w a s a n y such expense.
Mr. Warburg h e l d that letter f o r t w o o r three weeks
and t h e n wrote m e that h e thought i t was perfectly @afe,
in view o f the fact that h e had n o t heard anything further
from Mr- Burke,
t o assume that there was n o expense a s yet
incurred i n shifting t h e gold.
estoppel
of a
claim,
W h i l e t h a t i s not a formal
i t i s about a s m u c h a s w e could e x -
pect t o get n o w without stifing t h e subject up.
‘Governor M c D o u g a l : T h e expense involved there would
naturally come f r o m express charges, a n d s o forth, w o u l d
it not?
The Chairman:
W e l l ,
b y whatever m e t h o d t h e y employed
to move t h e gold, express, parcels post, a n d s o forth.
Governor McDougal:
I t might interest y o u t o hear a
little information which I have ascertained b y making a n
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis
67
inquiry through o u r official i n Chicago,
H e says w h e n
there a r e a n y Shipments t o make between t h e sub—treasurers
that t h e e x p e n s e i n v e l v e d i s p r a c t i c a l l y n o t h i n g , o u t s i d e
of insurance;
t h a t t h e y s h i p everything,
f r o m pennies
up
to and including g ld, arounc t h e country b y mail a n d that
they p a y n o charges except t h e insurance charges; t h e t t h e y
arrange i t , w h e r e v e r t h e y h a v e t h e c a p a c i t y i n t h e m a i l
carrying c a r s ,
t o t a k e f o l d a n d c u r r e n c y o f a n y kind, a n d
that n o expense i s involved,
T h a t was a
very interesting
thing t o me,
Governor K a i n s :
I
t i s very interesting because
our situation i n San Prancisco, I
in order t o get a
o f
wanted t c bring that u r
little light o n the subject.
V e are
constantly receiving g o l d a n d that g o l d must b e eventually
sent t o New York. T h e r e i s n o other way out o f its A
great m a n y i m p o r t a t i e n s
o f gold have taken place f r o m
Australia this year, a n d wnen i t reaches S a n Francisco t h e
gold i s immediately s e n t t o the mint, melted up, a n d the
holder a f the g o l d gets a
certificate f r o m t h e Treasurer
or from t h e Mint Master which i s collectible i n New York
at par.
Tater o n ,
W e d o not want t o b e saddled w i t h that expense
V
e want a n understanding
The Chairman: I
a s t o that.
d o not think there h a s been a n y ex—-
pense incurred t s date, I
think Governor McDougal's
information a s t o the practice o f the Department i s cor~
rect.
Governor Kains: f o k m e w . i t i s .
The Chairman:
I
n one case t h e y tried t o d o thet a n c
6s
fell down a n d had t o get tle American Express -Company to.
come i n a n d m o v e a
very l a r g e s h i p m e n t
o f gold a t a
very
great expense t o the Government.
Governor McDougal:
T h a t m a y happen, because i f they
depend u p o n t h e i r surplus m a i l c a r r y i n g f a c i l i t i e s ,
facilities m a y not always b e availablo. I
those
can u m erstand
how that might be.
The Chairman:
T h i s report i s rather informal, but I
think that i s about the best that c a n b e done o n that sub-—
ject u p t o date.
Governor W o l d :
T h e resolution adopted
b y the Executive
Commit tee o n that subject p r o v i d e d f o r a proper distribution o f expense,
i f any.
Personally I
a m not able t o
grasp this and I want a little light o n it. I
talked t o
Mr. Kains about i t , a n d o f course h e i s very much interested i m it, a n d h e was n o t a b l e t o explain t o m e just what
the meaning o f the resolution is.
I t may m e a n something
which i s rather different.
The Chairman:
It w a s d e v i s e d
I
t is a
little o b s c u r e , I
b y o n e M c K a y o f Chicago,
admit.
a n d o n e Hendricks
of N e w York.
Governor W o l d :
The Chairman: I
Y e s , L l remember that.
think t h e idea i s that a s l o n g a s
we are putting gold i n t o t h e sub-treasuries,
b y which
expense c a n b e caused, t h a t t h e expense that will arise
will b e caused b y the withdrawal o f gold f r o m the sub-—treasury that requires t h e movement o f gold t o that sub-treas-—
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Federal Reserve Bank of St. Louis
69
ury, o n d consequently t h e burden o f the expense o f shipping that g o l d should b e borne b y those banks t h a t g e t the
gold out o f the sub-treasury a m c a u s e that movement.
Governor Wold:
and myself?
B u t where does t h a t leave V a n Zandt
W e have n o sub-treasury,
w e put i t i n one
sub-treasury a m d t a k e i t o u t o f s o m e o t h e r sub-treasury.
Governor Van Zandt:
W e will get i t out o f Washing-
ton and we won't have mything t o pay, because this says
"sub-treasury".
Governor Kains ;
T h e r e a r e s i x o f us i n that s a m e
posi tion.
Governor V a n Zandt:
I t says, " W h e e a s ,
i t i s apparent
that n o e x p e n s e f o r t h e t r a n s f e r o f g o l d f r o m o n e p o i n t t o
another c o u l d a r i s e u n l e s s t h e w i t h d r a w a l s
Reserve B a n k a r e i n excess
by a
Federal
o f the deposits w h i c h have b e e n
ma d e b y such bank i n its sub-treasury."
Governor W o l d :
W h e r e
W o d o not make a n y deposits i n
Governor V a n Zandt:
a subtreaguby.
amount
i s our sub-treasury?
O n c e i n a while we do, but i t doesn't
t o a n ything GG. coe.
A l l o f o u r deposits a r e made
in Washington i n the Treasury.
Governor McCord:
posits
I
t costs m e more m o n e y t o make d e ~
i n m y sub-treagiry t h a n i t would c o s t m e t o make t h a m
in Washington.
The Chairman:
T h i s discussion i s academic:
expense o f this character h a s y e t arisen. I
N
o
d o not believe
we will h a v e a n y more difficulty i n agreeing a t s o m f u t u r e
date t h a n w e have h a d i n the past.
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Federal Reserve Bank of St. Louis
70
Governor Wold: I
did n o t want t o vote o n this until
I knew just exactly t h e effect i t was going t o have o n us.
Governor Van Zandt: W i t h o u t clarification 1 will vote
against t h e resolution.
The Chairman:
ground -
I t oaly covers fifty p e r c e n t o f the
I t was prepared u p o n t h e hypothesis that every
Federal Reserve Bank would operate through a
sub-treasury
in its o w n city, o r through t h e hearest sub—treasury.
Governor Rhoads:
L e t u s refer this t o a committee
of Governors w h o have n o t sub-treasuries
Governor Wold:
i n their cities.
W h y i s i t necessary
t o act upon i t
until w e m e e t u p w i t h t h e s i t u a t i o n ?
The Chairman: I
d o not think i t is.
Gov ermor V a n Zandt: I
think that will b e plenty o f
time.
The Chairman:
I s i t your desire t o pass this subject
for the present, leaving i t o n the program f o r future consideration?
Governor Wold: I
s o move,
Governor V a n Zandt: I
The Chairman:
I
if a
motion i s necessary.
second t h a t motion.
s there a n y further discussion?
(There was n o further discussion a m t h e motion was
carried.)
The Chairman:
T h e next item i s the report o f the Exe-
cutive C o m m i t t e e h a v i n g t o d o w i t h t h e s u b j e c t
collections.
o f check
T h a t matter cannot b e dealt w i t h finally b y
this meeting until a n opinion has been rendered b y the
Attorney General construing t h e law:
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Federal Reserve Bank of St. Louis
F r a n k l y I believe
74,
we w o u l d b e indulging i n a fruitless discussion t o review the work o f the committee i n that respect.
I suggest that this matter relating t o check collections b e l a i d o n t h e table, e x c e p t t h a t a c t i o n s h o u l d b e
taken b y this conference w i t h reference t o the report i n
answer t o t h o s e f i v e q u e s t i o n s , w h i c h r e p o r t h a s a l r e a d y
been submitted t o t h e Federal Reserve Board,
i n order that
those m e m b e r s w h o h a d n o t h i n g t o d o w i t h t h e p r e p a r a t i o n
of i t m a y v o i c e t h e i r o b j e c t i o n s
t o a n y part o f that report
or t o all o f it, a n d g e t their objections u p o n t h e record.
Governor Miller:
H a v e w e s m e information a s t o how
long i t will b e before t h e Attorney General will give h i s
opinion?
The Chairman:
T h e o n l y intimation w e have h a d was
brought o u t b y the fixing o f t h e date o f this meeting,
Governor Miller.
T h e Board said t h a t they would prefer t o
have t h e m e e t i n g g o o v e r f o r a
week i n t h e h o p e t h a t t h e y
might have t h e opinion b y that time, but, inasmuch a s a
good m a n y documents a n d a good deal o f data have b e e n r e quested f r o m the Board b y the Attorney General,
w e felt
that there might b e considerable delay.
Governor Van Zandt: I
had a letter, signed personally
by one o f t h e members o f the Federal Reserve Board, j u s t
a few days ago, i n which h e expressed t h e hope t h a t b y
February l s t t h e Federal Reserve Board would h a v e a definite
plan o f clearings a n d collections w h i c h they would put into
operation. I
came h e r e .
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Federal Reserve Bank of St. Louis
expected t o get some light o n that when I
12
The Chairman:
B u t that was just a
Governor V a n Zandt:
hope, w a s i t not?
I t was a hope, b u t there was a
definite d a t e given.
The Chairman:
T h e r e will b e n o plan, I
a m very sure,
until the Attorney General has rendered his opinion.
Govermsor M i l l e r :
W a s that letter received
a t a
recent
date?
Governor V a n Zandt:
J u s t a
few days before I
left
home t o c o m e here.
Governor Miller:
T h e y indicated t h a t they a r e ready
to a c t j u s t a s s o o n a s t h e o p i n i o n i s h a n d e d d o w n ?
Governor V a n Zandt: I
The Chairman:
would judge s o from that let-
T h i s subject o f chec& collections i s
an item i n the report o f the Lxecutive Committee, a n d i t
should b e actcd u p o n b y this meeting.
Governor V a n Zandt: I
move that t h e report o f the
Executive Committee o n that subject b e approved.
Governor McCord:
I f 1 remember correctly, m y bank
voted i n the negative o n that i n the Transit Men's meeting,
and this report i s based o n that?
The Chairman:
Yes.
Governor McCord:
my regret, I
V e r y naturally, a l t h o u g h m u c h t o
will have t o give a negative v o t e o n that.
That does n o t express m y own personal views, b u t m y board
is very much opposed t o the plan, a n d i n deference t o their
wishes I
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Federal Reserve Bank of St. Louis
will v o t e i n t h e negative.
73
The Chairman:
W h y d o w e vote o n a
plan that i s d e -
pendent e n t i r e l y u p o n t h i s o p i n i o n f r o m t h e A t t o r n e y G e n e r al? I
d o n o t t h i n k t h a t w e n e e d v o t e t o approve i t o r
disapprove i t .
Governor McDougal:
A s I understand it, w e are voting
now o n the Committee's report.
Governor V a n Zandt:
ceive a
second,
T h a t c a n be acted upon.
M y motion, w h i c h did not r e -
w a s t h a t w e approve t h e r e p o r t o f t h e E x e c u -
tive Committee o n that subject.
Governor Mjller:
T h a t i s r e a l l y v o t i n g o n t h e plan,
ie i t not?
The Chairman:
Y e s , I
think that i s really voting
o n t h e plan.
Mr-e Miller: I
move that i t b e laid o n the table for
the present.
The Chairman:
Executive Committee.
W e have acted u p o n the report o f the
O n e motion was adopted providing
that t h e r e p o r t b e r e c e i v e d a n d filed. .
O u r next proceed-
ure i s t o approve o r disapprove o f the action o f the
Executive Committee i n detail.
in order t o
a v o t d making a
W
e took t h e first action
blanket approval o f the
action o f t h e committee covering w o r k with which some o f
you gentlemen were n o t connected, a n d i n which y o u had n o
W e h a v e n o w reached t h e point o f acting upon that
part.
part o f their report having t o d o with check c o l l e c t i o n s , .
which recommends t h e adoption o f a plan.
Governor Miller: I
be l a i d
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Federal Reserve Bank of St. Louis
o n the table
move that that part o f the report
f o r future discussion.
74
I s i t not t r u e that t h e Confer-
Governor McDougal:
ence r e c o m m e n d e d t h e i n a u g u r a t i o n o f a
system i t s e l f
on
that p l a n , a n d n o t t h e E x e c u t i v e C o m m i t t e e ?
W e adopted that a t Minneapolis.
Governor Wold:
The Chairman:
Conference.
W
e d i d adopt t h a t a s t h e v i e w o f t h e
M r . F o o t e voted against it.
T h e preparation
of the details o f that p l a n was referred t o the kxecutive
Committee w i t h the understanding that t h e y would take i t
up with the Federal Reserve Board.
T h i s report o f the
Executive Committee h a s t o d o with the action taken b y that
Executive Committee subsequent t o t h e Minneapolis meeting.
Governor M c D o u g a l : T h i s i s simply a
bringing t h e p l a n t o t h e Conference,
Stands.
kind-
mtter n o w o f
a n d that i s where i t
W e have worked o u t n o detail o r anything o f that
W e have d o n e a s the Conference instructed u s t o d o
and nothing more.
T h e Conference instructed u s t o pre-
sent i t t o the Federal Reserve Board a n d w e have done that.
I think t h e report o f t h e Executive Committee s h o u l d h e a p proved b y this Conference.
The Chairman:
we a r e a c t i n g u p o n a
tee which,
T o get t o the right procedure here,
report m a d e b y t h e E x e c u t i v e C o m m i t -
i f approved,
m n e a n s t h a t w e a r e approving
again action taken a t the Minneapolis meeting.
i f 2t
is your wish t o d o that w e will p u t i t t o a vote.
