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134 A meeting of the Federal Reserve Board with Governors of Federal Reserve Banks was held in Washington on 'Jednesday, April 19, 1933, at 10:30 a. IT4 PRESMIT: Mr. Mr. Mr. Mr. Meyer, Governor Hamlin Iline r Tames Mr. Mr. Mr. Mr. ALSO PRESENT: Secretary EcClelland, Assistant Secretary Harrison, Assistant to the Lrovernor Goldenweiser, Director, Division of Research and Statistics Smead, Chief, iivision of Dank Operations lest, Assistant Counsel I:essrs. Young, Harrison, Norris, Fancher, Seay, Black, Martin, Geery, Hamilton, McKinney and Calkins, Governors of Federal reserve banks McKay, Deputy Governor of the Federal Reserve Bank of Chicago Mr. Strater, Secretary of the Governors' Conference. Govornorl.:eyer stated that the Secretary of the Treasury would join the "Ing shortly to discuss with the Governors the matters which he had 14 1-11's Ile also stated that the Secretary had advised him, for the infor- lalati°4 of the .11 leet1ng, that it had been decided that further gold exports, other than the export of sold already under earmark, would not be permitted r(11' the Present, and that a public statement to that effect was being made the Pr esident of the United States today. There were then distributed copies of a preliminary memorandum preby the chairnan of th-: Open Market Policy (3onference for consideration a't 4 111"t1na Of the conference to be held while the Governors are in 11111`''t°n, and a report of open market operations since the last meeting °I' the conreren ee on January 4 and 5, 1933. Reference was then made to the conditions of membership prescribed 135 V19/33 -2- bY the Federal Reserve Board for State banks and trust companies admitted to the Federal Reserve System. Governor Harrison stated that, while he is in eolnPlete aCreement with the Board's general policy embodied in these conthere are relatively few State banks which are able to meet the '311I'd's requirements at the present time, with the result that few banks are beillg admitted to membership, and, in sore cases, membership cannot be °btained by banks which are in a better condition than banks in the same eolillillanity which are already menbers and have been licensed by the Secretary the Treasury to resume normal banking operations. the He suggested that if policy is to be naintained it may become necessary to take steps toward requirin banks which are already members of the System to conform to the req-Ilireraents which are being prescribed for new member banks. Governor Meyer stated that the natter presents a ouestion as to the 11°11cY which should be followed by the System in the light of the best interests of the country; that there is a growing sentiment towards requiring tJa t statements shall be absolutely reliable; that the Board has taken the Position that admission to membership in the System should mean that the begik: is in sound condition; that a responsibility rests upon the Federal te erve Cents and officers of the Federal reserve banks to explain and e47°eet° tho merits of the Board's policy; and that if they would follow this °It1I3E1 it should not be difficult to get applicants to take the action Ileeea3zY. to meet the requirements. There followed a general discussion of the 11°a'zd'8 Policy, which was suspended upon the entry into the roam of the of the Board. DUrinC the discussion Mr. Wyatt, General Counsel, and Er. Paulger, 136 4/19/33 -3- Chief of the Division of Examinations, joined the meeting. The Chairman expressed his appreciation of the cooperation of the leral reserve banks during the recent banking crisis and stated that the 13/1AciPea reason for calling the Governors to Washington at this time was to f.„-441-er with them regarding conditions in the various districts and what tIllIber action might be taken to improve the banking situation. At the request of the Chairman, the Governors reviewed the situation t4 --r respective districts with regard to nember and nonmember banks Which 1, ' -'ave been licensed to reopen, the policies followed by the State ba4.10,„ "g authorities in the various States in licensing the opening of nontaelzber State banks, and the efforts which are being made to reopen unlicensed banks. 14 their They also reviewed briefly the present business conditions respective distric ts. Some of the Governors suggested that the 40et --wortant problem to be considered at the present tire is that presented 8 Which have been licensed to reopen but which are in a weakened con,. Others suggested that active consideration must be given to the (liti°11. hew banks which have not been licensed to reopen, and which are not 1101431. '831Y insolvent, may be reorganized and licensed to resume normal banking Ott -4e; that unless such banks are licensed without unreasonable delay the ing loss of confidence in such institutions will require that they be 11(11-tidA+, -"eu; and that the immediate and vital problem in connection with these benka 4 J'a not one of credit, for consideration by the Federal reserve banks, bIrt cr„ ' 4 Of recapitalization in which the Federal reserve banks cannot take the ialltiative Ch4irma or be of assistance except by way of counsel and advice. At the conclusion of the Governors' statements at 1:00 p.m. the 8uggested that the meeting reconvene this afternoon for a discussion 137 4/19/33 cr the methods now being employed, and which nicht be used, in effecting the l'e°18,nization Of closed banks and what can be done to aid licensed banks which are in need of assistance. eei Accordingly, the meetinF, recessed and re- ned at 2:llo p.m. with the same attendanceas the morning session, except the Chairman of the Board; and, in addition, Ur. Await Acting Comptroller 01' the L11.