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Federal Reserve Bank of St. Louis
CONFIDENTIAL
Secretary's Minutes
G O V E R N O R S
C O N F E R E N C E
November 2
- 3, 1927
Washington, D . C -
INDEX T O SECRETARY'S MINUTES
GOVERNORS CONF ERENCE
NOVEMBER 2 - 3, 1927
Paragraph i n
Secretary's
Minutes
Acceptances, Effect o f ruling o f Supreme Court o f Texas o n Trade
17
Agreement with National Bank of Belgium, Status of =
ad
Agreement with National Bank of Poland, Status of
1.
Assay Offices a n d Mints, Treasury practice i n purchasing gold a t
aT
Audited statements, Advisability o f requiring
14
Baker, Newton De, Matters pending report b y - ~ =
al
Bank stocks, Development o f investment companies f o r purchase o f
16
Bank Relations Departments, Survey o f - - - - - - -
35
Belgium, Status of agreement with National Bank of - - - - - - < - -
ll
Bills payable in foreign currencies, Purchase by F. Rs Banks of
12
Building and loan associations, Classification o f deposits i n member
BR
Calkins, Absence o f Governor John U - - - -
-
3 2 8 © e@ e# e e e e e e n
1
Canceled Government warrants a n d checks, Duties a n d liabilities o f
e e
e
e o e o a
F. R e Banks regarding
22
Cash letters, C h a n g e i n method o f procedure t o obtain immediately
a v a i l a b l e
r e m i t t a n c e s
f o r
n
a
w
e o we we h e e
m e e
Cash letters, Direct sendings o f e
w e leer e r e
e l l e r
e l
18
e l eel e l e
28
e
Cashier's check "not payable through F, R. Bank" Member bank
21
stamping o n
Checks and warrants, Duties a n d liabilities o f F. R. Banks regarding
canceled Government
22
Cheeks received for collection a n d transmittal t o member bank for
payment prior t o insolvency, Right o f F. R. Bank t o charge t o
reserve account o f insolvent member bank -
- e - - " e r "7 r r r 7
Collections, Procedure followed b y F. R, Banks i n handling.-.- - - - =
Colorado a n d Southern Railway Company vs. Docking, Receiver o f
in
Decision of Supreme Court e of Kansas
American State= Bank,
l
e
e ee e
w e we e w w e o
case
o f =
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Federal Reserve Bank of St. Louis
-
©
a
d
(Paragraph i n
Secretary’s
Minutes
Committees:
Advisory Committee of Governors o n Legislative Matters =
General Committee o n Bankers Acceptances = - - - - - - =
n
i
n
L e e
ee ees e
Ce
e e i ek e e a
b :i GCamettten:
~ do .i
<
e e
6 a) w e oa
n
O
23
4}
e
t w ee
32
a
2,6 7
e
eae
Open Market Investment Committee - ---<----+-++-Ponstem C a m i t t c e -
<< =
- sn «
wine
Standing Committee on Collections - ~ - - - - - - -
24
26
Treasury Currency Committee
Credit statements, Advisability o f stendardizing f o r m a n d character o f
13
Currency program of Treasury and relations with F.R, Banks - - = -'- «
26
Deposits in member banks by building and loan associations, mutual
savings banks, cooperative banks, credit unions and Morris Plan
banks,
D i r e c t
C l a s c i f i c a t i
s e n d i n g s
o f
V i sdne
Rates
aw
a
in:
e a s h
of) o
-
o o
l e t t e r s
a
e
e
e
t e
a
e
e
w t SS o
e e e ee
n obieted
t
F k s an 0 8 Ke
w
o
e ea
e
o n e
OK w e
e
e
e
w e e
e
w e
e
e e
ee
Duties a n d liabilities o f F, R, Banks regarding shipment o f canceled
Expense Reports, Standardization o r abandonment o f Functional
Expenses o f services rendered for Governmental Agencies,
R e i m b u s s e m e n t
-of..2
« ( 6 ©
0
0
w
wile
e u r e
@
a w
o
t
e
a l e
Federal Reserve Board Regulations, Revision o f - - - - - - - «
20, 37, 38,
39, 40
Financial statements o f subsidiary corporations -
= - - - + -
Foreign Relations:
Purchase by F, R, Banks of bills payable in foreign currencies
R e p o r t
a
o o d
e
d
Status of agreement with Bank of Poland
Status of agreement with National Bank of Belgium
Functional Expense Reports, Standardizatim o r abandonment o f Gold Holdings and Payments -
- - ~ - < - * + - - - =- -2 2
- 2"- 2
n5 5
Gold purchases a t Minte and Assay Offices, Treasury practice in making
Government securities bought b y Open Market Investment Committee,
Apportionment o f bills and - - = - e e = wee e e e m e w e e n e m n o n
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Federal Reserve Bank of St. Louis
hy5
Paragraph i n
Secretary's
Minutes
Government warrants a n d checks, D u t i e s a n d liabilities
o f F. R e
Deane
S e e
i n k Ceeeclek
w k aks
c S a
w e
w l
e
a
22, 25
Governmental Agencies, Reimbursement of
F, R, Banks for expenses
of services rendered
29
Immediately available remittances for cash letters, Wheat
change should
be made t o obtain
18
Investment companies for purchase o f bank stocks,
Development o f = =
16
Liabilities and duties of F, R, Banks regarding canceled Government
warrants a n d checks
Mints and Assay Offices, Treasury practice i n making purchases
of gold a t
Non-cash items, Recommendation o f conference relative t o regulation
¢ onc erning
"Not payable through F. R, Bank," member bank stamping on cashier's
check
S
S
e e aa a l
Open Market Operations;
Apportionment o f bills and Government securities bought b y
Open
Market Investment Committee
Discount Rates
Par clearance case of State Bank of Hugo, Minnesota =
---- - =
Penalties, Regulation relative t o method o f computing member bank
reserves for
Poland, Status o f agreement with National Bank of ~ - « - « - - «
Procedure followed b y F. R . Banks i n handling collections -
= = <-
Publicity Program, Future
Rates and Policies, Discount