L e
it i s y o u r w i s h t o l e t i t l i e o n t h e t a b l e w e w i l l p u t t h a t
to a vote.
I
t is a
question o f w h a t y o u d e s i r e
I want t o remind y o u , h o w e v e r ,
t o do.
t h a t t h e r e i s n o particular
point right n o w i n approving o r disapproving t h e action
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Federal Reserve Bank of St. Louis
75
taken b y the Executiee Committee which involves t h e approval
o r disapproval
of a
plan, b e c a u s e t h a t p l a n m u s t b e
held i n s u s p e n s e u n t i l t h e A t t o r n e y G e n e r a l h a s r e n d e r e d
his opinion.
A
s this report reads, a n d 1 think you will
find t h e minutes o f the txecutive Committee have t h e same
import, a
plan was submitted
oration o r p e r f e c t i o n o f a
t o t h e B o a r d , w h i c h w a s a n elab-
plan previously considered
at
the M i n n e a p o l i s C o n f e r e n c e .
Governor McDougal:
I
t w a s t h e actual plan;
there
was n o change.
The Chairman:
Y e s ,
Governor McDougal: I
i t w a s t h e a c t u a l plan.
think there were n o changes,
and 1 think what we have done i s entitled t o approval o r
disapproval b y this body, i t seems t o me.
make a n y d i f f e r e n c e w h e t h e r t h e y a p p r o v e
I t does n o t
i t o r disapprove
it; t h e y s h o u l d a t l e a s t a p p r o v e o u r efforts.
Governor V a n Zandt:
T h e Conference s i m p l y directed
the kxecutive Committee t o submit this plan t o the federal
Reserve Board a s being t h e views o f the Conference a t
Minneapolis.
T h a t i s t h e way 1 understand i t .
Governor Seay: I
did.
think that i s what t h e Committee
T h e Board declined
t o t a k e a n y attitude, u n d e r t h e
advice o f their counsel, because their counsel advised
them t h a t t h e y c o u l d n o t a g r e e t o t h e a s s u m p t i o n
o n which
the p l a n w a s based.
In t h e d i s c u s s i o n
certain q u e s t i o n s
those questions.
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Federal Reserve Bank of St. Louis
o f the plan t h e Board propounded
t o u s a n d w e prepared t h e answers
H e r e a r e t h e answers
to
t o those questions
propounded
t o w s b y t h e Board,
a n d i t seems
t o m e that
our action there should b e submitted t o this Conference
for a p p r o v a l
o r rejection.
The Chairman:
M r - Curtis w i l l r e a d t h e vote passed
at the Minneapolis Conference, a n d also the vote o f the
kxecutive Committee taking action o n this c a s e abject,
and w e will s e e i f w e c a n get action through c n that basis.
Mr. Curtis:
I t was voted, Mr. Foote not voting, "That
this C o n f e r e n c e a d o p t a s i t s r e c o m m e n d a t i o n t h e s u b s t a n c e
of V o t e N o . &
adopted
b y t h e transit Committee,
a n d rep-
resenting substantially t h e views entertained b y this Conference o f the method that should b e used i n handling t h e
collections,
a n d that t h e development
o f t h e details
of
the plan and the submission o f it t o the Federal Reserve
Board b e left t o the Executive Committee o f this Conference w i t h p o w e r t o i n v i t e s u c h o f t h e t r a n s i t m e n o f t h e
different b a n k s a s t h e y m a y s e e f i t t o a t t e n d m e e t i n g s
with the Federal Reserve Board."
The a c t i o n t a k e n b y t h e E x e c u t i v e C o m m i t t e e
at
its m e e t i n g o n December 1 4 , 1 9 1 5 , w a s a s follows:
"That the report o f the Committee consisting o f Messrs.
McKay a n d H e n d r i c k s , t o g e t h e r w i t h E x h i b i t s A
adopted a n d c o m m u n i c a t e d
and B , b e
t o t h e Federal R e s e r v e Board; t h a t
the B o a r d b e a d v i s e d t h a t t h i s r e p o r t h a s n o t b e e n s u b m i t -
ted t o o r received t h e approval o f the s i x federal reserve
banks which a r e not represented o n this committee; t h a t
the Board b e further advised t h a t i f any further statements o r details i n regard t o this matter a r e desired,
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Federal Reserve Bank of St. Louis
it
77
is r e q u e s t e d
t o indicate u p o n what particular p o i n t i t
wishes additional information,
a m t h a t i f possible a
fur-
ther report b e submitted i n connection w i t h the p l a n already
recommended,
o r whatever p l a n m a y b e adopted f o r t h e further
development o f the cohhection system."
The Chairman:
Gentlemen,
y o u have heard read b y
Mr. Curtis the substance o f the action taken b y the »xecutive Committee following t h e refermece o f this matter t o
the Lyecutive Committee o f t h e Minneapolis Conference.
Governor Kains: I
move that i t b e approved b y this
Conference.
Governor V a n Zandt:
Committee
T h a t t h e action o f t h e kxecutive
b e approved?
iima G o v e r n o r Kains:
cutive C o m m i t t e e
Y e s ; t h a t t h e action o f t h e ixe-
b e approved.
Governor V a n Zandt: I
The Chairman: I
will second t h e motion.
do not understand t h a t that vote
involve t h e approval o f the plan.
Governor V a n Zandt:
I t does not.
Governor Miller:
W h a t does i t involve?
The Chairman:
t merely approves t h e action taken i n
I
carrying o u t t h e d i r e c t i o n o f t h e M i n n e a p o b i s C o n f e r e n c e
to submit t o the Federal Reserve Board action determined
upon b y t h e M i n n e a p o l i s C o n f e r e n c e .
Governor Miller:
plan? I
W o u l d n o t t h a t b e voting
think everybody t h a t v o t e d
would b e committed t o the plan.
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Federal Reserve Bank of St. Louis
o n the
i n the affirmative
78
Governor McDougal: I
think t h e situation would b e
identical w i t h the situation which would have existed i f
the Executive Commit tee had never met.
affect t h e vote i n any way.
ence asked u s t o do.
W e have done what t h e Confer-
T r u e , w e have done i t i n part+
have n o t w o r k e d o u t a n y details,
TiO.
T h e n what
T h i s does n o t
W e
b u t w e have n o t b e e n asked
T h e situation
i s t h e situation?
i s that
the p l a n r e s t s w i t h t h e Board, a n d t h a t i s a s f a r a s w e h a v e
been able t o take it.
N o w , i s this Conference ready t o
approve t h e a c t i o n o f t h e E x e c u t i v e C o m m i t t e e w h i c h u n d e r -
took t o d o the best i t could w i t h t h e matter?
T h e y have
not done anything except t o add this matter which has t o
do with the five questions propounded t o i t b y the Federal
Reserve Board. I
d o not know h o w that will affect t h e
Situation.
The Chairman:
That i s a
T h a t c a n b e v o t e d u p o n separately.
separate p a r a g r a p h
Governor Miller:
i n t h e report.
W h y not just receive t h e report o f
the Executive Committee--- I
believe a
motion t o that e f -
fect h a s b e e n made--- a n d file it?
The Chairman:
T h a t «sotion was n o t seconded.
Governor Miller:
particular q w s t i o n ,
W i t h o u t reference t o a vote o n that
i t seems t o me that t h i s z
question cannot b e determined either o n e w a y o r t h e other.
Governor V a n Zandt: I
Committee
the other.
think i t leaves t h e txecutive
i n bad shape i f w e d o not a c t o n i t o n e w a y o r
T h e Conference instructed t h e Executive C o m -
mittee t o d o c e r t a i n things.
I
t did p a r t o f those things
and part o f those things i t left undone.
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Federal Reserve Bank of St. Louis
79
If w e d o not approve it, w e d o not approve o f
their n o t w o r k i n g o u t t h e details.
action i n t h e matter,
I
f w e d o approve t h e i r
t h e n that means t h a t w e are Satisfied
with t h e fact that t h e d i d not work out t h e details o f this
plan a s they were instructed t o do, b u t only complied w i t h
a part o f their instructions a s t o submitting i t t o the
Federal
Reserve Board.
Governor McDougal: I
a m very sorry that a l l o f t h e
members present h e r e today @ould n o t have been present a t
the several meetings w e have h a d since t h e last Conference
of Governors.
meetings I
I f I understand w h a t h a s occurred a t those
d o not think w e have changed t h e position o f
this collection p l a n i n the least.
I t rests right where
it was three months ago.
The Chairman:
T h e r e i s a motion t o approve t h e action
taken b y the lkxecytive Committee a t t h e direction o f t h e
Minneapolis
Conference.
T h a t m o t i o n w a s seconded.
(There were calls for the question and the motion was
carried. )
Governor Seay: I
member
i s doubtful
would like t o suggest t h a t i f a n y
a s t o whether
b y voting f o r this t h a t
he i s approving t h a t plan, t h a t h e may qualify h i s vote
to t h a t extent.
The Chairman: I
was going t o Suggest t h a t I would
call f o r t h e q u e s t i o n a n d a
reserved v o t e c a n b e r e c o r d e d
of course.
Governor M i l l e r : I
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Federal Reserve Bank of St. Louis
desire
t o b e r e c o r d e d a s . not v o t -
ing o n that question.
Governor McCord:
R e p o r t m e a s voting t o receive t h e
n o t binding.
o f t h e committee,
report
P l e a s e understand
a m n o t a n t a g o n i s t i c a b o u t this.
me - I
Governor Miller:
N o r aml.
Governor McCord:
T h i s i s a locah condition that l I
cannot c o n t r o l .
I
The Chairman:
t i s perfectly right a n d proper t h a t
your vote should b e resorded a s indicating just h o w y o u
feel about it.
wanted
Governor McCord: I
antagonizm
t o s a y that there w a s n o
o n m y part.
The Chairman:
Y o u have already received a
copy o f
the statements w h i c h took the f o r m o f answers t o the five
questions propounded b y the Foderal Reserve Board t o the
T h e Federal Reserve Board w a s advised
Executive Committee.
that t h e p r e p a r a t i o n o f t h e s e a n s w e r s w a s m a d e b y a
commit-
tee, a n d not b y the entire conference, a n d that consequently
it was subject t o review a t this conference.
What i s your p l e a s u r e
i n regard
t o that portion o f t h e
report.
Governor V a n Zandt:
Y o u mean with reference t o the
answers t o the five questions?
The Chairman:
Yes.
(tnformal discussion followed o n this matter, which
discussion t h e reporter w a s directed n o t t o take. )
The Chairman: I
suggest t h a t a c t i o n o n t h i s p a r t i -
cular matter g o over until a
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Federal Reserve Bank of St. Louis
later session, w h e n Mr. Miller
81
will have h a d a n opportunity t o consider these questions.
Mr. Miller has not deen them before today.
I
s there any
objection t o that?
In the absence o f objection w e will n o t consider t h e
action o n t h e f i v e q u e s t i o n s u n t i l M r . M i l l e r h a s h a d a
chance
t o s t u d y them.
The n e x t m a t t e r c o v e r e d
i n the report o f the Lxecu-
tive Committee was "telegraphic code for transfers between
Federal reserve banks a n d Federal reserve agents i n connection with t h e operation o f t h e Gold settlement fund-
Y o u
have probably a l l received b y this t i m e code words t o safedoubt i f there i s a n y
guard that f o r m o f transaction. I
necessity f o r f u r t h e r a c t i o n o n this p a r t i c u l a r matter.
Unless objection i s made w e will pass t h a t a s having
been d i s p o s e d o f .
(There was n o objection.)
The last i t e m i n the report o f t h e Executive Committee
has n o t y e t b e e n f i n a l l y d e a l t with.
port t h a t t h e m a t t e r w a s r e f e r r e d
T h i s i s simply a
re-
t o Messrs- M c K a y a n d H e n -
dricks a n d that their report should b e taken u p a t this
meeting: I
believe t h a t m a t t e r i s o n o u r r e g u l a r program,
and unless objection i s made w e will consider that i n its
regular place o n our program.
(There was n o objection.)
Is there a n y further discussion o f the report o f the
Executive Committee?
Governor W o l d :
T h e r e w a s one question dealt with
by the Executive Committee, i n conference with the »xecutive
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Federal Reserve Bank of St. Louis
82
Committee
o f the Federal Reserve Agents, t h a t I
discussed a n d a c t e d u p o n - - - a
believe w a s
question t h a t w a s n o t r e f e r -
red t o the Executive Committee b y the Conference; a n d I
think i t i s e x t r e m e l y u n f o r t u n a t e t h a t t h e E x e c u t i v e C o m -
mittee bound itself without ascertaining t h e opinions o f
the o t h e r s i x Governors.
The Chairman:
L e t u s h a v e i t out, G o v e r n o r Wold.
That sounds ominous.
Governor Wold:
we a r e concerned,
T h e milk has b e e n spilled,
and I
s o far as
o n l y w a n t e d t h e L x e c u t i v e Commit-—
tee t o understand h o w l feel about t h e matter.
question o f r e c o m m e n d i n g
I t i s the
t o t h e Board t h a t t h e Chief Examiner
be n o t a p p o i n t e d D e p u t y F e d e r a l R e s e r v e A g e n t o r a
I believe--~— I d o not know whether I
but I
believe
director.
a m correct o r not---
w e a r e t h e o n l y o n e s s o f a r affected.
The Chairman:
W
e did n o t take a n y such action a t
our joint meeting.
Governor Miller:
T h e Federal reserve agents t o o k
such action.
Governor Wold:
The Chairman:
D i d y o u not concur i n that action?
W
Governor Wold: I
e h a d n o t h i n g t o d o w i t h it.
will have t o withdraw that then.
