Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, April 4, 1928, Volume 15, Part 1

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286

;Lmeetinc, of tip. Federal _teserve Board was held in the office of the
Leral ieserve
3oard on Wednesday, April 4, 1928 at 11:00 a.m.
Governor Young
Mr. Platt
Kr. Hamlin
Mr. Miller
Mr. James
irs McIntosh
Mr. Eddy, Secretary
Mr. 11:t0lelland, Asst. 3ecretary
Mr. Wyatt, General Counsel

PRESENT:

PRESENT ALSO:

minutes of the meetings of the Federal ileserve Board held on March

31st

and.

pril 2nd were read and approved.

r.';iyatt then discussed with the Board a suit filed in the 3upreme Court
Of the District of Columbia for the purpose of obtaining a writ of mandamus
d'il'ecting the Board to approve the articles of association and organization
cel'tifieate of the proposed United 3tates Foreign Financing Corporation and
to
''S12.0

to that corporation a certificate to commence business. Lr.

yatt

ted that upon investigation he found that the proceedings governing in
suits in the District of Columbia are controlled entirely by a statute
‘114i°1 will not permit the filing of a bill to dismiss on purely legal grounds
c the
*

filir4.; of a demurrer.

He stated that on the contrary the statute re-

that the defendant in such asuit by the day named in the court order,
extended, shall file an answer fully setting forth all defenses upon
he intends to rely.
01

the

He pointed out that this makes the preparation

s
Board' answer to the complaint a most imnortant step and inquired

Wheth
-er the Board wishes his office to handle the case, in conjunction with
the u
lilted states District Attorney, or whether it wishes to employ special
el.

He stated that in the latter event he believed the special counsel




287
-2should

be brought into the case immediately in connection with the preparation

cltha answer, as several important questions will have to be determined upon
bef°Ie same is filed.
After some discussion regarding the suit and the nature
Of the Board's answer, upon motion it was voted that the
Governor be authorized to arrange for the employment of special counsel in connection with the defense of the wait.
Counsel called attention to the fact •that such special
counsel will be employed by the Board itself and that it will
be necessary that the compensation to be paid be fixed in advance.
Mr. Wyatt then left the roam.
he

Governor reported that following the meeting of the Board on April 2nd
he a„
-.444 Deputy Governor Harrison had an interview with the Secretary of State,
4

regarding
also a

the proposed Rumanian currency stabilization, which interview was

ttended by Assistant Secretary of State Olds and Dr. Younfz, Financial

Advis
or

of the State Department.

He stated he was advised by the secretary

()t State that
communicated
the Department's attitude in the matter would be
to
, "e Board later and that accordingly yesterday afternoon he was informed
bY the Q
no
Qecretary to the effect that the State Department would interpose
°1

oti-on to
central bank
participation by the Federal deserve banks in the

eraait -nvolved
that the Secrein the program. The Governor also reported
tEirv
Of State advised him that the procedure which has been followed in the
1)11" °f referring matters of this kind to the State Department informally
ia e
ntirely satisfactory.
Governor also stated that when he discussed the matter with the Secretary
°f the Treasury on Saturday, although the Secretary did not have an opt
of
) 14itY of going very fully into it, he indicated that he was in favor




288
-3-

41313r°7111€ the action of the New York directors as outlined in the letter adcltessed to the Board by Deputy Governor Harrison under date of March 30th.
Deputy Governor Harrison of the New York bank was then called into
th8 meeting and discussed with the Board further the proposed participation
(4 the Federal Reserve Bank of New York in the central bank credit to the
liational Bank of Rumania. Following this discussion, Mr. Harrison left the
rooms

Yr. Hamlin moved that the Board approve of the neFotiations entered into by the Federal Reserve Bank of New York
with the Bank of France for a credit arrangement in favor
Of the National Bank of Rumania, upon the conditions and
reservations set forth by the New York bank, and with the
understanding that the other Federal Reserve banks will be
allowed to participate in the arrangement as finally made
by the Federal Reserve Bank of New York
Mr. Hamlin's motion being
the members voting as follows:

it by the chair was carried,

Governor Young, "aye"
Mr. Platt, "aye"
Yr. Hamlin, "aye"
Er. McIntosh, "aye"
Mr. Miller, "no"
Mr. James, "no"
Mr. Miller stated:
informa"I voted 'no' upon this resolution because the
tion available to the Board in connection with the whole Rumanian
scheme of finance (with which the plan of monetary stabilization
is interrelated) is still so much in the formative stage as to
/flake a definite undertaking by the Federal Reserve Bank of New
York at this time practically equivalent to sponsorship for the
.inancial arrangements in contemplation for Rumania. Virtually
f
it appears to me that the Federal Reserve Bank of New York becomes with the Bank of France a co-organizer and indorser of the
.tumanian scheme. As I view it, this is beyond the proper province
and function of the Federal Reserve Balk, and there appear to me
to be particular objections to it in the present instance.
that
"The information before the Board is to the effect
as yet only one European Central Bank has been consulted with




