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A meeting of the Federal Reserve Board was held in the office of the ?sclera]. Reserve Board on Tuesday, April 9, 1929 at 12:00 o'clock noon. PRESENT: Governor Young Mr. Platt Mr. Hamlin Mr. James Mr. Cunningham Mr. Noell, Asst. Secretary Mr. McClelland, Asst. Secretary The minutes of the meeting of the Federal Reserve Board held on April 5th Were read and approved. Telegram dated April 8th from the Chairman of the Federal Reserve Bank O1 Dallas, advising that the board of directors at a meeting an that date made 40 change in the bank's existing schedule of rates of discount and purchase. Without objection, noted with approval. Application of the Farmers & Merchants National Bank of Stanley, Vas, for Permission to exercise general fiduciary powers; together with a divided report thereon by the Law Committee, Mr. Hamlin recommending approval and yr. expressing the opinion that a bank, which has a capital of 450,000, is t°° small. Upon motion, the application was approved, Li.. Platt voting "no". APplieation of the Tipton National Bank, Tipton, Iowa, for permission t° e xercise general fiduciary powers, which was referred to the Comptroller °f the Currency inasmuch as the institution was recently organized to take ()1ler the City National Bank of Tipton; together with a memorandum from the CeMPtroller recommending that at this time the bank be given authority to 4" as trustee only and that action on its application for further fiduciary 1)0were be deferred until a future date. 3,17 -2The recommendation of the Comptroller, being concurred in by the Law Committee, was, upon motion, approved. 1,:emorandum from Counsel dated March 27th, with reference to the Clayton 4ct application of LI*. L. L. Humphrey, involving the First National Bank at Pittsburgh, Pa., the Union Trust Company of Pittsburgh, Pa., and the First °nal Bank of Swissvale, Pa., on which the Board some time ago deferred action because of the fact that Lir. Humphrey is also serving as a director of the Pittsburgh Branch of the Federal Reserve Bank of Cleveland and the Board h4d to authority to authorize him to serve the four institutions; Counsel atating that, in his opinion, the amendment to the Clayton Act of :.:arch 2, 1929 . exempting from its provisions banking institutions which do no commercial ballking business, removes Mr. Humphrey's service as director of the Pittsburgh ilrelloh from the prohibitions of the Clayton Act and the Board may, therefore, 413Pr°ve of his serving the three banks named in the application. Upon recommendation of the Law Committee, it was, upon motion, voted to approve Lr. Humphrey's application. eports of Committee on Salaries and Expenditures on lists submitted by the Federal Reserve Banks of Philadelphia, Cleveland and Dallas of employees fcr whom the directors of those banks approved leaves of absence with pay, on 4ec°11nt Of illness, during the month of March, where the total of such absences aihce January 1, 1929 has exceeded thirty days; the Board's Committee recomIlle4cling approval of the salary payments involved. Approved. Letter dated April 8th from the Governor of the Federal Reserve Bank or R 81v York, with reference to gold exports, imports and earmarkings since 8‘1.8 4/9/29 -3- January 1, 1929; the net result of the transactions completed and anticipated beillg a total gain of 470,000,000 since the first of the year. Ordered circulated. Report of Committee on Examinations on letter dated April 4th from the Federal Reserve Agent at Chicago, with regard to the proposed absorption of the Old National Bank, Grand Rapids, Michigan, on April 20th by the Kent State Batik of Grand iiapids, a member institution; the Board's Committee recommendapproval. Noted, with approval. Memorandum from Counsel dated April 6th, approved by the Law Committee, submitting draft of letter to the President of the International Banking C°rPoration, New York City, granting permission to Mr. D. C. Borden to serve at the same time as Comptroller of the National City Bank of New York and as Comptroller and director of the International Banking Corporation. Upon motion, Mr. Borden's service of the two institutions named was approved and the letter submitted by Counsel was ordered transmitted. Letter dated April 6th from the Assistant Federal Reserve Agent at New YcIrk, transmitting application of the Trade Bank of New York, New York City, l'or Pe rmission to merge the Tompkins Square Bank of New York City, recently cllignizel to take over the private banking business conducted by Mr. Eugene tkaY; the Assistant Agent recommending approval of the proposed merger. Noted, with approval. adLetter dated March 27th from the Federal Reserve Agent at Boston, that the Old Colony Trust Company of Boston has bought a controlling O.