Governor McDougal: I
no r e c o l l e c t i o n
told Governor Wold t h a t I
had
o f dealing w i t h t h a t situation a n d that I
did not believe w e took a n y action a t all with respect t o
pa
The Chairman:
N o action was taken.
I t may have
been mentioned, b u t n o action was taken a t our joint meeting:
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Federal Reserve Bank of St. Louis
83
Governor Miller:
T h a t question w a s passed u p o n a t the
last m e e t i n g o f t h e F e d e r a l r e s e r v e a g e n t s ,
a n d a l l voted
in
favor o f i t except Mr. Perrin, M r - R i c h a n d myself.
T h e n I apologize.
Governor Wold:
M r - R i c h told m e
that t h e y h a d a c t e d u p o n i t .
Governor Miller:
Governor McDougal:
H e was there, b u t h e voted against
M a y ! read a reference t o that mat-
ter from the little digest I have here.
"Reference being made t o a vote b y the Conference o f
Federal Reserve Agents t o the effect that members o f the
Advisory Council should b e neither officers n o r directors
in Federal Reserve Banks"---
Governor Miller: (Interposing) T h a t refers t o the
Advisory Council.
T h i s refers
t o t h e c h i e f examiner.
O u r
We lost t h e best director w e had o r will e v e r have.
chief examiner would have b e e n appointed a
class C
director
on December 31st, but the action o f the Federal Reserve
Agents--- and I think the Federal Reserve Board was inclined
that w a y a l s o - - - m
d e i t impossible
t o appoint him.
(Informal discussion followed which the reporter was
directed n o t t o take.)
The Chairman: I
a m not going t o a s k y o u gentlemen t o
consider o n e m a t t e r n o t o n t h e p r o g r a m , n a m e l y , a
communica-
tion from Mr- Farnsworth, Secretary p r o t e m o f the American
Bankers’ ASsociation.
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Federal Reserve Bank of St. Louis
T h e letter is as follows:
"New York, January 18th, 1916.
Benjamin Strong, J r . , C h a i r m a n ,
Conference
o f Governors,
Shorcham Hotel,
Washington, D . C .
My d e a r Governor:
n behalf
O
o f the Executive Committee
of the National B a n k Section, a
cordial invitation i s ex-
tended t o y o u r b o d y t o t a k e l u n c h w i t h t h e N a t i o n a l B a n k
Section's Executive Committee and the Bederel Legislative
Committee o n Thursday, January 20th, a t one o'clock p. m.,
at t h e S h o r e h a m Hotel.
An invitation h a s also been extended t o the Federal
Reserve B o a r d t o m e e t w i t h u s a t this luncheon.
Sincerely,
Fred. E . Farnsworth,
Secretary p r o tem."
What i s y o u r p l e a s u r e w i t h r e g a r d t o t h a t i n v i t a t i o n ?
move t h a t w e a c c e p t i t .
Governor Miller: I
Governor Wold:
W i l l n o t that take a lot o f tine?
Governor Miller:
W e could stipulate a n hour a n d
thirty minutes.
The Chairman:
I
t i s moved a n d seconded t h a t w e express
our .thanks, t h a t w e accept t h e i n v i t a t i o n a n d s t i p u l a t e f o r
an h o u r
a m t h i r t y minutes
i n which t o have lunch.
(The motion, b e i n g ffuly seconded, w a s carried.)
The Chairman:
T h e next i t e m o n our program i s
f o r consideration
the c o n s i d e r a t i o n o f t h e t o p i c s s u b m i t t e d
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Federal Reserve Bank of St. Louis
85
to this meeting b y the Federal Reserve Board:
t w i i d
distribute t h e m a s far a s they will g o around.
This i s numbered 4 9 9 and i s headed a s follows:
"Memorandum o f topics suggested f o r
consideration a t meeting o f Governors o f
Federal Reserve Banks held i n Washington,
November 19, 1916.
S e c t i o n 1 1 o f Federal R e s e r v e A c t g i v e s t h e
‘Pirst:
Board t h e p o w e r
"'to add t o tho number o f citics classified a s
reserve a n d central roserve cities", a n d s o forth.'
"Under t h i s a u t h o r i t y t h e F e d c r a l R e s e r v e B o a r d c o u l d
name t h e c i t y i n w h i c h c a c h Federal r e s e r v e b a n k i s l o c a t e d
as a central reserve city.
to i n c r e a s e t h e r e s e r v e s
T h e immediate effect would b e
from
o f t h o s e c i t i e s , 1 5 t o 1 8 p e r cent,
and a t t h e s a m e t i m e c a u s e a
transfer
o f reserves
i n those
cities t o the Federal rcserve banks, both of which objects
are desirable, a n d more easily accomplished a t a period o f
easy m o n e y a n d e x c e S s reservos.
T
h
e Federal R e s e r v e
Board would b e very glad t o have a recommendation from
the Governors o n this subject. "
(Informal discussion followed which t h e reporter w a s
directed not t o take.)
Governor McCord: I
that t h i s q u e s t i o n
will make a
motion that w e Sug-
o f central r e s e r v e c i t i e s b e l e f t
majority tote o f the banks i n those citics.
Governor Miller: I
Governor Seay:
second that motion.
W h a t y o u mean t o say i s that i t b e
left t o t h e F e d e r a l r e s e r v e b a n k s
member b a n k s
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Federal Reserve Bank of St. Louis
i n those cities?
t o take i t u p with the
Governor McCord:
Yes,
The Chairman: I
will ask sow that w e proceed under
our usual method o f discussion, w h i c h i s t o have o n e m a n
talk a t a time. G o v e r n o r McCord h a s made a motion.
Governor McCord: I
m a d e a motion a n d accepted a n
amendment suggested b y Governor Seay, t o the effect t h a t
Federal rescrve banks other than those i n New York, Chicago
and St- Louis, t a k e the matter u p with the member banks i n
their cities a s t o thoir vicws before werive a final answer
to t h i s question.
The Chairman: I
do not believe the Federal Reserve
Board will entcrtain that sSuggostion.
Governor Kains: S p e a k i n g for San Francisco, I can
say i t w o u l d b e h i g h l y inadvisable.
Governor Wold:
M a y I ask i f they have asked for ac-
tion o n t h i s t o d a y ?
The Chairman:
N o .
Governor Wold:
W h y not give u s a n opportunity t o
think i t over tonight?
The Chairman:
P e r h a p s that would b e a
Governor Aiken:
I s there not a
good idea.
formal motion before
the m e e t i n g ?
Governor McCord: I
will w i t h d r a w
m y motion,
i f you
do n o t w i s h t o t a k e t h a t course.
The Chairman:
motion. I
G o v e r n o r McCord h a s withdrawn his
would l i k e t o s e e t h e r e s p o n s e
t o this question
show a little m o r e consideration t h a n would b e shown b y the
passage o f that motion.
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Federal Reserve Bank of St. Louis
T h e r e a r e a number o f points
i n
87
connection w i t h i t , o n e o f w h i c h h a s b e e n b r o u g h t o u t b y
Governor McCord:
a s that proposed
a s radical
Should a c t i o n ,
b e taken
without a n effort t o ascertain t h e views o f t h e member banks
in the cities affected b y the changed classifications being
made?
i s i t wise a t this t i m e t o under-
In the second place,
take voluntarily,
the l a w ,
a n d n o t under a n y mandatory provision
t o effect a s r a d i c a l a
discourage,
t o s o m e extent,
of
change a s that, w h i c h w i l l
t h e member banks,
a n d give t h e m
an additional feeling o f uneasiness about t h e operation
of the Federal Reserve System?
In t h e t h i r d p l a c e ,
i s i t wise t o take u p t h e subject
of a n y r e c l a s s i f i c a t i o n w i t h o u t s t u d y i n g t h e r e s e r v e s i t u a -
tion i n the cities t o b e affccted?
Fourth,
i f i t wise t o take u p the subject o f the re-
classification
o f these ninc cities before making a
of t h e w h o l e s u b j e c t
o f reclassification
study
t o see whether
this o r that ought t o b e done, o r t o sec t h e best thing
that ought t o b e done?
Personally, I
a m not willing t o vote f o r o r against
this p r o p o s i t i o n w i t h o u t k n o w i n g m o r e a b o u t i t ,
we w i l l h a v e a n o p p o r t u n i t y
Governor Kains: I
t o a s c e r t a i n a t t h i s meeting.
have consulted o u r banks o n the
ai b j e c t a n d t h e y a r e o p p o s e d
Governor McCord:
t h a n
t o is.
T h e sentiment i n m y city would b e
against i t .
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Federal Reserve Bank of St. Louis
Governor V a n Zandt: I
c o u l d consult o u r banks tomor-
88
“
row.
would g o t want t o vote
I . could n o t d o i t today- I
on i t and thereby bring u p something that would antagonize
them, w i t h o u t h a v i n g a n o p p o r t u n i t y
Governor Woldi »
at the T w i n Citiess
reserve, a
t o discuss i t .
@ would have a
peculiar situation
S t » Paul would b e carrying a
smaller
part o f which might b e d u e from Minneapolis o r
from Chicago o r N e w York a n d Minneapolis would b e practical-
ly required t o operate o n a n eighteen per cént basis, all
of which has t o b e i n their vaults o r with us.
Governor Scay:
I f I understand t h e tabulation given
cannot imagine that this i s a
out b y Governor Delano, I
question which i s pressing f o r immediate answer. I
would
judge that t h e y desire u s t o take i t under consideration
and give t h e subject s u c h thought a s has b e e n outlined
here.
The Chairman:
I f w e are going t o act intelligently
on a request f o r t h e expression o f views, Should w e not t h e n
request t h e “ e d e r a l R e s e r v e B o a r d t o p r o v i d e
or else undertake t o provide ourselves w i t h d
u s with data
a
o, f
t ra making
an analysis of. the reserve situation i n these cities a n d
possibly i n other cities t h a t would b e embraced i n any
general reclassification?
Governor McDougal:
T h e whole thing seems t o b e very
inconsistent u p t o the prescnt timemitted, under certain conditions,
central»
T h e s e banks a r e per-
t o bccome
W h y haven't they done it? B e c a u s e o f the inT h a t i s all there i s
crease
i n the reserve requirements.
to it.
N o w , t o force that u p o n t h e m a t a time w h e n t h e
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Federal Reserve Bank of St. Louis
89
only a d v a n t a g e s t h e y h a v e h a d i n b e i n g r e s e r v e c i t i e s a r @
being g r a d u a l l y w i t h d r a w n ,
s e e m s t o b e v e r y insonsistent.
T h e Board states h e r e that i t i s destx
Governor Scay:
i m those
able t o increase t h e proportion o f reserves k e p t
cities.
The Chairman:
to b e c o n s i d e r e d
cities;
Y e s , a n d i f w o other consideration w a s
w e might a g r e e t o that a s t o certain
b u t w e might n o t consider that i t was desirable
in s o m e o f t h e cities w h e r e t h e y p r o p o s e a
tion.
reclassifica-
B e f o r e a n answer i s given w e might w a n t t o know,
for instance, whether other cities, l i k e Buffalo, should
not a l s o b e rcclassified;
a l s o whether e a c h one o f these
particular cities justifies reclassification,
o r whether i t
should o n l y apply t o certain o f them.
Governor Seay:
H a v e w e a n y intimation f r o m them
that they a r e proposing a n y further reclassification t h a n
that r e l a t i n g
t o Federal r e s e r v e c i t i e s ? :
Governor Wold:
T h e y refer t o making reserve cities,
Governor Seay:
N o , t h e y merely quote t h e law.
All
they a s k i s our opixion a s t o changing t h e federal reserve
cities:
Governor Van Zandt:
T h i s thing i s headed "Memoran-
dum o f t o p i c s s u g g e s t e d f o r c o n s i d e r a t i o n
Governors
a t meeting o f
o f Federal R e s e r v e B a n k s h e l d i n W a s h i n g t o n
January 19, 1916."
Governor Miller:
D o y o u understand that those a r e
the o n l y t w o questions that t h e y have t o present t o this
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Federal Reserve Bank of St. Louis
body?
The Chairman:
for a
W
e have h a d n o rcsponse
t o our request
submission o f topics i n advanec, Mr. Millcr:- O r d i -
narily,
w o have heard f r o m them b y mail s o m t i m e i n advance
of the meeting and the various topics suggested have appeared i n our program.
Governor M i l l e r :
Y o u had
a n interview
with them and
they said they would have two subjects for discussion?
Governcr S e a y ?
Governor S e a y :
Y e s ; t w o subjects.
Governor Miller:
Governor Seay:
A n d these a r e t h e subjects?
Y e s ; these are the two subjects. I
would s a y that the Federal Reserve Board i s extremely occupied a t t h i s t i m e w i t h t h e p r e p a r a t i o n
o f i t s annual r e -
port t o Congress, a n d that i t i s a very busy body- I
presume t h e y have b e e n occupied i n that fashion f o r several
weeks past.
T h e s e a r e t h e o n l y two subjects t h a t t h e y
intimated t h e y h a d a n y desire t o submit f o r our discussion.
The Chairman:
W
e have nothing b e f o r e u s t o act on.
What i s your w i s h about t h e first topic suggested?
Governor McCord h a s withdrawn his motion.
Governor Kains: I
move it is the sense of this meet-
ing that i t would b e highly inadvisable.
The Chairman:
W o u l d y o u extend y o u r m o t i o n s o that
it would read, “highly inadvisable without a
thorough inves-
tigation o f the subject i n all its phases"?
Governor Kains: I
The Chairman:
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Federal Reserve Bank of St. Louis
am only speaking for San Francisco.
Y o u might n o t b e inclined
t o think
91
that i t was inadvisable, however, f o r some other Federal
Recere
Cl y?
Governor Kains:
N o . I
a m only speaking f o r S a n
Francisco.