Regulations D and K,Proposed revision of
20, 37, 38,
Regulations o f F, Ra Board, - Revision of -
20, 37, 38)
39,0
4
Reimbursement o f F, R , Banks f o r expenses o f services rendered
for Governmental agencies
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Federal Reserve Bank of St. Louis
a
e
S ee
r e
29
Paragraph i n
Secretary's
Minutes
Reports:
23
10
41
32
31
56.09
33
24
26
Advisory Committee of Gevernors o n Legislative Matters
Foreign Accounts
General Committee o n Bankers Acceptances = - =
Insurance Committee
Leased Wire Committee
Open Market Investment Committee
Pension Committee -
- - = -- = = « = = «
Standing Committee o n Collections
Treasury Currency Committee
Reserve account of insolvent member bank, Right of F, R, Bank
to charge checks received f o r collection a n d transmitted f o r
payment prior t o insolvency - - - * - - - r « a < «
Reserves against Time Deposits
- - - +--+ 8 4 # * - - -
7-277
772%"
Reserves for penalties, Regulation relative to method of computing
m e m b e r
b a n k -
=
«
a
k a
w
a
a
a e a ea
ae ee,
e e
e ea
Reserves for member banks, Revision of Regulation D dealing with - ~ Ruling o f Supreme Court o f Texas o n Trade Acceptances, E f f e c t o f = -
e-
Section 13, Desirability o f amending
Shipment o f canceled Government warrants a n d checks, Duties and
Liabriiaies o f o F e y Benks 2
epereee =
e
= a
e8
Se
e e
State Bank of Hugo, Minnesota, Par clearance case of - - - - - - -
7°"
Statements, Advisebility o f standardizing form and character o f credit
Statements: of subsidiary corporations - - + = =
Strong Stabilization Bill -
© e& © = ewe w m w e n
e n n werner
we
e e e
Subsidiary corporations, Aqgvisability o f requiring member bank t o have
on file recent copies o f separate financial statements o f - - - Time deposits, Reserves against -
- - =--e-+-=*2
eff e - -
Trade acceptances, Effect o f ruling o f Supreme Court o f Texas o n =
Treasury currency program a n d relations w i t h F , R , Banks - « - ° - - - -
Treasury practice i n making purchases o f gold a t Mints a n d Assay
Offices -
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Federal Reserve Bank of St. Louis
" =
~- =
6
PROGRAM
G O V E R N O R S
C O N F E R E N C E
November 2 , 1927.
Washington, D.C.
I, C R E D I T TRANSACTIONS A N D POLICTES
A. O p e n Market Operations.
1, Report of Open Market Investment Committee.
2.Policy.
3. Discussion of method ef apportioning bills and
Government securities bought by Open Market
Investment Committee.
B, Discount Rates and Policies.
C. Relations with Foreign Banks.
N
e
w York
1. Report.
2. Status of agreement with Bank of Poland.
3. Status of agreement with National Bank
ofBelgium.
4, Purehase b y F. R. Banks o f bills payable i n
foreign currencies.
BD. Advisability of requiring member bank offering for
rediscount paper of corporation having subsidiaries
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Federal Reserve Bank of St. Louis
F
, R. Board
F
, R. Board
to have i n its files recent copies o f separate
financial statements of the subsidiary corporations,
when there have been filed with F. R. Bank copies o f
the corporation's consolidated financial statement
and the individual finaneial statements o f ali sub-
sidiary corporations. ( S e e Board letter X~-4946
September 10, 1927.)
Advisability of standardizing requirements o f F. R.
Banks a s t o forms and character o f credit state-
ments. (See Board letter X-4958 September 23, 1927;
also paragraph 4 4 Secretary's Minutes and pages 426 <
434 stenographic record o f November 1926 Governors
Conference.)
Classification o f deposits i n member banks b y building
and joan associations, mutual savings banks, Coopera~
tive banks, credit unions and Morris Plan banks.
F
. R. Baard
(See Board letter X-4959 September 23, 1927.)
Development o f investment companies for purchase e f
bank stocks.
N
e
w York
2
Hs W h a t effect will ruling o f Supreme Court o f Texas that
trade acceptantes are non-negotiable which bear the
legend - "The obligation o f the aeceptor hereof
arises, out of the purchase o f goods from the drawer,
maturity being i n conformity with the original terms
of purchase" ~have upon the negotiability o f bankers acceptances containing similar language, e . g "This acceptance arises f r o m t h e domestic storage o f
cotton a n d was secured a t time o f acceptance b y docu-
ments securing a n d conveying title t o __ b a l e s and
will remain s o secured throughout the life o f this acceptance."
I. I n view of recent decision o f Supreme Court o f Kansas
K a n s a s City
(Colorado and So. Railway Co. vs. Docking, Receiver
of American State Bank, 124 Kansas, 48), i n which i t
was held that directions contained i n cash letters
to remit b y draft, c h a n g e d t h e relationship between
the forwarding bank and collecting bank from principal and agent to that of creditor and debtor: W h a t
change, i f any, should b e made i n methods o f procedure n o w followed t o obtain immediately available
remittances for cash letters?
_J. Strong Stabilization Bill.
N
e
w York
K. Report o f Advisory Committee o f Governors o n Legislative
Matters.
1. Desirability o f amending Section 13.
(See paragraphs9
1 and 24 Secretary's Minutes
of May 1927 Conference.)
C O L L E C T I O N SD
N
A CLEARINGS
A. Report o f Standing Committee o n Collections.
B, Matters pending report b y Mr. Newton D. Baker.
