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71 A meeting of the Executive Committee of the Federal Reserve Board 8 held. 48 ' in .:ashinton on I.:ondv, April 10, 1933, at 10:30 a. m. PRESLIPT: Mr. Mr. 1.1±. La.. Meyer, Governor Hamlin Ililler Tames Er. Lerrill, Secretary LieClelland, Assistant Secretary Mr. Harrison, Assistant to the Governor Er. lyatt, General Counsel Nr. Faulger, Chief, Division of :xaminations. ALSO PRESENT: Llr. Eugene I:. Stevens, Chairman and Federal Reserve Agent at the Federal Reserve Bank of Chicago Messrs. T. R. Leavell, R. Thstberg and George T. Schaller, Class A Directors of the Federal Reserve Bank of Chicago. Governor Meyer referred to the letter addressed by the Board to Er. Stevens under date of April 3, 1933, requestinj, that he and a cormittee of (lirectors of the Federal Reserve Bank of Chicago come to ashington to c°11Ter with the Board regarding the :atters covered by the report submitted 1) its 'Jivision of -xaminations with special reference to the handling of tl'Ellisactions in Government securities in the fiscal agency department of the Chicago bank. He stated that the members of the Board felt that these Iktters Imre of such importance that they should be discussed with a Itaittee of directors of the bank. Stevens read a memorandum prepared by him a few days ago of the illrormal action taken by the board of directors of the bank at its tleetill on February 24, 1933, when an informal motion was unanimously 1131)" Ifed. entirely absolving the officers and la, . Simpson, a Class C director ti le bank, from any wilful intent on their part or any persenal blame in the 'natter of the over-allotment of Government securities on subscriptions by them, and e:a2ressinr- a vote of complete confidence in them in this 72 4/10/33 tealircl• -2flbssrs. Estberg and Schaller stated that the memorandum expresses their understandins of the action taken at the meting. "he th Er. Leavell stated had not been elected a director of the bank at the time of the 11 'st411g referred to. A copy of this memorandum has been placed in the 13°11rd's files. Copies of the sunmary, dated March 25, 1933, of the report submitted 15 the Board's Division of Examinations, and of a supplemental memorandum Witb. regard to the matter, prepared in the Division of Examinations under date March b/r them, and ao, Ia.. 1933, were handed to each of the directors and were read Stevens stated that the statements therein are in practical 4Creeraent with the information contained in the records of the Federal 1'E/serve bank. He also stated that at a meeting on Xanuary 26, 1933, the cliectors were advised in detail of the situation which led up to the tesignation of Deputy Governor Tones, and that following that meeting there 1/Sa developed the information with regard to the aver-allotment of securities to officers of the bank, which was brought to the attention of the 150s.rd of directors at its meting on February 24, 1933. During the ensuing discussion, La.. Stevens referred to Lir. A. Y. 14Z611.1 Manager of the Invest,Lunt Department of the Chicago bank, and to 14re. T C. Lederer, formerly secretary to Er. Tones, and stated that the l'ea k;nation of Mr. Dazey was requested and accepted last Saturday, April e, 10,r uQ6, and 'the that Mrs. Lederer was dropped from the bank's rolls within Past Levi days. There was a general discussion as to whether the other officers of '73 4/10/33 -3- tlie bank and Er. Simpson, who received aver-allotments of securities, had IQUATledge of such over-allotnents or should be held responsible for the " Il'ellotnents in any way, and the members of the committee of directors N)ressed the feeling that neither the officers nor Er. Simpson had such "ledge, nor had any intention to obtain over-allotments on their sub) 4eri1 tions; that they had complete confidence in the integrity and ability elloh officers and LI% Simpson; and that in their opinion all of the 11-Ptions were for bona fide investments for which the subscribers were 8411 " 14 4 Position to pay. Reference was made to the situation leading up to the resignation " 14r. George T. Jarvis, Assistant Cashier at the Detroit branch, to the l'egent defalcation at the branch, to an overpayment of gold at the branch, 44a to the shortage of ,3,000 of bonds in the collateral held for the Reconstruction Finance Corporation at the head office, and it was pointed °Ilt to the committee that all of these things raise a question in the minds t tiqe members of the Board as to whether the operation of the Chicago bank 14 411 that could be desired from an administrative point of view. There 11:44 4180 a discussion as to the effectiveness of the auditing department °r the bank and La.. jtevens and 411°111d be strengthened. ra.. Leavell expressed the opinion that it Mr. Stevens stated that the directors are alert to the problems of the bank and have taken steps to prevent any recurrence r the irregularities referred to. All of the directors present expressed the °Pinion that there is