The Chairman:
G o v e r n o r Fancher, h o w d o y o u feel
about i t ?
Governor Fancher:
W
e have never discussed t h e matter
with our banks i n Cleveland, but |! should think that i t
would b e v e r y s t r o n g l y opposed.
The Chairman: G o v e r n o r Wold, what i s your view?
Governor W o l d : I
a m not prepared
t o express
a n opin-
fon o n that- T h e r e a r e arguments o n both sides o f it, I
think.
The Chairman:
G o v e r n o r Miller, w h a t have y o u t o say?
Governor Miller:
ments
I t i s m y view that there a r e argu-
o n b o t h s i d e s o f it. I
d o not know h o w o u r larger
banks would t a k e t o i t a t all.
The Chairman:
G o v e r n o r Aiken?
Governor Ajken:
T h e matter o f becoming central r e -
serve c i t i e s h a s b e e n t a k e n u p t w i c o
i n Boston,
i n m y exper-
ience, a r d b o t h times t h e banks h a v e decided t h a t e v e n with
the advantage o f the deposits that would accrue t o them a s
reserve depositaries, t h a t i t probably w o u l d n o t b e desirable,
and w e have n o t taken that action.
taken away, I
W i t h those advantages
think t h e y w o u l d b e very strongly opposed
to
it.
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Federal Reserve Bank of St. Louis
The Chairman:
G o v e r n o r Rhoads, w h a t i s your view?
Governcr Rhoads:
T h e question o f making Philadelphia
92
a central r e s e r v e c i t y h a s b e e n t a k e n u p s e v e r a l t i m s , I
do not know how many times, prior t o the passage o f the
Federal Reserve Act, and i t has always been defeated. I
do mot think i t has been considered since the Act was passed.
Governor McCord: I
do not think i t would b e desirable
to d i s t u r b r c l a t i o n s j u s t a t t h i s t i n .
Governor Seay: I
think, Mr. Chairmany t h a t the sub-
ject should b e considered w i t h reference t o the interests
of our member banks a s well a s the interests o f t h e Federal
Reserve System. I
without a
think n o recommendation should b e made
thorough canvass o f the situation.
The Chairman:
G o v e r n o r V a n Zandt?
Governor V a n Zandt: I
opinion o n that a t all.
a m not prepared
t o express
an
I t i s something that i s s o en-
tirely o u r o f l i n e w i t h a n y t h i n g t h a t w e h a v e e v e r c o n s i d e r ed i n Dallas, t h a t I
be- I
have n o i d e a w h a t t h e p o s i t i o n w o u l d
would n o t want t o vote o n i t without knowing t h e
views o f m y banks.
Governor Rhoads:
M r . Chairman, a r e w e a t liberty t o
inquire o f o u r b a n k s a s t o their v i e w s
o n this q u e s t i o n ,
or
is this confidential a n d not t o b e mentioned?
The Chairman: I
is
n e e
do not think w e are a t liberty t o
o f them.
Governor Miller:
The Chairman® I
Y o u d o not, M r » C h a i r m a n ?
should n o t think w e would b e a s yet.
The general course o f o u r meetings h e r e has been t o meet
with the Federal Reserve Board before leaving, t o take u p
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Federal Reserve Bank of St. Louis
93
a lot o f matters w i t h themand t r y t o get a n understanding
on t h e m .
T h e s e
t w o matters
w e should discuss
Boardj inasmuch a s t h e y have submitted a
for our views,
with the
memorandum asking
o r the views o f the meeting:
Governor Miller:
T h e president o f one o f t h e large
banks i n Kansas City, i n fact t h e largest bank--+ t h e Southwest i s t dena} Bank o f Commercc-—+{ Mr- Perry,
i s here, a n d
my mind o f coursc refcrred t o that fact,end t o a discussion
of t h i s v c r y q u e s t i o n w i t h h i m tonight.
Y o u d o n o t think,
however, t h a t i t would b e proper t o discuss t h a t w i t h him?
The Chairman: I
do not think i t would. I
think the
Board would feel a good decal c h a g r i n e d i f a n intimation
of their having c o nsidered this matter should i n a n y w a y
leak o u t a m o n g t h e banks.
Governor Miller: I
came up, because 1
The Chairman:
a m very glad that t h e question
would h a v e laid t h e matter before him.
D o y o u care t o take a n y action now,
after h e a r i n g t h e e x p r e s s i o n
Governor Miller: I
o f views
o f those present?
move that w e dcfer further discus-
sion and action until a t least further a l o n g i n our deliberations >
Governor V a n Zandt:
W o u l d i t not b e well t o l a y this
on the table and t o find out from the Federal “eserve Board
whether
o r not i t i s their idea w e should submit t h i s t o
our m e m b c r b a n k s ?
The Chairman:
Y o u r suggestion, combined w i t h Governor
Miller's resolution, which, b y the way, has not yet been
seconded, w o u l d i n v o l v e l a y i n g i t o n t h e t a b l e a n a t a k i n g
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Federal Reserve Bank of St. Louis
94
discussion w i t h t h e Federal R e s e r v e
no a c t i o n p e n d i n g a
Board.
would like t o offer a
Governor Aiken: I
motion, Mr. Chairman?
substitute
T h a t w e deem i t desirable that a
thorough investigation b e made o f the reserve conditions
in the cities i n which this change would b e effected before
any definite action i s takon i n the matter.
W o u l d y o u b e willing
Governor Seay:
Governor Aiken:
t o a d d t o that,
T h a t t h c m e m b e r b a n k s s h o u l d b e consulted,
after permission o f the Board i s obtained’?
Governor V a n Zandt: I
will second t h a t substitute.
I s i t not possible, M r - Chairman, t h a t
Governor Wold:
they w i s h u s t o c m s i d e r t h i s m a t t c r p u r e l y f r o m t h e v i e w -
point of the Federal Reserve System and not from the viewpoint o f the banker?
t h i n k t h a t i s v e r y p r o b a b l y t h e case.
The Chairman: I
Governor A i k e n :
H o w c a n w e s e p a r a t e t h e two, M r .
Chairman?
Governor Wold:
I
t i s easy enough t o consider t h e
question f r o m one standpoint onlyGovernor S e a y *
I
s i t not conveivable t h a t i t might
be desirable i n some cases a n d not s o desirable i n others?
Differences
i n conditions w i l l c p c u s t h e d e d i s i o n
i n the
matter.
The Chairman:
T h a t will b e disclosed b y a thorough
investigation o f the matter.
A motion has been made-
H a s Governor Aiken adopted
Governor Van Zandt's substitute?
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Federal Reserve Bank of St. Louis
Governor V a n Zandt: I
seco n d e d t h e substitute.
T h e
original m o t i o n w a s n e v e r seconded.
The Chairman: I
thought t h e original motion was s e -
conded.
Governor V a n Zaxdt:
O h , no; I
just made a
sugges-
tion t h a t w e l a y i t o w t h e table.
The Chairman:
T h e motion before t h e house i s that
action o n this r e q u e s t f o r a
recommendation
b e deferred p e n d -
ing further conferences w i t h t h e Federal Keserve Board,
and t h a t w e n o w r e c o m m e n d
t o t h e Board,
i n conneetion w i t h
the invcstigations, t h a t steps b e taken t o ascertain t h e
position a n d views o f t h e member banks o f the respective
cities before a n y attempt i s m
Governor M c D o u g a l :
d e t o determine t h e matter.
T h a t m a y b e t h e proper procedure
and a dignified procedure, b u t w e know i n advance what t h e
result would be, Mr. Chairman.
Governor Seay: I
d o not know what t h e result would
be i n o u r case.
Governor M c D o u g a l :
W w e a r e g o i n g t o impose a
tax
upon t h e m and give t h e m nothing f o r it.
Governor Miller:
B u t that would b e f o r them t o deter-
mine.
Governor McDougal:
T h a t h a s b e e n determined b y
every fair minded banker i n this room.
Governor K a i n s :
it.
W
e c a n a s k member banks
i f they want
T h e y a r e a s k i n g u s here.
Governor Scay: I
member b a n k s
i n some places m i g h t a o t v i e w i t u p o n t h e whole
as n o t s o undesirable. I
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Federal Reserve Bank of St. Louis
a m not absolutely persuaded t h a t
a m not s o fully convinced t h a t
96
our member banks would n o t consider t h e advisability o f
it, G o v e r n o r McDougal.
Governor McDougal: I
prevailing
a m convinced o f the sentiment
i n m y neighborhood:
(Informal discussion followed which the reporter was
directed n o t t o take.)
The Chairman:
T h e Secretary h a s evolved a
which h e w i l l s t a t e ,
a n d w e c a n see whether
motion
i t meets t h e
various v i e w s t h a t h a v e b e e n e x p r e s s e d h e r e ,
Mr- Curtis: I
would Suggest i t i s the sense o f t h e
Conference t h a t t h e G o v e r n o r s a r e n o t i n a
position
t o make
an a d e q u a t e r e p l y t o t h i s q u e s t i o n o f t h e F e d e r a l N e s e r v e
Board without a n opportunity f o r thorough investigation
and canvass o f the situation i n the respective cities i n volved.
That lwaves i t t o the Board t o say whether they want
that c a n v a s s m a d e o r not.
care t o have it.
T h e y
m y s a y that they d o not
T h a t will b e enough.
T h e y m a y Say,
"Go ahead."
The Chairman:
further,
D
o y o u w a n t t o discuss t h i s m a t t e r
o r d o y o u desire t o act upon t h e motion which will
postpone f u r t h e r c o n s i d e r a t i o n o f i t w i t h o u t g i v i n g a p y o f -
fense t o the “ederal teserve Board?
“Governor McDougal: I
would b e satisfactory.
Governor V a n Zandt:
W
think Mr. Curtis' suggestion
e will never h e a r from i t again.
W o u l d i t not b e well t o add
to t h a t m o t i o n t h a t w e d e s i r e t o k n o w w h e t h e r t h e federal
Reserve Board wishes u s t o make s u c h a n investigation a n d
canvass?
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Federal Reserve Bank of St. Louis
97
Governor S e a y :
W
Governor McCord:
act.
e c a n take t h a t u p w i t h t h e m verbal-
T h a t puts t h e m o n their m e t a l to
T h e y c a n side s t e p i t i f they wish to.
(Further informal discussion followed.)
Governor McDougal:
I f i t is i n order, Mr. Chairman,
1 would make t h e motion a s stated b y Mr- Qurtis.
The Chairman:
E
t i e quite
i n order.
(There were several scconds-)
Governor Aiken: I
will b e very l a d t o accept Gover-
nor McDougal's motion a s a substitute.
(The motion was duly carried.)
The Chairman:
T h e second q
mitted b y the Board,
"Second:
Council,
uestion,
o r questions s u b —
i s a s follows:
A t the September meeting o f the Advisory
i t recommended
t o t h e Federal R e s e r v e B o a r d t h a t
Federal Reserve Banks should n o t establish joint agencies
in Forel gn lands, b u t that this field should b e kept o p e n
for member banks.
S i n c e that t i m e t h e Federal Reserve
Board h a s canvassed t h e subject through t h e Federal Reserve
Agent o f each District w i t h a view t o ascertaining whether
the larger banks i n the various Districts w o u l d b e willing
to join i n the ownership o f branches i n foreign countries.
Tho: r e p l i e s
t o these i n g u i r i e s a r e n o t a s e n c o u r a g i n g
as h a s b e e n h o p e d t h e y w o u l d b e f o r i t a p p e a r s t h a t w h i l e
for a
number
o f good reasons
i t seems u n w i s e t h a t t h e Feder-
al Reserve Banks should undertake this business, t h e r e i s
a great deal o f hesitation o n the part o f most member banks
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Federal Reserve Bank of St. Louis
to u n d e r t a k e
i t ‘themselves.
"A f e w b a n k s a p p e a r t o s h o w a
spirit o f e n t e r p r i s e
in
the matter and the Board believes that under a n y circumstances t h e door ought t o b e opened a s wide a S possible a n d
that Congress should b e urged t o d o all i t c a n t o offer t o
member banks, s i n g l y o r combined,
t h e opportunity
o f enter-
ing these foreign fields.
"In this connection some questions have occurred t o
the Board i n considering this matter u p o n which i t will b e
glad t o have t h e views o f the Governors.
T h e s e questions
ares
"(a) S h o u l d the proposed amendment provide that
others t h a n m e m b e r b a n k s
b e permitted
t o b e stockholders
in t h e s e b a n k s w h i c h a r e t o o p e r a t e u n d e r F e d e r a l c h a r t e r s
in foreign countries?
that a
I f so, should there b e a provision
majority o f t h e stock b e held b y member banks?
"(b) W o u l d i t not be advisable t o provide that there
should n o t b e a double liability with respect t o the stock
holdings i n such banks, b u t o n l y a
liability u p t o the
authorized c a p i t a l ?
"(¢) W h a t , i f any, should b e t h e reserve requirements
of these foreign banks?
I f they are t o receive deposits
in foreign countries i t would subject t h e m t o great hazard
of fluctuation o f exchange i f against these foreign deposits
they a r e r e q u i r e d
t o keep reserves
i n t h e United States.
wats 3 S h o u l d these foreign banks b e required t o be
members o f the "ederal Reserve System?
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Federal Reserve Bank of St. Louis
"(e) S h o u l d these foreign banks b e permitted t o in-
99
vest a
definite p e r c e n t a g e
holdings
o f their capital a n d Surplus
i n
o f foreign banks operating under local charters?
"“(f) W h a t restrictions should b e placed upon these
foreign b a n k s f o r t h e i r o p e r a t i o n s
For instance -
i n the United States?
they might b e permitted t o accept deposits
only w h e r e t h e s e d e p o s i t s a r e i n c i d e n t a l
in foreign countries.