289
4A/28

-4-

"regard to the Rumanian plan, namely, the Bank of England.
It appears that the Bank of England does not regard with
favor the set-up and guarantees in connection with the
Rumanian plan, in other words, is not satisfied with the
risk, and for that reason has thus far abstained from accepting the invitation to participate in the proposed plan
for a stabilization credit. So far as the Board's information goes, it does not appear that any other Central Bank
has as yet been consulted; in other words, the Federal lieserve Bank is in as a party to the proposed arrangements ahead of any European Central Bank except the Bank of France
which, for special reasons, is the proponent of the plan.
This appears to me to be objectionable. The Federal Reserve
Bank might well have waited until it should appear whether
and how the proposed Rumanian plan would. 'take' with the
Principal Central Banks of Europe; for the working out of
suitable solutions, set-ups and guarantees for the financial
and stabilization problems of the smaller countries of Europe
Is primarily a European responsibility and one, in my opinion,
not to be interfered with by premature Commitment or action
on the part of the Federal heserve System.
"There are, also, other aspects of the procedure in connection with the Rumanian arrangement which I think are open
to serious objection at this stage."
affirmative by stat. Mr. Hamlin explained his vote in the
to asing that the Federal Reserve bank expressly declined
stabilthe
of
n
sume any responsibility as to the preparatio
withdraw from
ization plan, and has reserved the right to
plan ultimately
ion
the syndicate agreement if the stabilizat
are not
agreement
adopted or the details of the syndicate
satisfactory to it.
The G
member of the
overnor then stated that the term of M. Hamlin as a
4.4zeetztive
Committee expired on March 31st and that in the regular order of
vt4tiola
quarter ending June
Liiller would serve on the Committee for the
40th,

katter

ci

application of The
approved on initials on April 2nd, namely,

general fiduciary
3t4te 384rills Bank
of Llooile, Ala. for permission to exercise
11(1'41'4

effect ive if and when it is converted into a national banking associat itt
icj
business
authorized by the Camptroller of the Currency to commence
44 41N
Llobile
National Bank, Mobile, Ala."




290

4/4/28
-5-

Formally approved.
Letter dated March 30th from the Assistant Federal Reserve Agent at
114t011. advising of the adoption on that date of the following schedule of
l'ates f
or purchases of bankers acceptances:
3 1/2;0
;
3 5/8,
3
42;

1 to 30 days
31 to 90 days
91 to 120 days
121 to 180 days

Without objection, noted with approval.
Letter dated April 2nd from the Secretary of the Federal Reserve Bank
(4Claveland, advising of the adoption on March 30th of the following schedule
°I rates for

purchases of acceptances:
Bankers:
1 to 30 days
31 to JC) days
91 to 120 days
121 to 180 days
Repurchase
Trade

_

3 1/2
3 5/8:0
3
4;
3 1/2,6
4p

Without objection, noted with approval.
)3141,1z

52elagram dated April 3rd from the Secretary of the Federal Reserve

Of Atlanta, and
from the Governor
letters dated March 30th and 31st
44d. ch•
airman of the Federal Reserve Bank of Dallas, advising of the establishLiarch
44311t
bankers acceptances:
30th of the following rates for purchases of
1 to 30 days
31 to 90 days
91 to 120 days
121 to 180 days
Repurchase

IMO

3 0/0
3 5/8;;
3 3/4/0
47';
3

Without objection, noted with approval.'
elegram dated April 3rd from the Chairman of the Federal Reserve Bank




291
4/4/28

-6-

Of 8an Francisco, advising of approval by the Executive Committee of that
41111c of the
following schedule of rates for purchases of bankers acceptances
effective 'zarch 30th:
1 to 30 days
31 to 90 days
91 to 120 days

010

3 1/2/,07
3 5/8/i;
3/4/;

Nithout objection, noted with approval.
6/186ram dated April 2nd from the Chairman of the Federal :ieserve Bank
Of It;

"`nneapolis, advising that the rate of 3 5/8,0 reported in his telegram

Of

rch 30th for
purchases of bankers acceptances under resale agreement
W48

4

Jal error and that the rate should have been reported as 3 1/2
Without objection, noted with approval.