- rcnoY, and lir. Walter 1. Cummings, Executive Assistant to the SecretorJ of the Treasury. 1:r. Await stated that his office, following the passage of the Bank Ceriservation Act onilarch 9, 1933, set up in .:ashinton a division for the IxDose 01 assisting in the reorganization of unlicensed national banks, ' Ina that the Chief atioal 3ank 2 - ixaminers and the federal reserve agents We e e°0Peratin[- in this work in tho various federal reserve districts. lie 4180 stated that, vihile it is the general polity of his office to require l'e°1111.2ing national banks to mark-down their securities to market values, Ilblif°r141 plan of reorganization has not been prescribed, as it is felt that 11"14 institution must be given separate consideration and the plan applied Which is best suited for the particular situation. There then ensued a elle"41 aiscussion as to plans which night be adopted in connection with the l'ec)ree ' lli4ing of banks to meet the different conditions existing in the Varic)us Federal reserve districts. During the discussion hr. George P. Barse, Counsel for the Insolvent 8441 , Uivision of the CoLiotroller's office, joined the meeting at the request • Await for a short period. • Cummings stated that, in his opinion, the pressing question at the pre, 111e is what is going to be done to assist banks which have 138 -541141edY been licensed and are now facing the possibility, because of their 4/13atieractory condition, of being forced to close their doors. Ur. Tames suggested that as the Reconstruction Finance Corporation, Well as the Federal reserve barks, nay be called upon to assist these 138114 1 a meeting should be arranged, while the Governors of Federal reserve b4114 are in Washington, with representatives of the Reconstruction Finance C°I'Voration and the office of the Comptroller of the Currency for the purD°36 or determining, if possible, upon a definite program in this connection whieh the Governors may- submit to their respective boards of directors for eota ideration. General agreenent was expressed with Fir. Tames' suggestion and e"3116111°11 Meyer stated that he would submit the suggestion to the Secretary °t the Treasury. He then left the room for that purpose and, upon his return, etatec/ that the Secretary of the Treasury had advised that he would ask the cliteetclta of the Reconstruction Finance Corporation to net with the Board, the Gov ernors of Federal reserve banks and representatives of the --4-Ler's office at 10:00 a.m. tomorrow morning. Await inquired whether the Governors thought that, in connection With e xaminations of licensed national banks, there should be a more rigid l'ecIL1111)111.8 "by his office as to charging off bond depreciation, or whether 10.14e 13°11°Y followed by the Comptroller of the Currency prior to the banking Qlicie ' lr) Of requiring the charge off of depreciation only on defaulted bonds, aill°1114 be continued. D°Itted No opinion was expressed by the Governors, it being out that the problem was one with which the Acting Comptroller was erittre, 'Y familiar and which should be determined by his office. c,0 4/19/53 -6Consideration was also given to the extent to which Federal reserve bank flotes should be issued by Federal reserve banks. otzt that approximately lir. Snead pointed 610,000,000 of such notes have been printed; that Maitional supply could be printed in a very short period; but that, in his 0,- . vlulon, because of the emergency character of the notes, they should 4" be Paid out in large volume unless an emergency arises, which is not lilcelYunless there is an increased denand for currency and the Federal l'e3(Irlre banks are called upon to make 10(b) advances in substantial amounts. The natter was discussed and it was expressed as the sense of the meeting that , 'eral ' e ' reserve bank notes dhould at least be issued by the Federal l'eBel'vo hanks at the present tine in amounts sufficient to accustom the CellezEt1 Public to their circulation along with other forms of currency, so tig' ats in the event an emergency arises requiring their issuance in larger 411°111:ts, the public will be familiar with them. There was some further discussion as to the assistance to be given t0 liCeaSed ban/CS which are in an unsatisfactory condition and Mr. Await alin as a part of that problem, the possibility of Federal reserve '4doPting a more liberal policy of making section 10(b) advances to 111e11'13°z banka. The Governors pointed out that their banks had not rejected aPPlications submitted to them by member banks for such advances. Thereupon the meeting adjourned,
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