O
t o transactions
n the other hand, i t would appear
that they should b e permitted t o receive deposits o n demand
or o n t i m e f r o m o t h e r b a n k s , p a r t i c u l a r l y f r o m t h o s e f o r whic:
they w i l l a c t a s c o r r e s p o n d e n t s
o r agents
i n foreign c o u n -
tries.
"(g) S h o u l d these foreign banks b e permitted t o accept
and should their ‘bankers! acceptances’
b e eligible for ro-
discount with the "ederal Reserve Banks?"
Governor Aiken:
second question,
i f i t does n o t deal w i t h two entirely dif-
ferent activities?
agencics
M a y I inquire, w i t h regard t o t h e
W a s n o t t h e establishment o f joint
o f reserve b a n k s f o r t h e purpose
o f handling e x -
change operations i n which w e might b e engaged, a n d t h a t t h e
activities o f the banks owned b y the member banks should b e
those o f a commorcial b a n k i n the countries i n which they
were t o b e established?
I
t seems t o m e they a r e unre-
lated.
The Chairman:
W a s t h a t question addressed
t o me or
te the meeting?
Governor A j k e n :
The Chairman:
T o . you.
T h e r e a r e a number o f different views
as t o just what the Federal Reserve Banks could do, o r
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Federal Reserve Bank of St. Louis
100
might b e expected t o d o i n foreign countries,
established agencies there a n d correspondents.
of s o m e m e m b e r s
a f 43
T h e views
o f tho Board g r e quite different f r o m those
we hold i n New York.
Governor Aiken:
D
o y o u n o t understand t h a t t h e y
were simply t o b e agencies t o handle foreign bills t h a t
we may have bought, a n d t o transact business o f that sort?
The Chairman: I
any d i f f e r e n c e
did not t h i n k i t was possible t h a t
o f opinion could a r i s e a s t o what this
statute meant until this Pan-American discussion arose a n d
the Secretary o f the treasury suggested;
i n the absence
of othor arrangements b e i n g made, t h a t h e thought t h e
Federal Reserve B a n k should g o into South America a n d
establish branches o r agencics. I
d o not t h i n k e
h had
quite a n a l y z c d t h e s i t u a t i o n a s t o t h e F e d e r a l r e s e r v e
Bank doting business there.
la w
T h e y a r e not outhorized b y
t o d o the v e r y things that a r e required t o b e done i n
the establishment o f a branch o f a n American b a n k i n those
countries.
T h e y cannot receive deposits there; t h e y cannot
subject t h e m s e l v e s t o the liabilities t h a t would arise i n
doing t h a t business;
of credit;
t h e y cannot issue commercial letters
t h e y cannot d o business t h a t i s ahsolutely
essential t o the conduct o f a bank agency i n those countries
or a branch bank i n thoso countrics.
T h a t fact w a s pointed
out to the Federal Reserve Board i n one or two discussions
that w e had o n the m t t e r ,
a n d also t o some o f the members
of the Board, a n d i t has resulted i n s o m correspondence
with N e w York, a n d I imagine t h e other Federal “eserve
banks,
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Federal Reserve Bank of St. Louis
i n a n endeavor
t o ascertain w h a t t h e attitude
o f the
member banks w a s a S t o opening branches i n these countries.
We canvassed some o f the banks i n New York and found there
was c o n s i d e r a b l e a p a t h y a s m a t t e r s n o w stood:
T h e n the
suggestion w a s m a d e t h a t t e m p o r a r i l y w e m i g h t e m p l o y s o m e -
one t o g o down there a n d investigate a n d l o o k into credit
conditions,
and in a
preliminary w a y g o over t h e field
with t h e o b j e c t o f g i v i n g t e m p o r a r y s e r v i c e
t o t h e member
banks until they were able t o d o this business,
they f e l t m o r e i n c l i n e d
t o d o it-
u r until
W h e n y o u come t o look
into that i t i s subject t o all o f the defects o f the
establishment
of a
branch there.
W
e h a v e n o t t h e powers.
We cannot d o anything b y that method.
Then a r i s e s t h e q u e s t i o n a s t o l i b e r a l i z i n g t h e p o w e r s
of national banks s o that b y ome o r another device t h e y
could b e induced t o open bank agencies o r branches there.
I p r e s u m e t h e s e q u e s t i o n s m e a n t h a t a n y t h o u g h t o f Federal
reserve banks actually going into business i n a large
way i n those countries h a s been, f o r t h e time being, aban-
doned b y the Board, a n d that they are now seeking the vitws
of this mecting a s t o amendments t o t h e national b a n k act
that would encourage t h e member banks t o d o what t h e y a f
one time wore considering having u s do.
That,
chssion:
aS I
understand i t , i s t h e h i s t o r y o f t h i s d i s -
N o w w e a r e d o w n t o t h e s e p a r t i c u l a r questions.
Mr. Curtis:
H o w would
i t b e t o postpone discussion
of this until Topic No. 1 2 i s reached?
"Foreign arrangements,"
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Federal Reserve Bank of St. Louis
Wilf. @ls.
T o p i c No. 1 2 i s
102
(Informal discussion followed w h i c h t h e stenographer
was directed n o t t o report; a f t e r which the following
proceedings took place: )
Tha Chairman: I
am going to suggest that you pass
a resolution d i r e c t i n g t h e S e c r e t a r y
whomever y o u d e c i d e u p o n ,
o r Chairman,
or
t o convey t o Vice Governor
Delano t h e h o p e t h a t t h e F e d e r a l R e s e r v e B o a r d w i l l a f f o r d
us o p p o r t u n i t y
t o discuss t h e s e c o n d q u e s t i o n b e f o r e ask—-
ing u s t o give a
definite expression o f views o n the sub-
ject.
These questions a r e bare questions c f very considerand I
able i m p o r t a n c e ,
of t h e s e q u e s t i o n s .
I
happen t o k n o w w h a t h a s l e d t o s o m e
t has been brought
out
b y corres-
pondence w i t h a very strong .roup o f individuals w h o a r e
engaged
in a
very e x t e n s i v e c a n v a s s
o f this s i t u a t i o n
in
a very l a r g e w a y f o r S o u t h A m e r i c a n b a n k i n g business,
and i t happens t h a t t h e law a s i t now stands, a n d amendments s u c h a s h a v e b e e n p r o p o s e d w o u l d n o t f i t t h e s i t u a tion t h a t
e e
e e developed a l r e a d y i n quite a
These g e n t l e m e n h a v e o r g a n i z e d a
bank;
large way.
t h e y have acquired
an interest i m one o r another o f the South American institutions;
t h e y a r e making alliances w i t h South American
institutions and are doing business down there now. T h e
organization which they have already created i s n o t a
national b a n k ;
i t is a
state i n s t i t u t i o n ;
i t i s owned
to a large extent b y individuals a n d private bankers, a n d
it. can b e made a
very extensive a n d very important element
in t h e d e v e l o p m e n t
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Federal Reserve Bank of St. Louis
o f S o u t h A m e r i c a n business.
103 .
I do not feel quite a t liberty t o discuss plans
that have b e e n haid before m e i n confidence b y these bankers i n N e w York; I
and y e t 1
d o n o t t h i n k t h a t i t w o u l d b e proper;
find t h a t e v e r y o n e o f t h e s e q u e s t i o n s a p p l i e s
to a n existing situation that i s already i n course o f
development.
S o , frankly, I
feel embarrassed i n discus-
Sing <it.
As a
"No;
concrete p r o p o s i t i o n y o u g e n t l e m e n m i g h t s a y ,
w e think that t h e stock o f a
bank o f t h i s c h a r a c t e r
ought t o be owned entirely b y the member banks."
here i s a
situationas
t ® which,
if I
outlined
you might say, “Well, w e feel differently,
Y e t
i t t o you,
i n view o f your
explanation o f w h o these people a r e a n d what their plans
are.
T h a t sounds pretty good."
I think w e ought t o discuss t h a t with t h e Board a n d
not a t t e m p t
t o make positive answers
t o these concrete
questions.
Governor Seay:
maa,
T h e way 1 feel about it, Mr- Chair-~-
i s that t h e subject
is a
matter
o f very great import~
ance f r o m a trade point o f view, a n d that t h e l a w i n that
connection o u g h t t o b e m a d e a s w i d e o p e n a n d a s l i b e r a l
as i t i s p o s s i b l e
The Chairman:
subject.
t o m a k e it.
T h i s just touches the fringe o f the
I f they are going t o organize a
national b a n k i t means a
mew kind o f
new section i n the national b a n k
act, j u s t a s o u r State b a n k laws a r e divided u p itinto
various sections relating t o the organization o f savings
banks a n d b a n k s o f d e p o s i t a n d t r u s t c o m p a n i e s ,
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Federal Reserve Bank of St. Louis
a n d s o on.
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Federal Reserve Bank of St. Louis
104
It i s a very extensive piece o f legi&kation t o undertake,
So t h a t r a i s e s t h e question, s h a l l t h e y r e c e i v e d e p o s i t s ?
How shall their reserves b e dealt with?
W h a t shall
their p o w e r s b e ?
Governor V a n Zandt:
T h e y a r e required t o b e mem—
bers o f t h e F e d e r a l R e s e r v e System.
The Chairman:
that subject,
Yes.
i t means e
I f y o u a r e going t o develop
new national b a n k a c t t o cover
the organization o f a new type o f bank.
I t means d e -
termining a t t h e o u t s e t w h e t h e r t h e Board,
o r the Feder~
al Reserve A c t b y amendment, might n o t give recognition
to e x i s t i n g s t a t e i n s t i t u t i o n s
t o d o t h i s business.
W e
do not know enough what i s i n the mind o f the Board.
W e
have n o t e n o u g h d a t a t o m a k e t h e s e rec. mmendations u p o n .
Governor Seay:
T h e recommendation o f the Adviscry
Council w a s somewhat t o this effect:
t h a t this business
Should b e l e f t e x c l u s i v e l y t o t h e m e m b e r b a n k s
t o develop,
that i t should n o t b e connected with t h e Federal reserve
system, b u t that t h e member banks should
wide l a t i t u d e
ness
a s was possible
a n d t o induce t h e m
b
e given a s
i n order t o encourage b u s i -
t o enter into it.
T h a t I
know w a s
the decision o f the Advisory Council heretofore,
Governor Wold:
I t would seem t o m e that t h e y would
have t o form a class o f banks t o deal exclusively w i t h
foreign business, u n r e l a t e d
t o o u r present s y s t e m o f
banking.
The Chairman: I
d o n o t want t o urge a n y course o f
action a s t o t h i s m e m o r a n d u m ,
b u t o f course i t has b e e n
105
very l i v e s u b j e c t
i n N e w Y o r k w i t h t h e bankers t h e r e , a n d
naturally w o u l d b e i n that p a r t i c u l a r s i t y , a n d y o u r
views m a y b e v e r y d i f f e r e n t f r o m ours. I
to s i t d o w n w i t h t h e B o a r d a n d d i s c u s s
think w e o u g h t
i t without attempt-
ing t o answer these questions.
Governor McCord:
D o y o u not think that that w a s their
view i n p r o p o u n d i n g t h e juestion, t h a t w e m i g h t c o m e t o
a discussion w i t h t h e m o n the subject?
The Chairman:
Possibly 9.
L will o f f e r a
resolution,
t h a t i t i s t h e sense o f
this meeting that prior t o making definité a n d specific
answer
t o this question No. 2
i t would b e desirable f o r
the Conference o f Governors t o have a
meeting with t h e
Fedsral Reserve Board a n d discuss t h e subject generally.
Governor Fancher: I
second t h a t .
(The motion was duly carried.)
G. U N F I N I S H E D BUSINESS.
The Chairman:
T h e next i t e m o n the program i s No.5,
unfinished b u s i n e s s ,
a n d i t has been entered s o a s t o in-
clude t h e r e p o r t o f t h e Minneapolis C o n f e r e n c e
t o the
Federal R e s e r v e B o a r d a n d t h e a c t i o n t a k e n b y t h e B o a r d i n
respect thereof.
You h a v e a l l b e e n f u r n i s h e d w i t h a
made t o t h e Board,
and I
copy o f t h e report
should l i k e t o report n o w t h a t
the Board h a s sent u s a n acknowledgement o f the receipt o f
our report,
b u t t o date t h e y have n o t b e e n a b l e t o take
any action,
a s they customarily d o -
O n e o f the members
of t h e Board stated t o m e some weeks a g o that t h e y were
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Federal Reserve Bank of St. Louis
106
very a n x i o u s
Conference
t o g o o v e r t h a t i n detail p r i o r
o f t h e Governors,
t o the next
b u t that t h e preparation
of
their o w n ennual r e p o r t a n d v a r i o u s o t h e r i m p o r t a n t m a t ters h a d m a d e i t i m p o s s i b l e f a r t h e m t o t a k e i t up. i
do n o t t h i n k a n y a c t i o n i s required
o n Topic No. D
except
T o e Sane i s true o f t h e reports
o f the
to m a k e t h a t report.
Mr. Curtis:
meetings
o f the Executive Committee?
The Chairman:
Y e s .
W
e have already disposed
of
TOpLCENG. = G a
Governor Rhoads:
N o t e n t i r e l y . L i o L e £ixed f o r
ten o'clock tomorrew.
The Chairman:
row, a n d I
I t is fixed for ten o'clock tomor-
understand t h a t o u r a c t i o n t h i s m o r n i n g w a s
simply t o r e p o r t t h a t t h a t w a s t h e case, a n d u n l e s s G o v e r nor S e a y ' s r e p o r t f r o m t h e F e d e r a l R e s e r v e B o a r d i n t e r fered w i t h i t w e w o u l d k e e p o u r e n g a g e m e n t w i t h them.