also need for strengthening the management of th baak. They suggested that the Federal Reserve Board take no action at 74 4/10/33 -4- thia time with regard to the natter, but that it give the board of directors, Wil° have the primary responsibility for the operation of the bank, an 41)e tunity to make the necessary corrections. Governor Ilbylor requested that as soon as the board of directors 1°1* the bank has surveyed the situation it forward to the Board a summary °14 its conclusions and the steps which it is proposed to take, in order tbat the Federal Reserve Board, in the discharge of its responsibility, 'be assured that the irregularities that have occurred may not be Eq:Pected to recur in. the future and that the general operating efficiency eir the hank will have the detailed consideration of the board of directors. It 7184 understood that this procedure would be followed. The meeting then recessed and reconvened at 3:55 p.m, the 4/313°Iattve mambers of the Board and Messrs. Morrill, McClelland, Harrison 4411 Wyatt, of the Board's staff, being present. The Committee considered and acted upon the following matters: telegram dated April 7, 1933, fran the Secretary of the Federal 11136el''4.e Bank of Cleveland stating that at the meeting of the board of dil'actors on that date no change was made in the bank's existing schedule r rates of discount and purchase. Without Objection, noted with approval. Letter dated April 6, 1933, from Mr. Sproul, Secretary of the Federal 4e812111re Bank of Nev York, confirming the advice previously given over the telepliolle of the action taken at the meeting of the board of directors on V10/33 —5- 4111 6 1 1933, in voting, subject to review and determination of the Federal 1/(31"ve Board, to establish a rate of 5,:'; per annum for rediscounts of L. le Paper for menJ)er banks and advances to me:.ber banks under the tell's' of section 13 of the Federal Reserve Act, effective from the opening "buciness April 7, 1933; which rate was approved at the meeting of the -iceeutive Committee of the Board on. April 6. the The letter also stated that directors had voted to establish, effective from the opening of business 011 April 7, 1933, a minirumbuying rate of 15 for the purchase of bankers' "cepta,n,e,at or above which currently effective minimum buying rates may be fixed by the officers of the bank, and that, in accordance with the 1131141 "'stomp the rates for trade bills and repurchase agreements on Go vernment securities were reduced to 3. The minimum buying rate of i was approved and the reduction in the rates on trade bills and repurchase agreements was noted with approval. Tel(3,2ram dated April 10, 1933, from the Chairman of the Federal ReSprr. ' -- 7e see Bank of Dallas stating that, subject to approval by the Federal Board, the board of directors of the bank had fixed a rate of 11" Einnurn on advances to be made under the provisions of section 10(b) of the .e,4 "eral Reserve Act as anended by section 402 of the Act of T.T.arch 9, 1933_ 'and on advances to nonmember State banks and trust companies under the Pl'"isions of section 404 of the Act of Larch 9, 1933, as amended by the 'Act °f' ,larch 24, 1033. The rate of 5;) established by the directors Of the Dallas bank was approved effective today, April 10, 1033. 76 Vio/33 Letter dated April 7, 1933, fram the Federal Reserve Agent at Iktiton stating that the appointments of Messrs. Richard Rapport and George Zo Wallace, whose designations as examiners were approved in the Board's telegram of April 6, 1933, are on a permanent rather than a temporary beau. The letter also requested approval of the temporary appointnent as 601 ezaminer in the 2ederal reserve agent's department, of Mr. George T. 84rrY with salary at the rate of .3,600 per annum. The Secretary was requested to advise the Federal Reserve Agent at Boston that the Board notes with approval that the appointnents of Messrs. Rapport and Wallace are on a permanent basis, and that the Board approves the temporary appointnert of Mr. Barry as an examiner, with salary at the rate of :3,600 per annum. Letter dated April 7, 1933, from Governor Geery of the Federal Re"I've Bank of Minneapolis, stating that at the suggestion of the board of directO'5 of the Helena branch, the executive committee of the bank, on that date, approved the payment of additional compensation at the rate of 444 Per month to Ur. A. A. Hoerr, Gadder of the branch during the period 14 which Lir. E. Towle, Managing Director is absent from the branch incident to his service as Manager of the Regional Agricultural Credit Corporation at Spokane, Washington. The Secretary was requested to advise Governor Geery that effective as of April 7, 1933, the Board approves the payment of additional compensation to VII% Hoerr in accordance with the action of the executive committee of the bank. Tele. dated April 8, 1933, to the respective Federal reserve 48e4t4) aPProved by three members of the Board, stating that the Board has PI31‘clitecl the applications filed by the following State banking institutions 77 4/10/33 -7_ itleabership in the Federal Reserve System anti for 2edera1 reserve bank Stock, subject to the conditions prescribed in the individual telegrams: Name of Bank /lumber of Shares lierett Bank ana Trust Company, 2verett, Lassachusetts, Federal Reserve Bank 240 Boston Br ookline Trust Company, Brookline, nassachusetts. 300 Boston Boulevard Trust Company, Brookline, Eassachusetts. 420 Boston Citizens Bank of Tait° Plains, New York, 480 New York P4rmers Exchange Bank, Abingdon, Virginia. 36 Richmond The Bank of Glade Spring, Glade Spring, Virginia. 60 Richmond Approved. Telegrams to the respective Federal reserve a'zents stating that the Boa rias ship i ject approved the applications of the following State banks for member- the Federal Reserve 3ystem and for .Yederal reserve bank stock, sub- to certain conditions prescribed in the individual telegrams: __Name of Bank Number of Shares Citizens Bank and Savings CoraPauy, Leesburg, Ohio. 18 Federal Reserve Bank Cleveland Western. State Bank, Cicero, Illinois. 180 Chicago nutchinson State Bank, 1lUtchi1lson, Kansas. 122 Kansas City Approved. 4/10/33 -8Telegram dated April 8, 1933, to Yr. Bailey, Assistant Federal e Agent at :'inneapolis, approved by three members of the Board, re" Re terllOg to the application filed by the South Range State Bank, South Range, for permission to withdraw immediately from membership in the FedReserve .Dystem, and stating that the Board waives the usual requirement c't81:4 raonths notice of intention to withdraw, and that, accordingly, upon 81111 ' ender of the Federal reserve bank stock issued to the South Range State ktik the Federal reserve bank is authorized to cancel such stock and make a l'eru4d thereon. Approved. Letter dated April 7, 1933, to Mr. Stevens, Federal Reserve Agent at Chicago, approved by three members of the Board, calling attention to the, .Lact that the report of examination of the Uptown State Bank, Chicago, ultriole) as of February 14, 19330 and the formal application for member- 4' submitted by that institution, show certain reserves in the amount of 197 0, 1a 15, and an estimated loss of 4860002 on the asset of 4)805,226 due '" tr°111 the Fidelity Trust and Savings Bank, information as to which was not in- `4 14 the telegraphic advice transmitted to the Board and on which the 4arA acted in approving the application, and requesting that the a_ent advise Be the present status of these items and whether they were omitted rl ' ekra the tel egraphic advice through inadvertence or for some particular reasoa. the Approved. the Bo Tel -egraphic reply on April ?, 1933, approved by three members of ' erd, to a telegram dated April 6, 1933, from Governor Young of the Ped eral ---erve Banl ,of Poston, stating that the board of directors of the 79 4/10/a; — — belak has authorized the discount of a note of the H. T. Cushman Lianufacturinc Cora-panY, Of Bennincton, Vermont, furniture manufacturers, in the amount „ , 10,000 of which will be used to pay indebtedness to H. P. LI41.1osh receatly incurred for current operations while the application to tilebank was pendinc; and that while the advance made by a Personal La.. L:ecullough is one, he is President of the First ITational Bank of Forth 3erulinL;ton which has already loaned the maker LID to the legal limit. The telocg.04 also stated that if necessary under the provisions of section 5 of the Boardts circular letter of Xuly 26, 1932, the Board's approval of the Pr°13esed discount is requested. The reply stated that with the understanding that the note meets the reauiraments of elizibility laid down by the law alta the 3oard's regulations, and is acceptable to the Federal reserve bank r.z13111 el*edi6 standpoint, the Federal Reserve Board will interpose no °b jection to its discount by the Federal :teserve Bank of Boston because of the iact that u portion of the proceeds will be used for the purpose of Panne Off the existinc indebtedness referred to. Apa.oved. -leply to a letter dated Larch 23, 1933, from Controller Hollocher or -'eaeral iteserve Bank of St. Louis, inclosinj; a copy of a letter the Lincoln Bank and Trust Company, Louisville, :"entucky, inquiring hether 44. . "13 A1/42 ez.„110. necessary to maintain reserves ceverinc deposits of trust authorized by . the opinion of the FedTreasury ileculation 7; it beinf; r e3erve bank that, inasmuch as the deposits referred to were se7ref]ated ctlia raa. intained in cash in the nember bank's vaults or deposited with the Low, branch in a special account, they could be eliminated from 4/10/33 -10- 1 1 cleP°8it calculations and no reserve recuired against such amounts. The reP1Y referred to the 73oard's telegram of 1:arch 30, 1935, which provides that deposits received in special trust accounts oursuant to Treasury ReGulation 7, by a member bank not licensed to open, are demand deposits 411d subject to demand deposit reserves, and stated that reserves against "11 deposits may consist of amounts with the Federal reserve bank in a 8Pecial account opened for the receipt of the proceeds of deposits received by the member bank in such special trust accounts. Approved. Telegraphic reply on April 7, 1935, approved by three members of the B°a.rd, to a telegram dated April 5, 1933, from Governor Hamilton of the Federal .deserve Bank of Kansas City, referring to the Board's telegram O h• iM of that date regarding the maintenance of reserves by member banks • 2Dee1al trust deposits received by member banks pursuant to the provisions of Treasury Regulation Lo. 7 or by conservators in charge of such 13444, and statin; that since the law and Treasury regulation require that the ehtire amount of such deposits be either kept in cash, in direct °I)llations of the United States or deposited with the Federal reserve bank, it is believed to be inconsistent to require any reserve thereon, although 84 4 rlattor of fact it is believed that in 'lost instances conservators have ciel3c)ited the greater portion of such funds in the Federal reserve bank. • l 'eraY stated that the natter has had careful consideration by the Board, t• hat'in view of the provisions of section 19 of the Federal Reserve Act, it • la the Board's opinion that the deposits in question are subject to cleposit reserves as stated in the Board's telegram of liarch 30, 193,,, 4/10/,3r3 81 -11- to the Govc)rners of all Federal reserve banks. Approved. Tclecran dated Aizil 0, 10.i), to the Governors of all Federal re erve banl- , approved by three nenbers of the Board, referrinc to the B°ardes telecram of Larch 30, 1033, with rej;ard to the assessment of -aelini+4 for deficiencies in reserves, and statin:; that the Board will interPose no objection to the non-assessment of penalties for deficiencies ill l'euerves of miner banks from March 1. to I'arch 15 in cases where member banIzs a*id not have an adequate opportunity to restore deficient reserve balanco,, ,, to the amounts required by section 10 of the federal Reserve Act. Approved. TeleLwaphic reply to a telegram dated April 7, 1033, from Governor 11s' of the Federal Reserve Bank of San Francisco, statinc that the 130ardes tele gram of April 6, 1933, would prohibit the borrowin: by un1ieell3ea 'ember 'Dania; in those Sates where laws specifically provide for a. conservator but would allow borrowinc by unlicensed State member banks i States where similar restricted ilerrornance of banking functions may be .°°11diletod by officers without the foinality of appointing a conservator 4111 that the discrimination seems to apply to the form of manaement l'"her than the form of bankinc service. The reply stated that, in view °I' the ract that member banks in the hands of conservators or other State W-4eia1s havinc similar authority are in a status similar to that of banks ) 14 thC hands of receivers or banks otherwise closed by supervisory authoritio2, the Board ,s of the opinion, as stated in its teleGram of April 6, '.7 82 '1/3.0/33 -12- 193,, 0, that Federal reserve banks are not authorized to discount for or make 4d-vances to such banks; tilvt unlicensed member banks operating under illsurY Regulation 27 are still in charge of their own directors and icers and have not been takn over by supervisory authorities either for liquidation or conservation of assets; that their status is essentially ferent from banks in the hands of conservators and the Board feels that eUerai reserve banks are not legally prohibited from extending credit to 811ell banks to the extent authorized by Treasury regulations; and that loans 41.8 prohibited by the Board's telegran of April 6, 1933, only to 13411ka actually in the hands of conservators or to such conservators. Approved. Telegraphic reply on Apri 1 7, 1933, approved by three members (31' the Board, to a letter dated Earch 27, 1933, from Lr. Walsh, Federal Re2ei've Agent at Dallas, inclosing a copy of a circular being prepared for clistl'ibution to :tleraber banks in the Eleventh Federal Reserve District °vel'inC: the requirements and procedure governing the admission of State bezike. and trust companies to membership in the Federal Reserve System and l'ecille2ting any suggestions or criticisms which the Board may have to offer 14 c onnection with the text of the circular. The reply suggested a number chanCes in and additions to the circul2r as submitted. Approved. Copy of a telegram dated April 8, 1933, addressed by the Acting Secl ' etarY of the Treasury to the Governors of all Federal reserve banks, l'etel'ilnr; to the paragraph contained in the executive order issued by the i?°.rei •. .Lent of the United States on April 5, 1933, prohibiting the hoarding ] -13of Cold, which authorizes the Secretary of the Treasury, out of the sum de to available to the President by section 501 of the Act of iarch 9, 1933, PaY the reasonable costs of transportation of gold coin, gold bullion Cold certificates delivered to a merber bank or Federal reserve bank in "cordance with the order, and stating that the Federal reserve banks are culthorized to pay any expenses described in the executive order which they ine.Y deem reasonable under the circumstances in connection with the delivery r shiPment of L;old to them and to pay any such reasonable expenses in eclillection with the delivery or shipment of gold to a menber bank upon beinC furnished by the member bank with an affidavit that such gold has been received taking a receipt for such payment and such other satisfactory Iden00 of the expenses incurred as may be obtained from the member bunk Or °tiler Person delivering or shipping such ,sold, or by the member bank fl.orl the Person delivering or shiopinL; such gold. /Toted. Telegrauhic reply on April 7, 1933, approved by three members of the 11 -c ird, to a telegram dated April 6, 1933, from Deputy Governor Crane or the, -e,eral Reserve Bank of New York statinc, that advice has been ecetved from the Bani. for International Settlements that the Austrian lktticin`a Bank is requesting a renewal for three months of the full amount ef the - 'credit to that institution, stating that,in view of its foreign eZehn, Position, no other course is open to it pending settlement regard- 111 the new loan to the Austrian Government referred to in paragraph 3 of the 'ontract letter dated July 13, 1932, relating to the credit. The tele also stated that the Austrian National Bank may request a reduction 84 4/113/33 -14-- la the rate of interest from 5 1/1,; to 5:J which is its present official 1/4151k rate, and that at the meeting of the board of directors of the Federal reserve bank on April 6, it was voted, uabject to the approval of the Federal Reserve Board, to authorize the officers to arrange for the renewal, 1.(3r a Period not exceeding three months, of the bank's participation of 41/r°x1mate1y .,;975,000 in the credit which expires April 10, 1933, provided the other Principal participants in the credit do likewise. The reply stated that the Board offers no objection to the action of the directors "the New York bank, it being understood that the renewal will be anon the smile terms and conditions as govern the existing credit except that if reqUested by the Austrian National Bank and agreed to by the other 13"ciPants, the rate of interest may be reduced from 5 1/4çi to 5. Approved. Telegraphic reply on April 7, 1933, approved by three members of then to a telegram dated April 6, from Deputy Governor Crane of the l'ecleral Reserve Bank of New York, stating that advice has been received rl'aa the Bank for International Settlements that, in the absence of any °velment in the foreign exdhange position of the National Bank of Hungary 414. 14 view of the persistent low level of its free available foreign ex11413 sis it is compelled to request a renewal of the credits extended to that Illstitution for a farther three months period from April 18, 1933. The teleram also stated that at the meting of the board of directors of the ?"erell Reserve Bank of New York on April 6, 1933, it was voted, subject ePPrOval of the 2ederal Reserve Board, to authorize the officers Wage for the renewal of the bank's participation of approximately 85 4/10/33 -15- 14: 000,000 in the credits for a period not exceeding three months from 18) 1933, provided the other principal participants in the credits (1° likewise. The reply stated that the Board offers no objection to the 40tion of the directors, it being understood that the renewals will be upon the same terms and conditions as the existing credits. Approved. Telegram received under date of April 5, 1933, from Governor 41'rison of the Federal Reserve Bank of New York, and circulated among the ri/elribers of the Board, stating that advice has been received from the Bank DcIr In ternational Settlements that the proposed modification of Clause 5 ot the renewal agreement of December 3, 1932, which was suggested by the 411k of France, has proved unacceptable to the Reichsbank; that the Bank "Fr44ce considered Clause 5 somewhat ambiguous as to the repayment in g°141 or its equivalent and sought to modify the clause so as to remove e`lasIr possible ambiguity; and that • the Reichsbank has asked the participants in the credit to retain Clause 5 as previously drawn, failing which, it Qtrere immediate repayment in full. The telegram also stated that the New .ZOrk bank has advised the Bank for International Settlements of its ."11illene38 either to continue its participation in the credit under the te11218 Of Clause 5 as previously drawn or to accept immediate repayment of the -" ,olint now outstanding; that the Bank of France informed the Bank for Ittern", '4 4-Lonal Settlements that it prefers to accept the Reichsbank's offer Or re PeNYnlent in full and requests that such repayment be effected before the enC1 of the current week; and that it now appears likely that the whole °Isedit will be repaid in fall in the next few days. The Assistant Secretary 86 4/10/33 -16- ale° Presented a telegram dated April 8, 1933, from Governor Harrison, statin that advice has been received that the credit to the Reichsbank Will be repaid in full probably on April 13, 1933. Noted. Telegraphic reply to a telegram dated April 3, 1933, from Mr. licaure, Federal Reserve Agent at Kansas City, stating that nr. E. A. Walker, Oklahoma City, Who has been authorized by the Board to serve three banks t/hder the Clayton Act (the Tradesmen's National Bank of Oklahoma City, the Lore County National Bank of Marietta, Oklahoma, and the First National Oi1 °I% Ardmore, Oklahoma), resigned as a director of the First National 8e4k of Ardmore, Oklahoma, some months ago, and now contemplates accepting the Presidency of a new national bank to succeed the First National Bank, 4114 before proceeding with his plans desires permission, or assurance that he will receive permission, to serve the new bank and the two remaining 1144ka covered by the present permit. The reply stated that, on the basis Of the information before it, the Board would be prepared to grant the 413Plieation of Mr. Walker to serve the three banks referred to, provided the 41°Ilt is disposed to recommend approval of the application after ill"etigation of all the relevant facts, including those appearing in the reP ort 8 of examination of the banks involved and of other facts that may 447° a bearing upon the compatibility with public interest of such service. Approved. APPlication of Mx. Marshall Field, Huntington, Long Island, New (3rk, ror permission to serve at the same time as director of the Guaranty Net 0 cfraPenY of New York City, as a director of the Bank of the Manhattan 87 4/10/33 -17- C°144-111r, New York City, and as a director of the Continental-Illinois gational Bank and Trust Company of Chicago, Illinois; the Federal Reserve Aftnt at New York stating in his letter of March 2, 1933, transmitting the ePPlioation, that because of the conversion of the Continental Illinois 1344k and Trust Company in October, 1932, into the Continental Illinois 114tional Bank and Trust Company, Mr. Field's service of the three inst itutions was brought within the provisions of section 8 of the Clayton 4" IlakinG the application necessary, that there is no evidence in the liell°rts of the New York banks or otherwise at hand which would indicate thet the applicant's service as a director of the three banks named over the Past eight years or more has resulted in any restriction of credit or 14 alot.lr lessening of competition, or has had any other effect not compatible With the Public interest, ard that in view of these considerations he l'"(311tilends approval of the application. Stevens, 144'. A letter dated March 6, 1933, from Federal Reserve Agent at Chicago, stated that he concurs in Cgse's favorable reconrendation. The application was discussed and La.. Miller stated that he is of the -v4Illon that the application should not be approved as regards both or the two New York City banks but that he would not be opposed to la.. serving as a director of either one of the New York City institutions the Continental Illinois National Bank and Trust Company of Chicago. At the conclusion of the discussion, Mr. Morrill was requested to call the Federal Reserve Agent at New York on the telephone and to request that he ascertain from rr. Field whether he would be willing to resign as a director of one of the New York institutions. 88 4/10/33 -18Reply to a letter dated 'larch 22, 1933, from the Secretary of the **341/811rY suggesting that it would greatly facilitate the administration of tile) Beak Conservation Act if the Federal reserve banks would accept for 84rekesPing the restricted conservatorship funds held by conservators of 44ti °nal banks pending final disposition of the affairs of the banks, and 1*"14ssting that the Board advise as soon as possible whether arrangements "al be made for cooperation by the Federal reserve banks in this respect. The rsilly referred to the instructions recently prescribed by the Comptroller "the Currency for conservators of national banks, providing for the dell0 81t of funds of conservators under certain terms and conditions in 4nt3 with Federal reserve banks, and stated that consideration of the terza and oonditions of the sections of the instructions with regard to 4c°0Unt8 with Federal reserve banks by the office of the Comptroller of the 04 rrsnoY, with the assistance of members of the Board's staff and l'ePresentatives of Federal reserve banks, had commenced prior to the receipt (If the Secretary's letter, and that the Board has advised the Federal re- 461'" banke that it considers it desirable that they cooperate in this 414ttelb-bY opening and maintaining accounts for conservators in accordance WIth the terms and conditions of the Comptroller's instructions. The reply 8'113° Inclosed for the information of the Secretary of the Treasury a copy °r th --ard's letter of April 1, 1933, to the Federal reserve banks on thi8 subject. Approved. 14r, neP1Y to a letter received by the Secretary of the Treasury from 41bert C. Schott, Now Orleans, Louisiana, and by the former referred to 89 1/10/33 -19- the rsdaral Reserve Board for reply, suggesting that the Secretary of the 7:841.117 instruct the Federal reserve banks to assist certain specified bextks in New Orleans which are non operating on a restricted basis in the licillifYing of their assets in order that confidence in the banks may be l'estored. The reply stated that while the Federal reserve banks operate tillder the supervision of the Federal Reserve Board they are armed entirely by tb.eir member banks and not by the Federal government and the extent to 11414h they may properly discount paper or make loans within their legal 414"ritY" is a natter primarily for the exercise of the judcnent of the botv . A —4 or directors and executive officers of each Federal reserve bank; tilat the Board umderstands that the officers and directors of the Federal 11" " Ir0 Baak of Atlanta and its New Orleans branch are thoroughly familiar With the situation of the banks in New Orleans and have given that situation oloae sYMpathetic consideration; and that the Board therefore feels Q°11tident that the Federal Reserve Bark of Atlanta will cooperate to the 1\111e "Possible extent from the standpoint of the best interests of all of its member bexjk in. working out a sound solution of the New Orleans sittlation. Approved. °r Reply to a letter addressed by Mr. Bertram Chesternan, President the, liorris Plan Bank of Washington, D.C., to the Secretary to the ant of the United States, under date of Larch 8, 1933, suggesting til" tile Paper of Morris Plan banks be made eligible for rediscount by ?eclerill reserve banks. The reply stated that a broadening in the eligibility l'eclilll'enlents in the manner suggested would be inconsistent with the purposes 4/10/33 -20- for which the Federal Reserve System was established; that it is contemplated by the Aderal Reserve Act that the paper rediscounted for nelrber banks should 411-se out of commercial or azricultural transactions which ordinarily will be co nsummated within a comparatively short period of tire and out of which Will be derived funds to pay the paper at maturity; and that the paper of 1:orris Plan banks is not of this character. The reply also called attention to the provisions of Section 10(b) of the Federal Reserve Act, as amended; to the action of the Board in authorizing Federal reserve banks to accept as s ecurity for advances to member banks,under the provisions of that "ction, paper acquired from or indorsed by banks which are not members of the Aderal Reserve System; and to the fact that the Reconstruction Finance C°rPoration is authorized to make advances under certain conditions to banks, l'edit unions and certain other similar institutions, and that the security 17hich it IlaY accept for such loans is not confined to paper which would be °liable for discount at Federal reserve banks. Approved. Reply to a letter dated Yovamber 17, 1932, from 1]r. E. H. Gough, 1)ePlItY C omptroller of the Currency, requesting advice as to the proper el48 ification by the Central United Lational Bank of Cleveland, Ohio, of certain balances due to savings and loan comi)anies. he reply stated that the B communicated with the Federal Reserve Bank of Cleveland with l'eL:pect to this matter and it appears from the information which it has received that the savinr, ,s and loan companies in question, which are °ra'anized under the laws of the State of Ohio, are authorized to receive, " do l'eceive, from their members and from others deposits not subject to 4/10/33 -21- or to Payment on demand, and also to make loans to their members and °tilers upon certain classes of security, and that it is the practice of ' 1411Y. of these companies to receive deposits in substantial amounts and to PeIrlit their immediate withdrawal upon request of the depositor. The reply 4180 stated that, after consideration of the nature of these savings and 1°Elt companies, it is the opinion of the Federal Reserve Board that they Pr°13erlY May be considered as banks within the meaning of the eighth para' € 4*41)11 or section 10 of the _2'ederal Reserve Act and that deposits made by Ua4 in stitutions in a member bank properly may be classified by it as 18.1114)11rts due to banks in computing its reserves and in preparing its reports or condition. Approved. Governor Eeyer stated that it had been suggested by the Chairman or the Board that there should be a meeting of the Governors in the near O and he incluired as to the feeling of the other members of the Board in the matter. .After discussion, the Governor was requested to consider the matter further with the Chairman Of the Board and, if it is found to be feasible for the Governors to be away from the Federal reserve banks, to arrange a meeting in ;iashington at an early date. Governor Leyer also stated that he attended the meeting of the boexa 8.4c1 the .z (3-- directors of the Federal Reserve Bank of I:ew York on April 6, 1933, t in connection with a discussion of the possible stabilization of 1111811 Pound, he had stated that, in his opinion, and, as he understands it, it, the opinion of the Board, any suggestion on the part of Federal re erv. 0 authorities that the granting of licenses for the export of gold 92 1/1o/33 -22- tram this country should be conditioned upon the stabilization at this tine (31 ' the 1_,ng11s1l 'pound was entirely inappropriate. Lr. ljyatt then referred to the letters addressed by the Board to the Chairmen of the Co=dttee on Interstate and 2oreign Commerce of the li°1180 of Representatives and the Comittee on Banking and Currency of the SenatEl under date of Aoril 3, 193,3, suggesting an amendment to the bills (Ss 875 and h.2. 4314) being considered by those comittees which provide ()x* the supervision of traffic in investment securities in interstate ec3rilim3Isee• Lir. 'Jyatt stated that since that letter was dispatched it has beea suggested that there are other types of short term open market e°11721161"010.1 Paper which would not be covered by the suggested amendment and he an„. -6Gested that in replying to a letter received by the Board under date APril 4, 193U, from the Actinc, Clerk of the Lienate Convittee on 3anking ahci CUrrency requesting a report on the bill, the Board submit another r°11a or amendment covering the classes of paper referred to. In accordance with his suggestion, Lir. iyatt submitted a draft of a proposed letter to the Ch.4 -J-Man of the Banking and Currency Committee of the Senate, stating that in its letter of April 3, 1933, the Board suggested that the securities 40111d be auended so as to exempt bankers' acceptances and notes, ' Cil art8 n„A b oz. of exchange growing out of current comercial, agricultural 112trial transactions or the nroceeds of which have been or are to be kzaoa ()Isccma1ercjal, agricultural or industrial purposes, when such paper ' 11' 4a -'``ritieS not in excess of nine months; that there are, however, other elaases of paper such as paper issued to finance the breeding of ato -e4, which may be sold on the open market with maturities exceeding 93 4/10/33 -23- nite months, and it would seem desirable in the circumstances that the Federal. Trade Commission be given sufficient discretion to enable it to 813114 the provisions of the bill in harmony with its true intent and meaning; and that a form of substitute amendment for this purpose is being submitted 1'01 'the consideration of the committee. The letter also stated that it ttPPears that the provisions of the bill are manifestly not intended to be 8PPlicable to Federal reserve notes, Federal reserve bank notes, and Federal rys bank stock, but the definition of "securities" contained in subaectl°11 (a) of Section 2 of the bill appears to be broad enough to include 811ell notes and stock, and that in order to make the provisions of the bill 111411P1icab1e to Federal reserve banks, it is suggested that Section 11 be 814811ded by adding at the end thereof a new subsection in the form inclosed With the letter. After a discussion, the letter was approved and the Secretary was requested to address a similar letter to the Chairman of the Committee on Interstate and Foreign Commerce of the House of Representatives. Reference was then made to the new Glass Bill, S. 245, which was illtrodaced in the Senate by Senator Glass under date of Larch 11, 1933, and 144°W under consideration by a subcommittee of the Senate Banking and ett*I'l'encY Committee and hr. Wyatt called attention to a tentative memoraIldulas prepared in his office, of suggested changes in the bill, copies 131% 141141 were furnished to the members of the Board on April 8, 1933. Sozle 0 c4 the provisions of the new bill were discussed and consideration was 418° eiven to the desirability of submitting to the subcommittee or to 4 tIt m ass the suggestions of the Board as to changes in the bill; °- --, 94 4/10/33 -24- 1411'' Watt stating that he unflerstands that it is planned to report the bill to the rull committee this week so that any suggestions which the Board tleaires to make should be submitted promptly. Mr. Hamlin moved that the .eeretarY be requested to take the matter up with Senator Glass and to aaoerta-n whether he desires to receive from the Board a report on the bill. Action on Mr. Hamlin's motion was deferred for consideration at a meeting of the Board. Consideration was given particularly to a provision, which it is Understood is contained in the sub-committee redraft of the bill, which 17°1111 Prohibit the paymant of interest by banks on all demand deposits, and the °Pinion was expressed that the elimination of interest on such deposits r i Ii(naci involve a major change in an already complicated banking situation; that it would be difficult to foresee all the effects of such a change; and that ia any event, the natter is not an urgent one and, because of the Pceeible risks involved, should be carefully studied in all its aspects before it is adopted. Thereupon the neeting adjourned. 4PPZ0v-ed:
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