Letter dated
April 2nd from the Assistant Treasurer of the United States,
tkavi.4
'
411g that no applications were received from National banks during the
(1114rter
- ended 1,Iarch 31, 1928 for the sale of bonds under Section 18 of the
Pecl,
"ral iieserve
Act.
Noted.
14eTaoranri
--um dated April 2nd from the Assistant Director of the Division
Of
Aft()
arch and Statistics, submitting and recommending acceptance of the
rest
4tion of Lir. jack L. Schneider, messenger in the Division, effective
'44ril 15th.
Accepted.
lePort of
Committee on Salaries and Expenditures on letter dated April
4th fr
°111 the Comptroller of the Currency, recommending approval of an increase ,
,47414

ir°111 45,2j0 to „5,600 per annum in the salary of National Bank
B. lilson; the Board's Committee also recommending approval.




Approved.

292

,A/28

-7-

)
I

lieport of Committee on Salaries and Expenditures on letter dated April
4th from the Comptroller of the Currency, recommending approval of a salary
4440°0 per annum for National Bank Examiner George L. Yedill, assigned
t0 the Third Federal Reserve District; the Board's Committee also recommendillg

PProval.

Approved.
lePort of Committee on 3alaries and Expenditures on letter dated March

30th

from the Federal Heserve Agent at 3t. Louis, advising of the action of

theZxecutive Committee of that bank in voting to extend for a period of
thjrt
Y clays from April 6th, with WU pay, leave of absence on account of

ilariess
Previously granted Mr. J.

oarat

!iinkleff, controller of the Dank; the

s .'ommittee recommending approval of the salary payment involved.
Approved.
teport of Executive Committee on memorandum dated March 28th from

Ui
4etilig Comptroller of the Currency, recommending approval of an applica-

tiAa

Of The
First National Bank of Ladonia, Texas for permission to reduce

its r„,,,

--Pital from w125,000 to 400,0u0, on condition that the ,;25,000 released
he lls
66
'for the purpose of establishing a surplus of .A5,000 and eliminating
the
°ssee set forth in the last report of examination; theBoard's Committee
1124eilling approval subject to the conditions suggested by the
ttolier,

cting Comp-

Approved.
Aeport of Executive Committee on memorandum dated March 30th from
the
AefinR Comptroller of the Currency, recommending approval of an aonli1414/1101 of The iirst National Bank of Hemet, Cal. for permission to reduce




293
4/4/28

-8-

iti3 capital from na00,000 to „i50,000 on condition (1) that the entire amount
Of a4 assessment of 500 of the present capital be fully paid in; (2) that no
14148Y be returned to the shareholders in connection with the reduction in
al - all assets heretofore charged off and those charged off at examina"
c
t101,
,
M
totaling approximately 4,232,000, together with any assets charged off
48 Part of the
reduction, to remain the property of the bank ana any salvage
ther8011 to be credited to the profits of the bank if and when collected; and
(3) that when the reduction in capital is effected .,'5,000 be placed in the
a
11/1/111s fund, ,,40,000 in undivided profits and approximately „;35,000 be used
elinlinating certain doubtful assets listed.
Upon recommendation of the Executive Committee the
reduction in capital was approved subject to the conditions suggested by the Acting Comptroller.
41ePort

of Executive Committee on memorandum dated March 29th from the

4ottno,
'omptroller of the Currency, recommending approval of an application
(3f the

•

First National Bank of .otan, Texas for permission to reduce its

P1tai from
, 5O,J00 to .30,000 on condition that all stock be retired pro
retta,

that no money be returned to the shareholders, and that the entire
441/3411t

Of the reduction be used to eliminate "other real estate" and other

141desirable assets or for the reduction of the carrying value of banking
4011,
.4e, furniture and fixtures, all "other real estate" or undesirable as3t3 teMOved to be trusteed for the benefit of shareholders at the date of

Upon recommendation of the Executive Committee, it was
voted to approve the capital reduction, subject to the conditions suggested by the Acting Comptroller.




294

4/4/28

-9-

Memorandum dated Larch 30th from the Chief of the Division of Baak
°IP"atiens, submitting statements of expenditures by the Federal Reserve
barav, ,
'Or educational and welfare work, etc. during the month of February
441 for the
two months period ending February 29th.
Ordered circulated.
Liemorandum from Counsel dated March 27th, submitting draft of reply
to lett
er dated March 15th from the Cashier of the Pasadena National Bank,
l'asaA
Cal. with reference to the right of that bank to act as registrar
Of
ston,
-4e and bonds; the proposed reply stating that the Board is advised
Mat
there are no California state banks in cities the size of Pasadena
with
--Pital less than ,200,000 acting as registrar of stocks and bonds,
alla that
- since the Pasadena National Bank has a capital less than this
4141114t

the Board has no authority to grant the permit requested.