{nasmuch a s w e h a v e n o t r e c e i v e d a n y r e q u e s t f o r a
in o u r program, I
S o ,
change
presume t h a t t h e m e e t i n g t o m o r r o w
at
ten o'clock i s i n order.
7-(a) C O L L L C T I O N S A N D CLEARANCES. A T T I T U D E
OF BOARDS O F DIRLCTORS O F FEDERAL R E SLRVE’ BANKS.
Governor M c D o u g a l , u n d e r t h e s u b j e c t o f c o l l e c t i o n s
and clearances, I t e m No. 7 , sub-heading (a), attitude o f
Boards
o f Virectors
o f Federal R e s a @ v e B a n k s w a s s u b m u t -
ted f o r discussion b y you.
Governor McDougal: I
d o not remember having s u b m i t -
ted that, b u t I think I know what i t has t o d o with.
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Federal Reserve Bank of St. Louis
LOY
Arter o u r conference here w i t h t h e Board 1
notify a
2
o f the Governors w i t h respect
under voek t o
t o the status
t i m e ¢ f t h e c o l l e c t i o n plan, a n d m a d e s o m e r e f er—
ence t o t h e q u e s t i o n r a i s e d w i t h r e g a r d
2, a n d s u g g e s t e d
t o t h e clause No.
t o e a c h o f t h e Governors t h a t t h e y h a d
better, p e r h a p s , s u b m i t t h e w h o l e m a t t e r t o t h e i r a t t o r neys,
s o that i n case t h e Board a c t e d u p o n o n e p a r t o f t h e
plan a n d d e c l i n e d
t o take t h e responsibility under clause
2, t h a t w e w o u l d b e a b l e t o m a k e s o m e h e a d w a y w h e n w e
met togerner.
I received r e s p o n s e s f r o m t w o o r m o r e - - - I
received
several responses, b u t definite replies a s t o the action
taken, f r o m t w o o f t h e G o v e r n o r s t h a t I
remember,
i n which
they stated t h a t t h e y would n o t recommend t o their boards
for adoption a n y plan for t h e collection o f checks unless
the board t o o k t h e full responsibility.
all there was o n that subject. I
T h a t i s about
do not think i t requires
any action here a t all; b u t I did write letters asking
the: g o v e r n o r s
t o ascertain t h e attitudes
o f their direc-
tors a n d t h e i r counsel.
The Chairman:
report.
I
Y o u have heard Governor MeDougal's
s there a n y discussion
o r action desired?
Governor McDougal, w o u l d y o u l i k e a n y a c t i o n o n this s u b -
ject?
Governor McDougal:
N o »
Goverror-scay-: I
would l i k e t o k n o w , i f y o u c o u l d
pass a r o u n d t h e Board,
what t h e a c t i o n
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Federal Reserve Bank of St. Louis
and in a
f e w b r i e f w o r d s f i n d out,
o f the other banks was, I
know what ours
108
wes, and 1 should like very much t o know what the action
of t h e o t h e r s w a s ,
‘The Chairman!
directors
t o see i f w e take a
T h e specific q u e s t i o # i s , w i l l t h e
o f the various
sponsibility
lonesome position.
reserve banks undertake
o f introducing a
the re-
plan f o r c l e a r a n c e a n d c o l -
lection o f checks, w i t h o u t h a v i n g t h e r e s p o n s i b i l i t y
the F e d e r a l R e S e r v e B o a r d b e h i n d i t .
I
of
s t h a t t h e point,
Governor McDougal?
Governor MeDougal: I
took t h e m a t t e r
think that c o v e r s i t ; b u t I
u p w i t h o u r counsel,
t h e legal phase
o f
it, a n d h e w a s o f t h e o p i n i o n t h a t w e c o u l d n o t d e n y m e m -
ber banks t h e right t o take exchange charges a n d collection charges f o r items w e sent t h e m for collection a n d
credit. I
discussed t h e m a t t e r w i t h o u r b o a r d ,
were v e r y s t r o n g l y i n c l i n e d
a n d they
t o stand b y m e i n t h e p r o -
position o f n o t u n d e r t a k i n g a n y p l a n f o r t h e c o l l e c t i o n
of checks unless t h e Board w a s willing t o take the full
responsibility, a n d unless t h e p l a n was backed b y the
terms o f t h e A c t itself.
The Chairman:
for a
W o u l d y o u l i k e t o g o around t h e table
brief e x p r e s s i o n o f views?
Governor Seay: i
The Chairman:
Woudd indeed, sir.
G o v e r n o r V a n Zandt, w h a t would b e the
attitude o f your directors?
Governor V a n Zandt:
O u r Board f e e l t h a t should w e
try t o d o i t w e would create s o much antagonism against
our b a n k b y o u r members t h a t i t w o u l d n o t b e advisable
do i t a t a l l u n t i l w e w e r e s o i n t r u c t e d
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Federal Reserve Bank of St. Louis
to
b y t h e Federal R e -
1O9
serve B o a r d .
Governor S e a y
individual,
O u r board a g r e e d informally,
each
t h a t t h e y were w i l l i n g t o p u t i n operation a n y
plan w h i c h t h e F e d e r a l R e s e r v e B o a r d w o u l d a p p r o v e a n d
recommend.
The Chairman:
G o v e r n o r McCord?
Governor McCord: G o v e r n o r Van Zandt's answer i s
mine.
The Chairman:
G o v e r n o r Kains?
Governor Kains:
O u r board h a s n o t acted o n it, b u t
I think they would t a k e action t h e s a m e a s the Federal
Reserve B a n k o f Richmond.
The Chairman:
G o v e r n o r McDougal?
Governor MeDougal: I
The Chairman:
think I have stated m y views.
G o v e r n o r Rhoads?
Governor Rhoads:
O u r board informally stated t h a t
they would not attempt a n y check colleetion p l a n which
was n o t b a s e d
o n the construction o f l a w rendered
by
the Federal Reserve Board.
Governor Aiken:
O u r experience h a s b e e n the same
as that o f Mr. Rhoads.
Governor Miller:
lst, 1914.
W e put t h e plan i n o n December
E v e r y memberof o u r district i s a member o f
the c c l l e c t i o n system,
a n d while t h e r e w a s s o m e o p p o s i -
tion a t first, t h e y a r e a l l r e c o n c i l e d
t o i t and cooper-
ating i n t s
Governor Wold:
members?
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Federal Reserve Bank of St. Louis
A r e they voluntary o r involuntary
110
Involuntary.
Governor Miller:
e p u t 10- I m e b e —
W
cause w e h a d pretty g o o d authority. i
think 1 sould
produce some documentary evidence t o establish t h e fact
that t h e Federal Reserve Board w a s really behind u s i n
doing i t , a l t h o u g h t h e y w o u l d d e n y t h e i r r e s p o n s i b i l i t y .
W e have n o doubt o f that.
The Chairman:
Y o u restricted endorsements
Governor S e a y :
t o some
extent?
Gevernor Miller:
ments
e have restricted t h e endorse-
W
t o w i t h i n t h e district, b e c a u s e s o m e o f o u r s m a r t
members w e r e c r e a t i n g e a s t e r n exchange.
(Governor Miller m d e a further statement which the
stenographer w a s d i r e c t e d n o t t o report;
a f t e r which the
following proceedings t o o k place:)
G o v e r n o r Wold?
The Chairman:
Governor Wold:
O u r people h a v e t a k e m m o formal a c -
tion, b u t t h e y a r e n o t putting i t onto the Federal R e serve Board. I
think t h e y would b e perfectly willing t o
act o n anything t h e Governors w i l l recommend.
The Chairman:
G o v e r n o r Fancher?
Governor Fancher:
I
t has been discussed informally
in o u r b o a r d e r m t h e o p i n i o n e x p r e s s e d
b y t h e various
members t h a t t h e y w o u l d n o t e n d o r s e a n y c o l l e c t i o n p l a n
that t h e Federal Reserve Board d i d n o t order a m s t a n d
squarely behind.
Governor Wells:
matter formally.
they expressed a
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Federal Reserve Bank of St. Louis
I
O u r board h a s never t a k e n u p the
n going over t h e matter informally
desire t o have definite action b y the
Federal R e s e r v e Board.
The Chairman:
O u r board i n New York h a s taken n o
action b y resolution, b u t w e have discussed this matter
informally, a n d I think i t is their umanimous view that
whatever p l a n i s a d o p t e d s h o u l d b e a d o p t e d u p o n t h e
authority a n d have a l l t h e weight o f the authority o f the
Federal R e s e r v e Board.
Governor Seay, does this answer your point o f getting t h e c o n s e n s u s
Governor Seay;
o f views?
I t does indeed;
i t gives m e a great
deal o f comfort.
The Chairman:
G o v e r n o r McDougal,
d o y o u desire t h a t
any action b e taken o n Topic No. 7 , Sub-head ( a ) ?
Governor McDougal:
N o sir.
T=(b) S H O U L D FEDERAL RESERVE BANKS N O W B E PERMITTED T O RiCLIVE I N ACCORDANCE W I T H T H E
SCHEDULE F O R DEFERRLD CREDITS, CHECKS O N
MEMBER BANKS LOCAT&D I N OTH:R FEDLRAL
RESLRVE CITIES?
The Chairman:
T h e next topic, sub-heading (b) o f
Topic 7 , was also suggested b y y o u a t the instigation o f
Mr. McKay.
W i l l y o u discuss that?
Governor MeDougal: I
think that question came u p
in connection with the Committee's report, did i t not, a s
to how w e might avoid t h e loss o f gold? I
have a report
on that which I think covers t h e situation.
T h a t was
really covered i n the minutes, I
The Chairman:
I t would come u p now, under this
heading, Governor McDougal.
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Federal Reserve Bank of St. Louis
think.
112
Governor McDougal :I
d o n o t believe that I
ed t h a t t o p i c f o r discussion,
suggest-
b u t t h a t came u p i n connec~
tion with this report, w i t h relation t o the. gquestiom that
was given t o Mr. McKay and Mr. Hendricks with respect t o
the o p e r a t i o n o f t h e G o l d S e t t l e m e n t F u n d .
The Chairman:
C a n w e n o t d e a l -with this: p a r t i c u l a r
question b e f o r e t a k i n g u p t h a t r e p o r t ,
whether w e should o p e n t h e d o o r s
b y determining
t o a n y plan o f limiting
the interdistrict exchange o f items until this question
has been ruled u p o n b y the Attorney General?
act u p o n that,
i t m a y b e possible
of q u i t e a
long report
after a l l ,
w e a r e encroaching a
in actual p r a c t i c e ,
I f we can
t o pass c o n s i d e r a t i o n
b y t h o s e t w o gentlemen, h e c a u s e ,
of a
little b i t u p o m t h e terms,
plan which m a y later b e very
materially d i f f e r e n t f r o m w h a t w e would n o w a d o p t i n a
temporary w a y i n h a n d l i n g i t e m s b e t w e e n t h e districts.
We a r e a n t i c i p a t i n g t h e plan,
Governor McDougal: I
subject, because I
i n o t h e r words.
a m perfectly willing t o pass
do not believe I
suggested this.
not s e e w h y m y name w a s p u t there.
Mr. Curtis: l
think t h e precora i s a g a i n s t y o u o n
that, Governor.
Governor McDougal:
T h e o n l y topic I suggested i n m y
second letter--Mr. Curtis:
Y e s , b u t i n a n earlier letter y o u sug-
gested this topic here.
Governor M c D o u g a l :
B u t t h i s s e c o n d letter. t o o k t h e
place o f all previous communications.
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Federal Reserve Bank of St. Louis
L135
I t was n o t s o nominated i n the bond.
Mr. Curtis:
(Laughter)
Governor McDougal: I
that way. I
t o pass
t o think that t h e matter c a m e u p i n
aminclined
it. I
a m perfectly willing
believe t h a t m a t t e r w a s s u g g e s t e d f o r t h e
last C o n f e r e n c e
o f Governors,
w a s i t not, a n d w a s d e a l t
with b y t h e Committee.
I t was suggested f o r this conference
Mr: Curtis:
it was supposed t o b e held i n December.
Governor M c D o u g a l }
O u r committee
t o o k the respon-
sibility o f d e a l i n g w i t h i t , d i d i t not, M r . S e e r e t a r y ?
Mr. Curtis:
subject,
T h e MeKay~Hendricks report i s o n that
o f course.
Governor McDougal:
I t seems t o m e this report o f
McKay a n d Hendricks perhaps might need some special
action here. I
d o mot know.
The Chairman:
A s a matter o f fact, Governor McDoug-
al, unless some o n e o f the Governors a t this meeting
feels that t h e existing inter-district operation: t h r o u g h
the g o l d f u n d i s w o r k i n g d e c i d e d l y
t o their disadvantage
in taking t o o much gold, w e c a n defer action upon that
matter a n d l e t i t b e t r e a t e d a s a
part o f t h e g e n e r a l s u b -
jeet o f inter-district clearings.
Governor McDougal:
The Chairman: I
T h a t i s entirely agreeable
to
should l i k e t o a s k G o v e r n o r S e a y
if h e feels t h a t h i s d i s t r i c t
i s suffering a n y inconven-
fence because w e have received nearly $15,000,000 o f gold
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Federal Reserve Bank of St. Louis
from t h e m ?
Governor Seay:
N o t a t all.
W e 267 2 2 from some=
body else,
The Chairman:
W
e h i v e i t i n N e w York.
Governor Seay: Y e s ; I
ting it.
a m very glad that y o u are get-
W e hope i t will give y o u some relief, because
I know s o m e o f o u r m e m b e r b a n k s a r e d o i n g s o m e t h i n g s
that a r e irregular i n collecting drafts i n New York.
The Chairman:
Governor S e a y :
M a k i n g New York exchange?
Y e s ; t h e y are.
O n e bank gave another
Richmond B a n k a check o n us, a m t h a t bank, instead o f
collecting f r o m u s sent i t t o New York f o r exchange.
would h a v e b e e n a s h a m e d
Governor McCord:
Governor S e a y :
The Chairman:
t o d o such a
thing.
D o y o u not penalize them?
N o .
i t i s up-to us.
Governor Seay:
A s long a s i t i s not a burden o n
you a n d a S l o n g a s y o u a r e c o n t e n t e d
t o take the gold
we give you, w e are satisfied.
Governor Miller:
H o w d o you get the gold t o New
York?
Governor Seay:
ment fund.
us i t e m s
W e send i t through t h e gold settle-
T h e exchanges b a l a n c e e a c h o t h e r
o n Richmond,
H
e sends
a n d t h e Richmond b a n k gives i t e m s
on s o m e b o d y else.
Governor Miller:
Governor Seay:
i
t if- working a l l right, then?
I t i s undere tood that i f w e impose
a burden o n any bank they a r e going t o let u s hear f r o m
them.
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Federal Reserve Bank of St. Louis
as
The Chairman: I
d o n o t w a n t t o smother a
topic
that h a s been suggested i n good faith for this progran,
but I
cannot h e l p b u t f e e l t h a t a n y t h i n g t h a t b e a r s
on
the subject o f inter-district collections a n d clearings
Should b e deferred until after this opinion i s rendered,
unless there i s something i n age S a a s
appears
t o create a
hardship
Governor McDougal:
Ssituatiou that
o n some reserve Dank.
Y o u remember, Mr. Chairman,
that your condition, having, I believe, $25,000,900 t o pay
into t h e Gold Settlement Fund, o f which y o u held o u t
$19,000,900, brought u p the question o f what w e should d o
to help o u t that situation, a n d that would c o m e i n here,
too.
The Chairman: I
c a n answer t h a t b y saying t h a t t h e
word o f warning which was sent around d i d n o t meet w i t h e n tire a p p r o v a l o v e r h e r e i n Washington.
was rather arbitrary.
T h e y thought
T h e exchanges have n o t been oper-
ating a s heavily against u s a s they were, a m ,
we a r e concerned, I
it
would a
s o far a s
great d e a l r a t h e r d e f e r a c -
tion o n this m t t e r s o long a s w e are n o t inconvenienced,
and avoid t h e mistake o f having t o g o t o our clearing house
in New York, after having made two or three changes already i n our plans a n d g e t t h e m t o approve o n e still furPier.
T h a t might possibly h a v e t o b e changed a g a i n
when o u r iaterdistrict p l a n i s adopted:
O e ; te. Y R O r s
willing t o allow this d o g t o lie dead a little while
longer,
w e are, a n d w e c a n t a k e i t u p w h e m t h i s o p i n i o n
comes d o w n .
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Federal Reserve Bank of St. Louis
116
Governor S e a y : I
move t h a t f u r t h e r c o n s i d e r a t i o n
of t h i s t p p i c b e d e f e r r e d u n t i l
w e receive a
report f r o m
the F e d e r a l R e s e r v e B o a r d u p o n t h e c o l l e c t i o n P l a n submit—-
ted t o them.
(The motion, being duly seconded, was carried.)
T7-(c) C O L L L C T I O N S F R O M MEMBER BANKS O F OTHER DIS}
TRICTS.
The Chairman:
T h e next item i s Topic 7-(c), suggest-—-
ed b y Mr. Kains.
Governor Kains:
T h e foregoing seems t o preclude a n y
discussion o f that, b u t i t was caused b y o u r receipt o f a
collection f r o m a member bank o f the Federal Reserve
Bank o f Philadelphia, w h i c h sent i t direct t o u s but e n dorsed i t a s i f i t came f r o m t h e Federal Reserve Bank o f
Philadelphia, a m d t h e instructions w e r e f o r u s t o account
to t h e F e d e r a l R e s e r v e B a n k o f Philadelphia. I
just want-
ed t o g e t u n i f o r m i t y o f a c t i o n t o k n o w i f w e w e r e d o i n g
that sort o f thing, a n d l e t u s have some uniform instruc-—
tions r e g a r d i n g t h e p r o t e s t
o f t h a t s o r t o f thing; b u t
that c a n very well wait f o r t h e decision o f which y o u just
spoke.
The Chairman:
Y o u would b e satisfied, then, t o let
it g o o v e r o n o u r p r o g r a m w i t h t h e o t h e r t w o p o p i c s ?
Governor Kains:
Y e s .
8. F I B C A L A G E N C Y FUNCTIONS.
The Chairman:
G o v e r m o r Wold, will y o u discuss s u b -
heading (a) o f No. 8, transfer o f Government funds and ap-~
pointment
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Federal Reserve Bank of St. Louis
o f reserve Qanks
a s fiscal agents?
aA
Governor Wold: I
think practically a l l those
wrinkles have b e e n ironed o u t since 1 decided t m t I
would p u t that o n the program f o r discussion.
had more o r less correspondence; I
W e have
presume a l l o f y o u
have.
The Chairman:
G o v e r n o r McDougal,
h a v e y o u something
under this Item 8-(a) t o bring before t h e meeting?
Govermor McDougal:
N o t h i n g , M r . Chairman, e x c e p t
that i t n i g h t b e i n t e r e s t i n g
t o hear what t h e experience
of t h e b a n k s h a s b e e n s o f a r i n t h e m a t t e r o f h a n d l i n g
the G o v e r t m e n t d e p o s i t a r y accounts. I
tell y o u o u r s i n a
would v e r y g l a d l y
f e w words.
We t o o k t h e s t a n d t h a t t h e c o l l e c t o r s
might a s w e l l b e i n f o r m e d
ceived f o r many years a
a t t h e outset
i f they h a d re-
good deal o f consideration a n d
many f a v o r s t h a t w e w e r e n o t i n a
First,
i n Chicago
p o s i t i o n t o g r a n t them.
t h e f a c t t h a t t h e i r deposits h a d b e e n collected
by the various banks along about four o'clock o r a little
later e a c h day, a n d t h a t t h e r e w e r e a t h e r m a t t e r s t h a t
entered i n t o t h e situation.
T h e y h a d b e e n depositing
all kinds o f checks i n the Chicago banks, regardless o f
whether
o r not there was exchange
and t h e b a n k s a b s o r b e d t h a t .
W
justing a l l matters except one.
handling c h e c k s s u s c e p t i b l e
t o b e charged
o n them,
e were successful
i m ad-
T h a t w a s t h e matter o f
t o p a y i n g e x c h a n g e charges.
We declined t o take those checks, a n d t h e Collector o f
Internal Revenue, w h o had a great many o f them, stated
that h e w o u l d u n t e r t a k e
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Federal Reserve Bank of St. Louis
t o g e t Chicago exchange a n d would
118
tey t h e splam o n r e t u r n i n g T n e e e Z
I t s o happened,
however, that the first day's business h e had a hundred o r
two c h e c k s t h a t w o u l d b e s u s c e p t i b l e
o f exchange, p e r -
haps, a n d would f l o p over a n d would not send t h e m back.
He s n i d w e w o u l d h a v e t o t a k e t h e m , a n d w e t o l d h i m t h a t
we w o u l d n o t t a k e them.
ed was a
T h e n t h e next t h i n g t h a t pappen—
tclegram f r o m Washington stating that t h e y under-
stood t h a t w e d e c l i n e d
Celleector
i n Chicago,
to t a k e t h e s e c h e c k s
t o accept certain checks f r o m t h e
a n d w e replied t h a t w e h a d declined
o n non-members
o f the collection
system, a n d w e b e l i e v e d t h a t i t w a s c o n t r a r y t o t h e i n t e n t
of the Federal Reserve A c t t h a t w e d o it, a n d i f w e began
permitting o u r m e m b e r b a n k s
t o charge exchange--- those
are t h e members,
w h o a r e m o t members
o f course,
o f the col-
lection system--- w e would get i n t o trouble a n d establish
a precedent t h a t i t might b e difficult t o overcome.
Tnereupon we, got a
second m e s s a g e f r o m W a s h i n g t o n
stating t h a t t h e i r i n s t r u c t i o n s
t o u s were contained
i n
a copy o f t h e telegram they had sent t o the Philadelphia
bank.
W
e h a d received t h a t b u t h a d n o t acted u p o n it.
They s a i d t h e y w o u l d l i k e t o h a v e u s , t e m p o r a r i l y ,
take those checks.
yester@ay,
Y e did n o t d o it.
o r day before yesterday, 1
called M r . D e l a n o u p a n d !
they h a d a
peck m e a s u r e
a t least,
w e waited until
believe, w h e n I
told h i m t h e situation,
o r a bushel b a s k e t
that
o f checks t h a t
they were holding o v e r there, a n d w e could not handle
them, a n d t h e s i t u a t i o n w a s v e r y serious;
t h a t w e had
not f o l l o w e d h i s i n s t r u c t i o n s a n d d i d n o t b e l i e v e w e
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Federal Reserve Bank of St. Louis
119
H
should b e c o m p e l l e d t o .
e then told m e that t h e q u e s —
H e
tion had been put before t h e Treasury Department.
H e said i t would b e
had advised u s o f that previously.
a very hard thing t o handle, a n d h e requested t h a t w e g o
ahead a n d t a k e t h e m temporarily.
wouldget
promising that they
t o w o r k o n t h e m a t t e r a s s o o n a s possible.
W w e
Legan yesterday taking those checks, b u t i n each case w e
o n which t h e y a r e drawn that t h e y a r e
notified t h e b a n k s
expented
t o m a k e r e t u r n s w i t h o u t a n y charge.
D
The Chairman:
o they d o it?
W e will k n o w that b y this morn-
Governor MeDougal:
ing:
I f they m a k e a charge w e are going t o protest
against i t the best w e can, a n d i n the m e a n time I
have
notified t h e Collector o f Internal Revenue t h a t w e were
going ahead temporarily o n this plan, b u t i t would n o t b e
a permanent o n e , a n d t h a t w e would d e p e n d ,
O t Course, upper
the u l t i m a t e d e c i s i o n t h a t c a m e f r o m Washin;,ton.
W
The Chairman:
e received,
u p t o today, a b o u t
49,000,000 o f deposits f r o m the collectors i n New York ;
and t h e d a y I left w e h a d only paid 5Ocents exchange o n
all t h e checks w e had received.
T h e y were subject t o ex-
change charges.
Governor Aiken; would y o u like t o speak o n this mat-
ter?
I n fact, that part o f the subject was suggested b y
you--- e x c h a n g e charges.
Governor Aiken:
checks
e have o n l y h a d three o r four
u p t o t h e present t i m e t h a t w e r e subject
Change charges.
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Federal Reserve Bank of St. Louis
W
A
t t h e request
t o ex-
o f t h e t r e a s u r y Departmen’
120
Mr. M a l b u r n ,
w e have t a k e n these checks a n d have carried
those c h a r g e s
i n aseparate account, temporarily.
I
t
scems t o m e very desirable t h a t w e should n o t establish
the practice o f taking these checks a n d absorbim, t h i s
charge, a n d I think w e should establish a uniform practice
among t h e
j a
I
suggested t h i s
i n order t h a t t h e m a t -
ter might b e brought up, a n d i n order t h a t w e might establish a uniform practice, perhaps, carrying these charges
as a
temporary a c c o u n t
t o b e taken u p
ly settled b y the Treasury Department.
to have a
e e
a n d definite-
W e are centain
large amount o f t h s e when t h e payments f o r t h e
income t a x c o m e i n i n June.
The Chairman:
Y o u will reéall that x e W i c e a e s e
this m a t t e r w i t h Mr. Malburn.
H
e h a d n o disposition
to
make a n y particular point o f the matter right now, b u t
it was solely o n account o f his feeling that i t would
subject a l l t h e c o l l e c t o r s
to a
great d e a l o f i n c o n v e n -
lence a n d i t would take a little t i m e t o bring about a
change.
M r . Malburn evidenced
upon t h a t point.
gulations
I
n fact,
n o disposition
t o insist
h e said t h a t t h e existing r e -
o f t h e Department r e q u i r e d t h e collectors
t o re-
fuse a n y checks which could n o t b e collected b y the Govewn-
ment without expense; consequently, a change could
gradually b e brought about now that the avenues o f collection were being changed, a n d Mr. Malburn will d o anything
and e v e r y t h i n g
i n his power
t o make these n e w arrangements
workable w i t h o u t u n n e c e s s a r y i n c o n v e n i e n c e a n d e x p e n s e
us. I
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Federal Reserve Bank of St. Louis
to
hope that n o very aggressive s t a n d w i l l b e taken
121
by the reserve banks f o r a period until w e are able t o
work t h i s t h i n g o u t s o m e way.
M r . Malburn i s really e n -
titled t o every possible eooperation.
limit t o m e e t o u r views. I
H e has go#e t h e
euppose y o u a l l r e c e i v e d
the m e m o r a n d u m t h a t w a s p r e p a r e d c o v e r i n g o u r m e e t i n g w i t h
him.
I t was sent t o all t h e banks, I
think.
Y o u recall,
Goverrmor Rhoads?
Governor Rhoads:
A n d t h e trouble i s , h e went b a c k
on i t w h e n h e c a m e t o c o r r e s p o n d w i t h m e .
Governor Aiken:
tenor:
H e did w i t h us, Mr. Strong,
in
H e thought w e could afford t o absorb those
charges.
The Chairman: I
d o not t h i n k h e will s t a n d b y
that.
(At this point informal discussion took place which
the stenogr:.pher w a s directed n o t t o report; a f t e r which
the f o l l o w i n g p r o c e e d i n g s o c c u r r e d . )
The Chairman:
O
f course Mr. M a l b u r n h a s entirely
misunderstood t h e r e a l q u e s t i o n a t issue:
i
t ts- n o t e
question o f whether w e are willing t o absorb a
a few dollars
o r not.
consistently u n d e r t a k e
charge o f
T h e real question is, n o w c a n w e
t o introduce a
tem a n d t h e n a l l o w t h e m e m b e r b a n k s
par collection s y s -
t o p a y exchange
checks t h e y h a n d l e f o r t h e G o v e r n m e n t i t s e l f -
on
T h a t
feature o f the matter ought t o be referred t o the Federal
Reserve Board t o negotiate, a n d I think that a s a part
of o u r report o n the discussion o f this subject o f the
fiscal agency functions we should submit t o the lederal
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Federal Reserve Bank of St. Louis
12
1
Reserve B o a r d a
statement
22
o f t h e situation
i n respect
of
the G o v e r n m e n t ' s f i s c a l a g e n c y a c c o u n t a n d a s k t h e m i f
they w i l l n o t a s s i s t
i n bringing a b o u t a
reconcilement
of
this apparently inconsistent situation t h a t w e are in.
Governor Wold:
T h e Federal Reserve Board have ad+
vised u s that t h e y were going t o request,
not a l r e a d y r e q u e s t e d ,
i f they h a d
t h e Treasury Department
t o confine
the taking o f checks b y their agents a n d collectors t o
checks u p o n banks that have joined t h e Federal Reserve
System.
Governor Seay: I
think they have done that.
O u r
collectors a r e sending o u t notification that t h e y will r e ceive c h e c k s d r a w n o n national banks.
checks o n non member banks,
W h e n w e receive
i n places were there are non-
member banks, w e enclose a
slip a n d send i t t o the bank
and say, "This i s a check o f the United States Government a n d n o provision i s made f o r the payment o f exchange,
and w e t r u s t y o u w i l l c o o p e r a t e
check without charge."
A
n
i n the payment
o f this
d they have been doing it.
In places w h e r e t h e r e a r e n o m e m b e r b a n k s
w e collect
from the country clearing house i n Richmond.
Governor McDougal:
T h e collectors o f internal
revenue, a n d all other collectors, I
presume, a r e uyder
instructions f r o m the authorities i n Washington t o demand,
for instance i n Chicago, Chicago exchange i n payment o f all
dues t h a t a r e p a y a b l e t h e r e .
T h e custom there o f accept-
ing anything t h a t comes i n goes b a c k a good m a n y years a n d
has been permitted t o continue, o w i n g t o the fact that
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Federal Reserve Bank of St. Louis
123
each administration,
a s i t comes in, wantsthe good favor
of its constituents,
o r whatever y o u might call them>
Our collector does n o t make a n y bones about it.
H e says
that h e will n o t send these checks b a c k because that would
injure h i m personally a n d would injure t h e Administratiog
in Washington.
O n t h e o t h e r hand, W a s h i n g t o n h a s g i v e n
him instructions, a n d h e says so, t o accept nothing b u t
Chicago exchange.
(At this point a n informal discussion occurred which
the s t e n o g r a p h e r w a s d i r e c t e d n o t t o report; a f t e r w h i c h
the following proceedings took place.)
The Chairman: I
think Secretary M a l b u r n h a s m i s -
underctood o u r a t t i t u d e
i n assuming t h a t w e a r e trying
to duck some expenses, a n d i t ought t o b e corrected i n his
mind, that this i s really a
matter o f principle a n d o f
law, a n d that a l l thet w e want i s t o have h i m cooperate
in relieving u s f r o m embarrassment a n d n o t i n relieving
us f r o m expense.
Governor Miller:
S o that w e might live consistently.
Governor McDougal: I
think h e i s laboring under
a misunderstanding w i t h respect t o t h e check collection
system i n some o f the districts, too.
The Chairman:
McDougal,
ence d o - - -
D o you offer a resolution, Govemor
a s t o what y o u would like t o have this Confero r Mr. A i k e n ?
T h e a t i a y o u r topic, G o v e r n o r
Aiken.
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Federal Reserve Bank of St. Louis
Governor Fancher:
I t might b e interesting i f I should
124
relate o u r experience. I
had a
ternal revenue collector,
conference w i t h o u r i n -
i n fact, b o t h coilectors, a m d
+ found t h a t o u r i n t e r n a l r e v e n u e c o l l e c t o r h a d b e e n r e -
ceiving these checks, b u t 1] think h e was probably reminded
by the treasury Departm nt what h e should take.
out v e r y c l e a r a n d p l a i n i n s t r u c t i o n s
H e sent
t c t h e collectors
and t o people making remittances t h a t h e would receive o
sly
Cleveland exchange, p o s t office orders a n d currency.
When h e did n o t receive that f o r m o f remittance h e returned t h e checks.
T h a t meant t h a t h e w a s returning
e items; a n d t
m o rather h e l po out t h e situation
s
to o u r m e m b e r b a n k s
+ wrote
i n ths District t h a t w e r e n o t members
of t h e i n t r a - d i s t r i c t c o l l e c t i o n s y s t e m ,
a n d told t h e m
that w e h a d been fiscal agents f o r deposits o f the United
St tes, a n d that w e might receive f r o m time t o time small
items, a n d w e w e r e c o m p e l l e d
t o receive t h e m a t par, a n d
in t h e a b s e n c e o f a n y i n s t r u c t i o n s
t o t h e contrary,
would a s s u m e t h a t t h e a r r a n g e m e n t w a s satisfactory.
have r e c e i v e d a
banks,
few items
we
W e
o n points w h e r e t h e r e w e r e s t a t e
a n d w e have pinned a
little m e m o r a n d u m o n , a n d u p
to t h e p r e s e n t t i m e o u r i t e m s h a v e b e e n r e m i t t e d f o r .
The Chairman:
p rivate bank. I
W
e g o t o n e uncertified c h e c k o n a
do not know h o w that slipped through.
Wegot it collected all right.
Governor Rhoads: U n c e r t i f i e d checks o f favored
customers a r e accepted.
dollar i n exchange.
pothered about.
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Federal Reserve Bank of St. Louis
W
e have o n l y paid less t h a n a
i t ; i s t h e principle t h a t w e a r e
125
Governor Aiken: I
move that tho federal Neserve
Board b e asked t o take t h e matter u p through t h e proper
officers o f the +reasury Department.
Governor McCord: I
The Chairman:
s e c o n d t h e motion.
I s there a n y further discussion?
(There being n o further discussion, t h e motion was
carried.)
The Chairman: G e n t l e m e n , 4 + would l i k e t o refer t o
one o t h e r f e a t u r e
o f this q u e s t i o n o f t h e fiscal a g e n c y
function t h a t o u g h t t o b e d e a l t w i t h b y somebodyinception o f o u r appointment,
o f course,
T h e
w a s simply a n
order b y the Secretary o f the 4reasury which h e was e m powered
b y l a w t o mike, a n d w e h a d r a t h e r s h o r t n o t i c e ,
but were able t o get some sort o f a systematic development o f the plan, a n d i t seems t o b e vorking all right,
S90. far a s i t goes. H o w e v e r ,
i t i s simply bécause w e are
only r e c e i v i n g d e p o s i t s f r o m t h e c o l l e c t o r s l o c a t e d w i t h i n
the c i t i e s w h e r e o u r banks a r e located.
I
t i s not,
of
course, t h e intention o f the Department t o stop there.
Some d a y t h e h a n d l i n g
o f t h e collections m a d e b y collec-
tors i n o t h e r p a r t s o f t h e d i s t r i c t must. g r a d u a l l y w o r k
to the Federal Keserve Banks, a n d s o far a s I a m aware
no p l a n h a s y e t b e e n c o n s i d e r e d f o r t a k i n g u p t h a t p a r t o f
the business.
W e have, I
think, £ 2 collectore i n our
Gistrict, w h i c h i s o n e o f t h e s m a l l e s t d i s t r i c t s
of area.
S o m e o f t h e districts m a y have a
more than that.
i n point
great m a n y
W h a t w e are proposing t o d o i n New York
is t o take e a c h district, e a c h collector,
a t least, ascer-
tainwhere h e made his deposits, where h e handled them, a n d
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Federal Reserve Bank of St. Louis
126
what kind o f deposits h e received, and,
i f posaible,
that t h e Assistant Secretary o f the ‘treasury shall work
out a
p l a n f o r transfers.
I
n fact,
w e are getting some
transfers n o w f r o m t h e o t h e r d e p o s i t a r i e s w h e r e t h e i r
balances e x c e e d t h e a m o u n t c o v e r e d
b y their b o n d o r t h e
terms o f their appointment, a n d 1 am wondering whether
it might n o t b e a goodplan f o r u s t o develop a
shheme
by w h i c h w e c a n t a k e u p t h a t s u b j e c t s y s t e m a t i c a l l y
so
that w e will extend t h e field o f our work, w i t h o f course
the cocperation o f the officers o f the D e p a r t m e n t , o
s
that s o m e d a y w e will n o t get a n order thrown a t u s t o
take everything i n our district without knowing h o w w e
are going t o handle it.
Governor W o l d :
W
e h a d that question u p w i t h regard
to St- Paul, a n d i t would require t w o hours a
day f o r
each d e p a r t m e n t t h e r e t o g o o v e r a n d m a k e deposits,
that w o u l d b r i n g u p a l l k i n d s
not.
o f funds, c h e c k s ,
and
a n d what-
T h e y t o o k t h e matter u p with us, a n d w e supg-sted
that those deposits b e made with t h e bank i n St- Paul,
which they a r e doing from d a y t o day.
The Chairman:
T h e t m a y b e t h e p l a n t o develop
throughout t h e country a s a whole.
Stance,
partment
W e might, f o r i n -
b e able t o w o r k o u t a n arrangemeat w i t h t h e Deb y which instructions w o u l d b e sent v e r y s o o n
to a l l c o l l e c t o r s t h a t t h e i r d e p o s i t s a r e t o b e m a d e i n
one bank a n d a n arrangement b y which exchange would b e
effected e v e r y day.
I
t seems t o moe the initiative i n
working u p a plan might well b e taken b y t h e banks them-
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Federal Reserve Bank of St. Louis
I27
sckves, r a t h e r t h a n w a i t i n g f o r a n order, w i t h c o m p a r a tively S h o r t n o t i c e f o r u s t o f o l l o w it. up.
Governor Scay:
agreed t h a t b a n k s
cess b a l a n c e s
T h e treasury Department h a s already
i n their district m i g h t remit t h e i r e x -
t o us.
The Chairman:
Y e s ; I
trict a r e d o i n g t h a t now.
remittances
that.
I
f r o m various
think t h e banks i n . o u r d i s M I know w e a r e g e t t i n g t h o s e
banks
i n Newark a n d cities
t m a y n o t b e desirable
the matter now.
of u s h a v e a
like
t o take a n y action o n
I f , before leaving Washington, a n y
chance t o discuss t h e m a t t e r w i t h Mr. M a l -
burn, 1 think it might be desirable t o do that.
Governor Miller: I
idea t o discuss
very good
i t w i t h Mr. Malburn.
Governor Rhoads:
Chairman, I
t h i n k i t would b e a
B e f o r e w e l e a v e t h e subject, M r .
would l i k e t o a s k h o w c l o s e l y y o u a r e holding
the collectors t o making their deposits a t three o'clock.
The Chairman:
lutely,
k
b u t w e are endeavoring
Governor Rhoads:
Slipped
e h a v e n o t b e e n a b l e t o d o i t abso-~
t o d o it.
O u r colle ctor of. internal revenues
i n a s l a t e a s 4 : 4 0 o n e afternoon.
very i n e f f i c i e n t f o r c e there,
T h e y have a
a n d t h e y d o n o t know, e v e n ,
how t o c o u n t t h e i r own: cash.
The Chairman:
M a y b e y o u c a n teach them.
Governor Rhoads:
T h e y want u s t o come u p and d o
the w o r k f o r them; t h a t i s t h e problem.
Governor Seay:
W e a r e holding t h e m t o it-
T h e y
deposit about t w o o'clock every day, and not after.
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Federal Reserve Bank of St. Louis
The
128
banks h a v e b e e n taking depesits o n holidays heretofore,
but -we décline
t o d o it.
W h O -COLLeC DOr SAVE e 7 2 6
Very ered “of lt.
Governor Fancher:
deposits,
w
e have b e e n asked t w i c e t o take
b u t w e a c c e p t t h e m u n t i l t h r e e o'clock.
Governor McDougal:
Governor Fancher:
Governor MeCord:
T h a t i s your banking hour?
Y e s .
O u r banking hours a r e from nine
to two, a n d t h e deposits m u s t a l l b e made i n those hours.
The Chairman:
on this topic?
I s there any further action suggested
I f not, what a r e your views about adjourn-
ing?
Governor Kains: I
move w e a d j o u r n u n t i l
1 0 o'clock
tomorrow m o r n i n g .
The Chairman:
B e f o r e adjourning, I
think a little
understanding shceuld b e h a d a b o u t h o w l o n g a
are t o have v i t h these gentlemen tomorrow:
session w e
W e a r e going
to l u n c h w i t h t h e m a n d w e w i l l m e e t h e r e a t ten.
I
f we
can m o e t p r o m p t l y a t t e n o'clock, p o s s i b l y w e c a n dispose
of o u r meeting w i t h them tomorrow morning a n d have t h e
afternoon a t o u r disposal.
Governor McCord:
i v a n
w e n a d p e i b o r t r y to: con=
fine o u r meeting w i t h t h e m t o the morning session, tomorrow morning.
The C h a i r m a n :
C
a
i
S O . coo.
(Whereupon, a t 5:35 o'clock p. m., theGonference
adjourned until tomorrow, Thursday, January 20, 1916, a t
LO 6 Glock a s ms)
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Federal Reserve Bank of St. Louis
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Federal Reserve Bank of St. Louis