1. Member bank stamping o n cashier's check "not pay-
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Federal Reserve Bank of St. Louis
able through F. R. Bank." ( S e e paragraphs 1, 2
and 4 Secretary's Minutes o f May 1927 Conference.)
2. P a r Clearance Case o f State Bank o f Hugo, Minn.
(See paragraphs 11 and 25 Seeretary’s Minutes of
May 1927 Conference.)
3. Procedure followed b y F. R. Banks i n handling
collections.
Duties and liabilities o f F. R. Banks with regard t o ship- Dallas
ment o f canceled Government warrants and checks.
N
e
Direct Sendings of Cash Letters.
It is suggested that each F. R. Bank make a survey and
report o n the questions (a) whether i t is receiving too
many cash letters p e r d a y from a n y one direct sending
member bank of another district, and (b) whether any of
its own member banks are making a practice o f sending
daily letters of trifling amounts direct to F. R. Banks
of other districts. { S e e paragraph 29 Secretary's
Minutes of November 1925 Conference.)
w York
COIN, CURRENCY AND CIRCULATION
A. G o l d Holdings and Payments.
New York
B. T r e a s u r y practice i n making purchases o f
New York
gold a t Mints and Assay Offices.
C. Treasury Currency Program and relations
with F. R. Banks.
Treasury
OPERATION AND ADMINISTRATION
A. Revision of F. R. Board Regulations.
l. Regulation relative t o method o f com-
puting member bank reserves for
penalties. (See paragraph 30 Secre~
tary's Minutes o f May 1927 Conference.)
2e Reserves against time deposits.
(See paragraphs 34 and 39 Secretary's
Minutes o f May 1927 Conference and
Board letter X-4888, J u n e 24, 1927.)
Reimbursement o f F. R. Banks f o r expenses o f
services rendered for Governmental agencies.
(See Board letter X-4957, September 23, 1927,
and paragraph 2 3 Secretary's Minutes o f May
1927 Conference.)
Standardization o r abandonment o f Functional
Expense Reports.
Philadel phia
Report o f Leased Wire Committee.
Report of Insurance Committee.
Report o f Pension Committee.
RELATIONS W I T H MEMBER BANKS A N D THE PUBLIC
A. HFoture publicity program.
New York
B. A
Philadelphia
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Federal Reserve Bank of St. Louis
survey of the Bank Relations Departments
of the F. R. Banks,
VI. SUPPURMENTARY TOP TCS
Ae Report o f sub-committse o f General Coumittee o n
Bankers Acceptances.
Ba. Proposed revision o f Regulation D dealing with
reserves o f member banks.
F
. R; Board
( S e e Board letter
X-4972, October 15, 1927.}
© Right of a Federal reserve bank to charge to
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Federal Reserve Bank of St. Louis
the reserve account ef an insolvent: member
bank checks received b y the Federal reserve
bank for collection and transmitted t o the
member bank for payment prior to insolvency.
(See Board letter X-4976, October 19, 1927.)
F
. Re Board
GOVERNORS C O N F E R E N C E
November 2 = 3, 1 9 2 7
Washington, D . Ce.
First Day's Session, Wednesday, November 2,
Morning,
The meeting was called te order at 10 o'clock a. m.
PRESENT: Governor Strong, Chairman.
Governors Harding, Norris, Fancher,
Seay, Wellborn, McDougal,
Biggs, Gerry, Bailey and
Talley.
Deputy Governor Day.
Mr. Harrison, Secretary.
The Chairman presented a letter to the conference from
Governor Calkins stating that it would be impossible for him to
attend the conference o n account o f illness and that Mr, Day,
Deputy Governor, would serve i n his place.
T h e Chairman also
presented a telegram i n reply expressing the regrets o f the con~
ference that Governor Calkins was unable to attend, T h i s
telegram was approved,
(See pages 1
~ 4 stenographic record)
TOPSC L s h s O p e n Market Operations
1. Report o f Open Market Investment C o m i t t e e
(See also paragraph 6)
Atthe request of the Chairman, the secretary distributed to
those Governors not serving on the Open Market Investment Committee,
copies of the preliminary confidential memoranda submitted to and
considered b y the Open Market Investment Committee a s a basis o f their
report.
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Federal Reserve Bank of St. Louis
(See pages 4 = 5 stenographie record)
(2)
Topics I, A, B, and C,, all of which relate to open
market matters were deferred, without objection, until after the
meet ing of the Open Market Investment Committee with the Federal
Reserve Board a t 11 o'clock a , me
(See pages 4 = 5 stenographie record)
TOPIC I , D , A d v i s a b i l i t y o f requiring member b a n k
offering f o r rediscount p a p e r o f
corporation having subsidiaries t o
ave i n its files recent copies o f
separate financial statements o f the
subsidiary corporations, w h e n there
have b e e n filed with F , 8. B a n k copies.
of the corporation's consolidated
financial statement a n d the individual
financial statements o f all subsidiary
corporations.
( S e e Board letter X-4946
September 10, 1927.)
(See alsoparagraph 5 )
Govemmor Geery discussed the difficulties incident t o the
requirements o f the Board's present regulation that separate state~
ments o f all subsidiaries o r affiliated companies must b e o n file
with each member bank presenting the paper o f the borrowing company
for discount with the Federal regerve bank.
H e emphasized the
reluctance o f some borrowing concerns t o file detailed and separate
statements with every bank which might b u y their paper.