The let-

'411' submitted by
Counsel also stated that it is not within the power of a
114t1(41111 bank to act as registrar unless it obtains a permit from the Board
his memorandum he suggested that the proposed reply, therefore, be

44c1

ad. to the Comptroller of the Currency for approval before being trans4l1ttea,
l'elt

Upon motion, it was voted to refer the proposed
letter to the Pasadena National Bank to the Comptroller
Of the Currency, in accordance with Counsel's suggestion.
Llernorandum from Counsel dated March 24th, with reference to the I
kola

izea

1.7 application of the City National Bank in Miami, Fla., a newly organ-

b
411k Which recently consolidated with the City National Bank and Trust

of

" vf Miami and is handling a few trusts rJtained when the majority
the ,
"rust business of the City National Bank and Trust Company was trans-




295
4/4/28
-10ferTed to a
state institution known as the City Trust Company; Counsel suggestiag
that before acting upon the application, which is made in accord"with the Board's Aegulations although not believed to be technically
141
IleeessarY, the Board take up with the applicant bank a statement contained
t44 letter
is
addressed to the Federal Reserve Agent at Atlanta that it
4" the intention of the bank to qualify for the exercise of trust powers
bY the

A
,
&eposit of securities with state authorities.Counsel pointed out
that under
the law and regulations of the Board if the City National Bank

111141.41 is to exercise trust powers it must deposit securities with the
state
an
as required by state law.
Upon motion, it was voted to instruct Counsel to
prepare an appropriate letter to the applicant bank.
on
The Governor
then reported that following the meting of the 3oard
liarch
°Oth he wired the Deputy Governor of the Federal Reserve Bank of Dallas
that saauld that bank comply with the request of the Pacific National AgriCredit Corporation of Fresno, made though the Federal Intermediate
ete(lit Bank
of Berkeley, that the El Paso Branch be designated as its agent
thA
- performance of certain specified operations, the Board feels that a
thar
e should be made for the services rendered by the Branch and would like
anticinatto 114.16 suggestions as to what would be a proper basis therefor,
'
i le th,i•
-- other requests of the kind may be received and that some definite
PolicY should be worked out.

He reported that no reply to this tele-

has as yet been received. He also stated that he discussed the matter
With th,
there
?Algene Meyer, Farm loan Commissioner, who informed him that
are 0
unlikely
41Y two agricultural credit corporations in existence and it is




296
4/4/26
-1141147 other

requests of the kind will be received.

Memorandum from Counsel dated March 23rd, submitting for the use
"the Secretary
of the Treasury in a proposed letter to the Chairman of
the committee
on Bankimo: and Currency of the Senate, a memorandum relative
t0 31 3°24, a bill to "provide for the establishment of Federal Cooperative
and a Federal Cooperative .eserve System and for other purposes".
'
Upon motion, the memorandum submitted by Counsel
was approved and ordered transmitted to the Secretary
Of the Treasury.
llemorandum from Counsel dated March 12th, submitting draft of letter
t° the C
hairman of the Committee on Banking and Currency of the Senate, pre-

for
8+406, a

the signature of the Secretary of the Treasury, with regard to
bill "to increase the number of members of the Federal Reserve

to make
the Board more representative, to provide for the proper control

and

oolltact

equitable distribution of the credit supply, to establish closer

between Congress and its agent, the Federal Reserve Board, and for

"her P4rPOsesu.

Upon motion, the letter submitted with Counsel's
memorandum was approved.
Memorandum from Counsel dated February 23rd, prepared at the request
or tar s

Gilbert, Supervisor of Examinations, with respect to the proper clas-

"eat'
1°11 of deposits due in exactly thirty days.
Ordered circulated.
STANDING COMMITTEES:
rch 31st,
134tecl'14
!
—P1'i1 3rd,




Recommending changes in stock at Federal Reserve Banks
as set forth in the Auxiliary Minute Book of this date.
Aecommendations approved.

297
4/4/28

-12-

BaPORTS OF
STANDIG COMMITTEES: (Cont'd)

Dated, March

29th, Recommending action on applications for fiduciary
April 2nd,
Dowers as set forth in the Auxiliary Minute Book
of this date*
Recommendations approved.
Dated,
March 27th,
ecommending action on applications for membership
31st, by state institutions as set forth in the Auxiliary
April 4th,
Minute Book of this date.
Aecommenaations approv
The meeting adjourned at

:40 p.m.

Secretary
APProved: