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153 A meeting of the Tederal Reserve Board with the Governors of Pe(leral Reserve Banks was held in•JashinL,-ton on Saturday, April 22, 1933, at 11:30 a. 114 PRESENT: Er. :Teyer, Governor Mr. Hamlin Mr. Miller Mr• James Mr. Morrill, Secretary Lir. McClelland, Assistant Secretary Mr. Harrison, Assistant to the Governor Mr. ',7yatt, General Counsel Mr. Snead, Chief, Division of Bank Operations Mr. Goldenweiser, Director, Division of Research and Statistics Paulger, Chief, Division of Examinations. ALSO pEEsizTrr: to I.:essrs. Young, Harrison, Norris, Fancher, Seay, Black, Martin, Geery, Hamilton, 1.7.cianney and Calkins, Governors of Federal reserve banks Mr. LicITay, Deputy Governor of the Federal Reserve Bank of Chicago Mr. Strater, Secretary of the Governors, Conference. Governor 1.Ieyer stated that the Chairman of the Board was confined i 1home by illness and would not be able to attend the meetinc. Governor Harrison stated that a meting of the Open Market Policy C°11rel 'ellee was held this morning at which the following resolution was Elci°13toa -ePuty Governor I.:cKay not voting: "it is the sense of the Open Market Policy Conference subject to the approval of the Federal Reserve Board, s tbe e-xecutive committee be authorized to arrange with the , ecretarY of the Treasury from time to time to purchase up 000,000,000 of G-overnment securities to meet Treasury requirQuents." that G°Irernor Harrison stated that the resolution was apDroved in this t°113a with the idea, not that all purchases of securities made pursuant there- to WOUld be made directly from the Treasury Department, but that purchases 14141(1 41° 00 made in the open market whenever conditions made such action 154 4A2/33 -2- clesirable; that it was the feeling of the conference that the resolution was neeessarY to prepare the System to make arrangements with the Secretary of the TreasurY along the lines proposed in the Thomas Bill; and that, even if tilt bill is not enacted into law, it is felt that the committee should be rl'ee to act if a situation developed which would require the Treasury %artment to turn to the Federal reserve banks for assistance. Governor Harrison then presented the following resolutions which he tatcd had been unanimously approved by the Conference: "It is the sense of the conference that while, as a general princii)le, the avera2;e maturity of GovernMent securities held in the System account should be kept as short as possible, nevertheless, in the present eLlerCencY, and especially in view of the need of full cooperation with the Treasury in meeting its fiscal Problems, the executive committee should be authorized from time to time to shift maturities in the System account as conditions in. the market or requirements of the Treasury appear to make that advisable. FUrthermore, it 13 understood that in replacing maturities in the Sy.stem account, the executive conaittee will use its discretion in the light of existing conditions and this resolution in selecting replacements." "It is the sense of the conference that the executive committee be instructed to work out a system of allotment of existing holdings as well as new purchases °I Government securities with a view to arriving at a more equitable relationship of reserve percentages of -ale several Federal reserve banks." Governor liarrison stated that, in approving the first of the two l''z'aolutions Quoted above, it was not intended that there should be any ellcia in the fundamental policy of maintaining a portfolio of Government 4eaLlrities with short maturities, but that the resolution would give to the %rattee a uthority to adopt a more liberal policy as to longer maturities Iharl it has had does not seem to be much need in the past, and, as -there 155 4/22/33 -3- to eaticipate a major liquidation of the System account, it was felt that consideration night be given to the advisability of acquiring longer raatialtieet at the appropriate time, for the purposes (1) of avoiding the WIcle sPread between the yields on short and long term maturities, and (2) ot toni.nr. —15 11.1) the market for short maturities which would enable the 14144147 DePartment to market an issue of securities without the assistance or the Federal reserve banks, where such assistance might otherwise be teeusetry. Governor Harrison added that it was not considered that the aituaticil required immediate action by the Federal Reserve Board on these reso lutions. At this point Ia.. Wingfield, Assistant Counsel, joined the meeting. It was stated that the Governor' Conference, in separate session, he141 1.1ren consideration to the policy now being followed by the Board in 131'158°11-bing conditions for admission to membership in the Federal Reserve aYstem euad that it was felt exceptions to the present requirements might be ma de in certain cases. Governor Harrison stated that there are factors Ifhiollmnst be taken into consideration at the present time which may make t ilece48arY to be a little more liberal in considering applications for 1714414be 1and that, in his opinion, it is essential, in connection with tile co 48idsration of such applications, that (1) as prompt action as Possik, -J-Ls be taken, and (2) that, in view of the present banking situation, 44 liberto 4 Policy be followed as sound banking principles will permit. 411 of the governors indicated that, with the exception of one or two, - oemes Where it appeared that delay was occasioned by the consideration or --- of policy involved, the Federal Reserve Board had acted as 56 V22/33 PlicazDtly as could be expected on the ai)plications submitted to it. Governor Ilarrison then left the meeting. A general discussion ensued, during which the opinion was expressed that the preJenI Policy with regard to admission of State banks and trust °r-uPliiee to membership is sound and should be continued, but Governor 1101"ie and Governor Young referred to certain cases where they thought eZeoPtions might be made. It was Pointed out that when membership applications are received by the -71 -°ard they are given very careful consideration and every effort 'acle to, e ' et 6 each individual situation; that perhaps the greatest difficulty -xPezieneed in the nrocedure is the failure of the applicant banks to Ithderstand the reasons for, and benefits of, the present requirements; that 1 to nembership in the Federal Reserve system is understood by the Dtzblic as a representation that the bank is in good condition; and that any Lowell of the standard which would result in the admission of unsound batks w°111d only result in discrediting membership in the Federal Reserve 2Ystera. Governor Leyer suggested that the Federal reserve banks, in the s ituation, have an unusual onnortunity to emphasize to banks CtPlayi l'or membership the desirability of putting their affairs in sound Q°40liti -(34 in order to come into the system, and that he feels that the oirea.,110 1.8 and Vederal reserve agents should personally interview the reDI,e senta't1ve3 of the banks whenever possible and explain to them the re84048 for the Board's policy' The CX)vernors expressed themselves as being in favor of such 157 4/22/33 tleZibili ---tY in meting the problems of inddual banks as does not impair t4e Paley of admitting only sound banks to membership, and Governor Meyer Painted out that the Board cooperates in every way possible in working out tile Problems presented by individual applications, and makes such changes requirements as may be justified in special cases, when such changes 4"ot involve a lowering of the standards now required for admission to 1"h113 in the Federal Reserve System. Thereupon the meeting adjourned. Secret A.131) .
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