H e also
stoted that t h e practice varies i n different Reserve banks i n apply~
ing requirements o f the regulation relative t o statements, G o v e r n o r
Strong pointed o u t however that i f a Federal reserve b a n k discounts
the paper o f a borrower which has n o statement o n file with the
member benk, t h e Federal reserve bank might b e construed a s having
passed o n the merits o f the particular paper and that there Was,
therefore, much reason i n support o f the present requirements o f the
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Federal Reserve Bank of St. Louis
regulation,
I n this connection the secretary read t o the conference
the recommendation o f the Federal Advisory Council made o n
September 17, 1926, t o the effect thet separate statenentssshould
be filed b y borrowers with their banks o f deposit.
(See pages 5 4 20 stenographic record)
At 11:00 o'clock p. m. the conference adjourned until
@ o'clock p, me to permit the Open Market Investment Committee to
meet with the Federal Reserve Board,
First Day's Session, Wednesday, November 2 .
Afternoon
TOPIC I . D, v i s a b i l i t y
(Cont'd)
o f requiring m e m b e r b
e r i n g for rediscount
o
uk
f
corporation havine subsidiaries t o
have i n its files recent copiss o f
separate financi s t a t %
f t
subsidiary corporations, when there
have been filed with Federal Reserve
Bank copies o f the corporation’s consolidated financial statement and
the individual financial statements of
all subsidiary corporations. ( S e e
Board letter X-4946 September 10, 1927.)
~ (See also paragraph 4
)
The conference discussed a t some length the arguments pro and
con relative t o the Board's regulation o n the filing o f consolidated
and ‘separate statements of borrowing companies with member banks pre=
senting paper for discount, W h e r e u p o n , upon motion o f Governor Gesry,
ak
an -
it A
e
_ V O T E D t o recommend t o the Federal Reserve Board that that
paragraph of Regulation A relating to the filing of seperate financial
statements o f closely affiliated o r subsidiary eorporations
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Federal Reserve Bank of St. Louis
or firms should be amended s o as to require the filing of such
statements only with those member banks which are depositaries
of
the borrower and which grant lines o f credit t o the borrower, i t
being the sense o f the conference that i t is not
necessary t o
Tequire every member bank presenting paper of the borrower for
discount t o have o n file separate o r detailed statements
o f all
subsidiaries provided depositary banks granting lines of credit
to t h e borrower h a v e s u c h statements o n file a n d available
t o the
Federal reserve bank,
(See pagés 20 = 29 stenographic record)
TOPIC I. A, O p e n Market Operations.
i. Report o f Open Market Investment Committee.
(See also paragraph 2)
At the request o f the Chairman, t h e secretary distributed t o
each o f those members o f the conference w h o a r e n o t members o f t h e
Open Market Investment Committee, a
copy o f the report o f the O p e n
Market Investment Committee, which was presented t o the Federal Reserve
Board a t its seshind with the Committee this morning.
T h e secretary
then read to the conference Governor Young*s letter dated November 2,
stating that the Federal Reserve Board had considered the report and
approved the policy governing open market operations recommended there~
inby the Open Market Investment Committee. T h e Chairman stated
that a copy o f the letter and the report would b e sent t o all the
Federal reserve banks s o that they might be considered b y their respective directors,
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Federal Reserve Bank of St. Louis
(See pages 29 - 32 stenographic record)
In connection with the consideration of the report of
the Open Market Investment Committee which was discussed at some
length by the Governors, there was a general discussion of discount
rates, their effect o n and relation t o other rates for money, a n d
also t h e general effect o f recent reductions.
U p o n motion o f
Governor Biggs, i t was
VOTED t h a t the report of the Open Market investment
Committee b e accepted and filed,
(See pages 32 ~ 49 stenographic record)
TOPIC I . A. O p e n Market Operations.
3. Discussion o f method o f apportioning
bills and Government securities
bought b y Open Market Investment
Committee.
The secretary read a memorandum relative t o the present
practice i n apportioning bills and Gevernment securities bought b y the
Open Market Investment Committee, T h e Chairman stated that h e c o m
sidered the present method the best feasible but asked for an expres
sion of the views o f the conference. Governor Seay indicated that h e
thought i t might better suit his situation . i f a n apportionment were
made o n the basis o f the first quarter o f the year rather than o n the
basis o f the first half of the year.
T h e Chairman suggested that i f
Governor Seay's situation: needed special treatment a n d i f the present
method was satisfactory t o all the other Governors, i t might b e
possible t o adjust t h e allotment i n Governor Seay's c a s e b y special
arrangement . W h i l e n o formal action was taken o r called for i t was
generally the sense o f the conference thet the present procedure i s
satisfactory but that i f Richmond o r any individual bank requires
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Federal Reserve Bank of St. Louis
adjustment such bank should write t o the Open Market Investment
Committees outlining its situation i n order that the committee might
determine whether i t would b e possible t o accommodate i t without a
change i n the general procedure.
There was a discussion off the record o f the possible
effect o f apportionment carried t o extreme o r to the point where all
Federal reserve banks had precisely the same percentage o f earnings.
Itwas generally felt that diss ‘estrone. tener Siaient G a g be subject
to some criticism.
T h e Chairman stated that it would be possible to
consider the surplus account inmaking apportionment but that that
method would give New York, Philadelphia and Cleveland a very large
apportionment. G o v e r n o r s Strong, Norris and Fancher all agreed that
they would net urge such apportionment. T h e r e were n o further comments
and no action was taken o n the topic.
(See pages 50 = 60 stenographic record)
TOPIC I. Be. Discount R
a
t d Policies.
en sa
It was understood that this topic would b e passed inasmich a s ~
it had been covered thoroughly during the course o f the discussion o f
open market policy.
(See page & stenographic record)
TOPIC I . C. R e l a t i o n s w i t h Foreign Banks.
is Report.
Mr. Harrison stated off the record (see.page ©
stenographic.
record) that the usual practice of submitting a detailed statement of
foreign accounts t o the conference had been omitted because o f the fact
that the only substantial changes i n the account since the last regular
monthly statement forwarded t o each reserve bank had been covered b y the
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Federal Reserve Bank of St. Louis
Chairman i n his discussion o f open market policies,
M r . Harrison ine
dicated, however, that he had available a statement of the accbunts if
any of the Governors wished t o see i t expressly,
TOPIC I. C. Relations with Foreign Banks,
2.Status of agreement with Bank of Poland,
3, S t a t u s f
o agreement with National Bank
of Belgium.
At the request o f the Chairman, Mr, Harrison reviewed off the
record the status of the agreements with the Bank of Poland and the
National Bank of Belgium.
TOPIC I. C. Relations with Foreign Banks.
4, Purchase b y Federal Reserve Banks
of bills payable i n foreign cure
renciess
The Chairman referred to the fact that inquiries had been
received from some of the Federal reserve banks regarding the purchase
and collection of bills payable i n foreign currencies and outlined the
reasons why it would not be feasible for the Federal Reserve Bank of
New York to effect the collection o f documentary bills payable i n
foreign currencies, and also the reasons of policy which appear to make
it unwise for any of the Federal reserve banks at this time to purchase
intheir respective markets bills that are payable in foreign currencies.
While there was no formal action taken regarding the matter, those
Governors who had originally made inquiries stated that the question was
not now periding and that there was n o need t o take any further action i n
the m a t t e rPge -
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Federal Reserve Bank of St. Louis
ff
{See pages 60 « 67 stenographic record)
TOPIC I, E y A d i s a b i l i t y o f standardizing requirements
of F, R e Banks a s t o forms a n d character
of credit statements, ( S e e Board letter
X-4958 September 23, 1927: a l s o paragraph
44 Secretary's minutes a n d pages 4 2 6 =
434. stenographic record o f November 1926
Governors Conferences)
After a general discussion o f this topic and a n expression
ofviews by the individual Governors as to the advisability of standard=
izing credit statements, upon motion of Governor Seay, i t was
VOTED t o be the sense o f the conference that i t should b e
the policy of the Reserve banks to aid member banks in procuring suitable forms o f credit statements from their customers, i f necessary,
by
furnishing forms, out not toattempt te urge the adoption o f standardized
forms o f credit statements because i t is’ wholly impracticable t o get
uniformity i n such statements.
(See pages 67 = 71 stenographic record)
a
S t r o n g referred t o the fact that a t one time the
question was raised whether the Federal Reserve System should attempt
to require audited statements.
I + was t h e informal opinion o f those
governors w h o spoke that i t was n o t feasible f o r t h e Reserve banks
to
require such statements although t h e practice i s growing among
member
banks.
T h e matter not being o n the program, n o action was takens
(See pages 71 - 73 stenographic record)
p e e ee eee C l a s s i f i c a t i o n o f deposits i n member banks
by building a n d loan associations, mutual
savings banks, cooperative banks, c r e d i t
‘unions and Morris Plan banks. ( S e e
Board letter X=4959 September 23,-1927.)
At the request of the Chairman, the secretary read Mr.
Round*s memorandum o n this subjecte G o v e r n o r s
Fancher and Seay also
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Federal Reserve Bank of St. Louis
referred t o the opinions o f their counsel.
A f t e r further considera»
tion of the matter, upon motion of Governor Talley, it was
VOTED t h a t the Federal Reserve Board should b e requested
tomake no change in its existing rulings under which deposits of the
character referred to are understood not to be deposits “due to banks,"
(See pages 73 = 81 stenographic record)
TOPIC I. Gs Development o f investment companies for
purchese o f bank stocks.
The Chairman referred t o a memorandum prepared i n the Federal
Reserve Bank of New York relative to the development of investment com
panies for the purchase of bank stocks, and upon his request the secretary
read the recommendations contained i n the latter part of that memorandum, |
The other Governors expressed some concern in the development of these
companies, especially i n the New York district and Governor Talley read a
memor andum calling attention t o t h e need o f some regulatory influence.
While the question was raised whether this subject i s amy concern o f the
Federal reserve bank, i t was felt that the possible dangers incident to
a widespread development of companies of this character wale it a matter
for consideration b y the Federal Reserve System. U p o n suggestion o f the
Chairman, i t was finally agreed that the Federal Reserve Bank of New
York should elaborate t h e memorandum referred t o b y the Chairman a n d send
it to all other Federal reserve banks with the request that they, upon
receipt of the New York memorandum, prepare a similar report with refere
ence t o the development o f concerns o f this character i n their respective
of the —
districts, T h i s was agreed to as the action
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Federal Reserve Bank of St. Louis
(See pages 61 ~ 100 stenographie record)
POP LCs « t s W h a t effect will ruling o f Supreme Court
of Texas t h a t trade acceptances a r e n o n
negotiable which b e a r t h e legend < "The ~
obligation o f the acceptor hereof arises
out o f the purchase o f goods f r o m t h e ;
drawer, maturity being i n conformity with
the original terms o f purchase" -
have upon
the negotiability o f bankers acceptances
containing similar languace, e . Seg “This
acceptance arises f r o m t h e domestic storage
of cotton and was secured a t time of acceptance b y documents securing a n d convey
ing title to -«- bales and will remain so
secured throughout t h e life o f this a c cep tance,"
Governor Talley discussed this topic and referred to the
opinion of the counsel. f
o the Federal Reserve Bank of Dallas expressing
doubt as to the negotiability of bankers aeceptances bearing a legend
ofthe kind quoted above, Governor Talley also mentioned that counsel
of some o f t h e other Federal reserve banks differed with this opinion o f
his counsel, A f t e r some further discussion, upon motion o f Governor
Bailey, i t wa a
VOTED t o be the sense o f the conference that the Federal
Reserve Board should call a conference o f the counsel o f the several
Federal reserve banks i n Washington a t a reasonably early date t o meet
with Mr, Wyatt and Mr. Baker to consider the various legal questions
now pending before the System and that this topic should b e referred t o
that conference, i f called, f o r consideration,
it was also understood t h a t a
list o f t h e legal questions n o w
pending before the Conference would b e prepared b y the secretary t o
be submitted t o t h e Federal Reserve Board a n d that each Federal reserve
bank would have its own counsel bring t o the meeting any legal questions,
pending before them, which they think should be submitted to the
Conferences. _
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Federal Reserve Bank of St. Louis
we’ (See pages 100 + 109 stenographic record)
TOPIC I . I.
I n view o f recent decision o f Supreme Court
of Kansas (Colorado a n d So. Railway Co» vs.
Docking, Receiver of American State Bank,
324 Kansas. 4 8 i n which i t was held that
directions contained i n cash letters t o
remit b y draft, ehanged the relationship
between the forwarding bank and collecting
bank from principal and agent to that of
creditor and debtor: W h a t change, i f any,
should b e made i n methods o f procedure now
followed to obtain immediately available
remittances for c a s h letters?
Upon motion, duly seconded, i t was
VOTED t o refer this topic to the conference of counsel.
(See pages 109 = 111 stenegraphic record)
TOPIC I. J. Strong Stabilization Bi}l.
There was a discussion of this topic eff the record. T h e
secretary read to the conference Ongressman Strong*s letter addressed
toGovernor Strong under date of October 28, 1927. U p o n motion, duly
seconded, i t was
VOTED t o refer this letter t o Governor Strong t o take u p
with Governor Young for disposition.
(See page 111 stenographie record)
At 6
o'clock p . m. the conference adjourned t o reconvene a t
10 o'clock a. m. on Thursday, November 3.
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Federal Reserve Bank of St. Louis
Second Day's Session, Thursday, November 3 ,
Morning
The meeting was called t o order a t 10 o'clock a. me
Reguiation D and Regulation K e
(See also paragraphs 37, 38, 39 and 40).
At the request of the Chairman, the secretary distributed
copies o f Federal Reserve Board letters X~4915a relative t o Regulation
Ky e n d X-4878a, X-4988 o n d Xo4915 relative t o Reguiation D e
(See pages 112 - 114 stenographic record)
TOPIC Ile Be Matters pending report by Mr. Newton Dy, Baker.
le Member,bank stamping o n cashier's check
“not payable through Federal Reserve
Banke" (See paragraphsl, 2 and 4
Secretary’s Minutes o f May 1927
Conf erences)
2e Par Clearance Case of State Bank of Hugo,
Minne (See paragraphs 11 and 25
Secretary's Minutes of May 1927
Conf erences)
3eProcedures followed b y Federal Reserve
Banks i n handling collectionss
it was agreed b y the conference that all matters under this
topic should b e referred t o the meeting o f the conference o f counsel o f
the Federal r e s e r v e banks,
(See page 115 stenographic record)
TOPIC II, C. Duties a n d liabilities o f Federal Reserve
Banks w i t h regard t o shipment o f can=
celed Government warrants a n d checkse
(See also paragraph 25)
Governor Talley discussed this topic, quoting from an opinion
ofthe counsel of the Federal Reserve Bank of Dallas. A f t e r a gmeral
discussion during which it was pointed out thet matters such as that
referred t o i n this topic relate t o transactions between the Federal
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Federal Reserve Bank of St. Louis
(21)
reserve banks a n d the Treasury a n d d o not directly
come within t h e
jurisdiction of the Federal Reserve Board, i t was understood
that
Governor Talley should take up the matter with the Treasury and
Feport back t o the conference efter any agreement may be reached,
(See pages 115 = 125 stenographic record)
TOPIC I o K e Report o f Advisory Committee o f Governors o n
Lepislative Matters.
le Desirability o f amending Section 13.
(See paragraphs 19 and 24 Secretary's
Minutes of May 1927 Conferences)
Governor Seay discussed the report of the committee which
hed previously been distributed, U p o n motion of Governor Fancher, i t
was
VOTED t h a t the report o f the committee b e adopted, that is,
that i t is believed thet the Federal Reserve Board now has the power and
should make a ruling sufficiently broad to meet the legitimate demand
for
the discount of sight end demand drafts secured by shipping documents
covering agricultural products euch as bran, flour, cotténserd meal, etca,
and that it ig not believed to be necessary or advisable at this time to
seek e n amendment t o Section 1 3 of the Act relating t o this subject.
(See pages 126 ~ 132 stenographic record)
ZOPIC IT, Ae Report of Standing Committee o n Collections
Mr, Strater presented t o the conference the report e f the
Standing Committee on Collections (printed on pages 132 & 2.45 sterioe
Braphic record) and after a full discussion of the first two topice in
the report, that is, (8) revision of the Time Schedule with a view te
reducing float and avoiding inequalities, and (b) a study of the whole
question of the collection of cash items, upon motion of Governor
Soay,
it was
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Federal Reserve Bank of St. Louis
VOTED t h a t the report of the committee b e received and
filed and studied and that in the meantime a copy of the report be
submitted to the Federal Reserve Board for its information.
(See pages 132 = 164; 195 ~ 209 stenographic recoré)
At this point Undersecretary Ogden L , Mills joined t h e
conference,
TOPIC II, C, Duties and liabilities of Federal reserve
(Cont *d)
b a n k s with regard t o shipment o f canceled
Government warrants a n d checks.
(See also paragraph 22)
Governor Talley reviewed the subject matter of this topic
for Mr. Mills, whereupon i t was finally agreed,
a s Mr, Mills suggested,
that Governor Talley should see Mr. Hand o f the Treaa@ury Department
regarding the matter and that a n y conclusions which may be arrived a t
should b e reported t o all Federal Reserve banks b y the Treasury D e p a r t
ment,
(See pages 164 = 167 stenographic record)
TOPIC Itt, C . T r e a s u r y Currency Program a n d relations
with Federal reserve banks,
Mr, Mills discusse< the progress made regarding the Treasury's
currency programs,
(See pages 167 = 173 stenographie record)
TOPIC III, A. G o l d Holdings and Payments
TOPIC Tit. B , Treasury practice i n making purchases o f
gold a t Mints and Assay Offices,
Mr, Harrison reviewed t h e status o f the present g o l d holdings
of all Federal reserve banks and discussed the present Treasury practice
in making purchases o f gold a t Mints and Assay Offices, comparing this
practice with that prevailing i n other gold markets, such a s London,
Amsterdam, Berlin and Zurich,
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Federal Reserve Bank of St. Louis
(See pages 174 = 195 stenographic record)
e e
p o i n t Mr, Mills left the conferences
TOPIC 33, D. Direct Sendings o f Cash letters.
Governor Geery referred t o the number and amount o f items
which are received b y the Federal reserve bank sent direct from member
banks i n other @istricts, particularly the New York district, Governor
McDougal also indicated that the Federal Reserve Bank of Chicago was
receiving large numbers of letters in one day from certain banks in
New York City, A f t e r some discussion o f the particular cases referred
to, it was indicated that probably the cause was the fact that each of
the banks mentioned have large numbers of branch banks and that
individual letters are necessarily sent directly by each branch, After
further @is¢ussion a n d upon motion o f Governor Seay,
i t was
VOTED t h a t the Federal reserve banks should follow the prac=
tice recommended by the Standing Committee on Collections i n its report
to the Novembey 1 9 2 5 Con fe rence (see paragraph 2 9 of the Secretary's
Minutes), o v e r n o r Harding did not vote,
(See pages 209 = 218 stenographic record)
TOPIC IV. B, Reimbursement o f Federal reserve banks for
expenses o f services rendered f o r G o v e r n
mental arencies,
Governor Norris reviewed the history of this topic referring
Specifically to the action taken at the last Governors Conference and the
Board's letter X=4887 dated June 24, 192%, stating that the view of the
Board with respect t o this matter was not i n harmony with the view o f the
conference, a s expressed at that time,
H e also referred to the Board's
letter X-4957 dated September 23, 1927, resubmitting this topie for
further discussion a t the present conference. A f t e r some discussion, upon
motion o f G o v e m o r Harding,
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Federal Reserve Bank of St. Louis
i t was
16
VOTED t h a t the conference should reaffirm a n d reiterate the
action taken by the conference a t its meeting i n May 1927, (see paragraph
23, Secretary's Minutes, M a y 1927 Conference) believing i t to be entirely
f o r a n y substanproper f o r a n y Federal reserve bank t o claim reimbursement
tial service performed for a governmental agency.
(See pages 219 = 225 stenographic record)
At 1:10 o'clock p. m. the conference adjourned t o reconvene
at 2:15 o'clack poe m s
Second Day's Session, Thursday, November 3.
Afternoon
The meeting was called t o order a t 2:25 o'clock p e M e
WORE
40%
S t a n d a r d i z a t i o n o r abandonment o f Functional
Expense Reportse
(See also paragraph 36}
Governor Norris discussed the Functional Expense Report prepared
by the Federal Reserve Board o n the basis o f Form E and stated that the dis«
crepancies i n the cost shown for different banks which h e cited indicates
that the report itself does not now serve a useful purposée
H e expressed the
view that while the discrepancies were unavoidable a t first, nevertheless h e
believes either that they should now be eliminated o r that the report b e aban=
doned, bejecbudiy a s he estimates that the preparation o f the figures o n which
the report is based costs the System between $40,000 and $50,000 a yeare
Governor Norris t h e n moved that i t should b e
RESOLVED t h a t t h e Federal Reserve Board b e requested t o dis-
continue the requirement o f making these functional expense reportse
Governor Fancher seconded t h i s motione
I n the course o f t h e
discussion o f the motion, when i t was indicated that many o f the
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Federal Reserve Bank of St. Louis
Governors w e r e opposed t o abandoning t h e report entirely, a
further
discussion was postponed pending the arrival o f Mr. Smead, o f the
Federal Reserve Board,
(See pages 226 - 236 stenographic record)
TOPTO: 10s t h R e p o r t o f Leased Wire Committees
4
Upon motion, duly seconded, i t was
(printed
VOTED t h a t t h e report o f t h e Leased W i r e Committee
onpage 237 stenographic record) be accepted and filede
(See pages 236 - 237 steographic record)
TOPIC Ve. B e R e p o r t o f Insurance Committecs
the
Since n o n e w matters h a v e been referred t o t h e committee,
te
c o m m i t t e e , h a d no report t o files
(See page 237 stenographic record)
TOPIC IV. F e R e p o r t o f Pension Committees
Upon motion, duly seconded, i t was
VOTED that the report of the Pension Committee (printed on
pages 240 et seq. stenographic record) be accepted and filede
(See pages 237 - 240 stenographic record)
TOP IG Vi A e F u t u r e publicity programs
this topic was dis=
The report o f the Agent's Conference o n
discussed a t the
tributed w i t h t h e understanding t h a t i t b e read a n d
joint confgrence tomorrow,
(Sea pages 240 » 241 stenographic record)
‘TOPIC V. Be A
survey of the Bank Relations Departments
of the Federal Reserve Bankse
had been
Governor Norris stated that the questionnaire which
distributed among the Federal reserve banks before the conference,
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Federal Reserve Bank of St. Louis
together with the mimeographed replies o f all Federal reserve banks
which were distributed b y the secretary, f u l l y covered t h i s subject
and while h e suggested t h a t a l l banks r e a d a n d ctucy t h e replics o f
all the other banks, n o action was asked fore
{See pages 2 4 1 -
243 stenographic record)
TOPIC IV, C. S t a n d a s c d fi abandonment
z a toi o n of Functional
(Cont'd)
E x p e n s e Reports.
(See also paragraph 30)
Mr, Smead joined the conference a t this point, a n d a dis»
cussion o f this topic was continuede
M r . Smead stated that there were
no doubt many discrepancies i n the figures now incorporated i n the
Func ti onal Expense Report, b u t s a i d that even though s o m e o f these might
be unavoidable, h e was opposed t o abandoning t h e report entirely,
T h e
sentiment o f t h e c o n f e r e c e seemed t o b e opposed t o complete abandonment
ofthe report, feeling that some of the existing discrepancies might be
avoided, that the useless figures might b e eliminated and that a compar~
able and useful report might still b e madée
Upon motion o f Governor Strong, i t was,
VOTED t o adopt the following resolution;
WHEREAS
I t is the sense o f the conference that the adoption
of the budget plan b y each Federal reserve bank has materially aided i n
accomplishing many o f the objects originally sought through the prepara~«
tion o f t h e Functional Expense Report, a n d
WHEREAS t h e Functional Expense Report now eontains many dis~
crepancies which tend t o destroy the usefulness o f the report, but
WHEREAS
i t i s t h e sense o f t h e conference t h a t t h e report m a y
still b e prepared i n a way to serve a useful purpose and, i f so, shouke
be continued, n o w therefore
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Federal Reserve Bank of St. Louis
BE I T RESOLVED | that t h e Federal Reserve Board b e asked t o
request Mre Smead and Mr. Rounds, i n connection with the appropriate
committee o f the Board, t o study the whole question o f the functional
expense report with a view to seeing whether a more comparable and
useful report may be made with less effort and at less expense than that
now required in the preparation of the present report.
(See pages 243 - 264 stenographic record)
TOPIC IV. A. R e v i s i o n o f Federal Reserve Board R e egulations,
(See also paragraph D 1
Regulation K. There was a long discussion, off. the record
f
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Federal Reserve Bank of St. Louis
e
e
f o l l o w i n g motions were made, seconded, and voted:
1) I t was VOTED + o recommend to the Federal Reserve Board.
that no regulation be issued concerning the collection of nom
cash items.
Governor Seay voted i n the negative.
(2) Itt was VOTED that the question of (a) a uniform circular
and (b) a limitation on the
e r e
o f non-cash items to be
handled b y Federal reserve banks should b e referred t o the Stand=
ing Committee o n Colleetions for study and recommendation to the
next conference o f governors.
(3) I t was VOTED that ponding the receipt of a report by the
Standing Committee q n Collections o n the character o f nomcash
items t o be handled
b y Federal Reserve Banks i t should b e the policy
of the System gradually t o discontime the handling o f drafts with
bonds and stocks attached.
(4) I t was VOTED that it is the sense of the conference that no
Federal reserve bank should be expected t o collect non-cash items
payable o n points where adequate and satisfactery facilities d a not exist. é
(See pages 264 +2267 stenographic record)
P
e
i
TOPIC VI. B. Proposed Revision o f Regulation D.
(a) Periods for averaging reserves
Upon motion, d u l y seconded,
i t was unanimously
VOTED ‘that the proposed amendment t o Regulation D provid-
ing for semieweekly averaging of reserves of member banks located in
Reserve bank and Reserve bank branch cities, should b e approvede
(See pages 267 = 269 stenographic record)
(>) Progressive penalty f o r deficiencies
i n reserves.
Upon motion, duly seconded, i t was
VOTED
t o advise t h e Federal Reserve Board that i t i s the
sense o f the conference that the proposed provision o f Regulation D
relating to progressive penalty for deficiencies in reserves should
be amended s o a s to provide that such progressive penalty shall b e
optional with the Federal Reserve Banks, a s at present, and not.mandatory
as provided i n the tentative draft o f the regulation.
(See pages 269 ~ 272 stenographic record)
Governor Young. joined the conference a t this point,
(c) Definition of .savings d
n
a time deposits.
There was a long discussion o f the question o f further
defining savings and time deposits i n the regulations of the Federal
Reserve Board.
W h i l e n o formal vote was taken, i t appeared t o be the
‘sense of the conference that i t would b e preferable i f the Federal Reserve
Board should not attempt a n y further definition o f these deposits b y
regulation inasmuch a s the only satisfactory correction appears t o require
an amendment t o the law,
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Federal Reserve Bank of St. Louis
(See pages 276 - 285 stenographic record)
TOPIC VI. A . R e p o r t o f sub-committee o f General Committse
on Bankers Acceptances.
Upon motion of Governor McDougal, i t was
VOTED t h a t this report (printed o n pages 275 et segs
stenographic record) be accepted and filed.
(See pages 275, 2 8 5 stenographic record)
TOPIC Vi, CO. Right of a Federal Reserve Bank to charge
to the reserve account o f a n insolvent
membsr bank checks received by. the Federal
reserve b a n k f o r collection a n d transmitted
to the member b a n k for: payment. prior t o
insolvency. (See Board letter %-4976,
October 19, 1927.)
Upon motion o f Governor Seay, i t was
VOTED + o refer this topic to the conference of counsel.
(See page 286 stenographic récord)
_At 5:20 o'clock p. m. the conference adjourned to reconvene
at
10230 o'clock a. m. Friday, November 4, i n joint session with the
Federal Reserve Board and Federal Reserve Agents.
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Federal Reserve Bank of St. Louis
George L. Harrison,
Secretary.
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Federal Reserve Bank of St. Louis
@FedFRASER