•,4,9 4/9/29 -4- 41terest in the First National Bank of Mansfield, Massachusetts, the Second national Bank of Malden, Massachusetts, Winchester Trust Company of Winchester, Ilassachusetts, the Harvard Trust Company of Cambridge, Massachusetts and the that it is 3Pringfield National Bank of Springfield, Massachusetts, and also tOlderstood that the Federal National Bank of Boston has acquired control of the Brockton Trust Company. In his letter, the Federal Reserve Agent also eclvised that an application for withdrawal from the System is expected within 4 14W days from the Hadley Falls Trust Company of Holyoke, Massachusetts. Noted. ce to a request Memorandum from Counsel dated March 26th, with referen hereafter the 8 bY the Secretary of the American Acceptance Council that ' 4146 Council be furnished with a copy of each ruling made by the Board with reference to bankers acceptances immediately after such rulin7 is made, in order now that member banks may receive earlier advice of such rulings than they suggestl'eceive throup:h publication in the Federal Reserve Bulletin; Counsel of the Amerithat in order to avoid criticism for discriminating in favor rulings in question, 4cceptance Council and to expedite publication of the of a 1141hediately after such rulings are issued they be made public in the form tatement to the press, a copy of which can then be furnished to the American AcePtance Council and to any other persons who desire to receive it. After discussion, upon motion, Counsel's suggestion was approvel. submittinp: draft of reply to Memorandum from Counsel dated April 9th, Nevada First National letter dated April 3rd from the Assistant Cashier of the --' Of the Tonopah, Nevada "trustee" under inquiring whether the bank may act as stocks the Board to act as registrar of Permission heretofore granted by t_30t, 4/9/29 - and bonds' and "in any other fiduciary capacity in which state banks, trust c°113Panies or other corporations which come in competition with national banks are permitted to act under the laws of the state of Eevada"; the proposed rePly, prepared in accordance with previous policy, advising that the bank may act as trustee under the permit which has been granted to it by the Board, if c°711Peting state banks are authorized to so act by the laws of Nevada. Upon motion, the proposed reply was approved. Memorandum from Counsel dated April 8th, submitting draft of reply to letter dated march 12th from the Deputy Governor of the Federal Reserve Bank °f 179W York, with regard to an inquiry by the Bankers Trust Company of New l'ort as to whether funds held by it against American Bankers Association travelers' checks are deposit liabilities against which reserves must be maintained; the proposed reply stating that, in the opinion of the Board, funds held by 4 member bank against travelers' checks issued in exchange for cash and outstanding are deposits within the meaning of Section 19 of the Federal Reserve t aCainst which reserves must be carried and that inasmuch as they are pay4c' able on demand, such deposits must be classified as demand and not as time deOsit Upon motion, the letter submitted by Counsel was approved. Llenorandum from Counsel dated April 8th on letter dated March 29th from the Assistant Attorney General, transmitting copy of a communication addressed t° the Comptroller of the Currency with regard to the impropriety of obtaining national banking laws °°11fessions of those guilty of apparent violations of the by "Ile promise of immunity or by coercion, such as was done in connection with V9/29 -6- Investigation by a private detective agency of certain apparent violations Oh the part of an employee of the Brockton National Bank, Brockton, Massachu- setts; Counsel submitting draft of a letter to the Attorney General advising that the matter will be called to the attention of all examiners of the Federal aeserve Board and the Federal Reserve banks, with a view of preventing the use of any such methods on their part. With his memorandum, Counsel also submitted draft of a circular letter to all Federal deserve Agents on the subject. Upon motion, the letters submitted by Counsel were approved and ordered transmitted. Xemorandum from the Assistant Secretary submitting letter dated March 13th from the Secretary of the Sub-committee of the General Committee on 1/44kers Acceptances, transmitting a supplement to the report made to the 11°vemoer, 1928 Conference of Governors, setting forth specific examples of clolnestic transactions which, during recent years, have come to the attention °f Federal Reserve banks and as they could not be financed under the rulings Of the Board by eligible acceptances, illustrate the need for a modification f the Board's rulings concerning bankers acceptances drawn under domestic creaits. Referred to the Law Committee. Letter dated Lpril 5th from the Secretary of the Governors' Conference, 114/r1s1ng that in response to a request by Assistant Secretary of the Treasury 11°11(1 and Commissioner of the Public Debt Broughton that the Federal Reserve barlb. to advance to the Bureau of Engraving and Printing an amount sufficient f rs1 'usce care of the added expense occasioned by the unusual quantity of materials 97";0 '1/9/29 -7- for printing the new size currency and the employment of extra labor, the following resolution was adopted by the Conference: "Voted, that unless objection was raised by the Federal Heserve Board, the Governors comply with the request of the Treasury for an advance of ,i750,000. during the first part of April and 4750,000. on the 1st of May." Upon motion, the action of the Conference was formally approved, the Board having previously informally approved it and authorized one payment in accordance with its informal action. Letter dated April 5th from the Secretary of the Governors' Conference, advising that in considering the topic submitted by the Board on the question °f the desirability of establishing a higher rate of discount on member bank collateral notes secured by government obligations than is maintained for discounting eligible paper, it was voted: "That in the opinion of the Conference, it is not advisable at the present time to establish any differential between these two classes of paper, and if any such differential were to be established, consideration of it should be postponed until after the Federal Aeserve banks are ready to reduce their rediscount rates." After discussion, the resolution adopted by the Conference was noted and action thereon was deferred. Letter dated April 5th from the Secretary of the Governors' Conference, adthat in considering the topic submitted by the Board, relating to the 15°esibility of Federal Aesorve banks acting as custodians of securities, in111(iing bankers bills, pleded to secure public deposits, a committee consist°f Governors Geery, Fancher and Harrison was appointed, in accordance with the fo llowing resolution adopted by the Conference: "That the Chairman appoint a committee to review this whole question in the light of the earlier report submitted by the committee appointed for • 4/9/29 -8"that purpose, and in the liht of further developments since that time." Noted, with approval. Letter dated April 5th from the Secretary of the Governors' Conference, lidvising that after consideration of the resolution introduced by Llr. James elld referred to the Conference on April 1st, setting forth a proposed formula ill connection with the designation of reserve cities, the following resolution wee adopted: "Resolved, that the Conference is unable to give any advice at this time and would like to have further time for consideration. We would, however, call the attention of the Federal Reserve Board to the fact that in many cases, one or two banks in a city might have bank deposits while other banks did not, and suggest that they consider the advisability, if they desire to carry out this plan, of having this provision apply to specific banks rather than to all banks in the city." The Assistant Secretary was instructed to call attention to the fact that the Board could not, under the law, apply a formula of the kind to individual banks. In connection with the above, the Governor stated that in accordance with the uuaerstanding had at the joint meeting between the Board and the Governors' Carlfer nee, he has directed the preparation of a letter to the Governors of all Federal Reserve banks on the subject of the designation and termination of reCities, incorporating therein a request for expressions of opinion on the ad visability of special legislation which would fix a higher reserve against bahl, - ueposits, wherever carried, than is required against other deposits. He statea that the letter will be submitted to the Board within a day or two. He also stated that, if agreeable to the Board, he will defer sending out 4 letter to all Governors on the general reserve frora triP question until after he returns ‘-')*•-• 1);)`:17. 4/9/29 -9- There was no objection. Letter dated April 5th from the Secretary of the Governors' Conference, aavising that following consideration of the question of the use of self-insurance reserves carried by the Federal Reserve banks, which topic was submitted bY the Board, the following resolution was adopted: "Resolved, that it is desirable that all Federal Reserve banks should set up self-insurance reserves for the purpose of meeting any losses of whatever nature not covered otherwise, and that the effect should be a very material reduction in the cost of all types of insurance." After discussion, the resolution was noted and action thereon was deferred. Letter dated April 5th from the Secretary of the Governors' Conference, advising of consideration given to a question submitted by the Board on the 1)°11eY to be pursued by Federal Reserve banks in asserting rights on behalf aepositors of unremitted for transit items against receivers of insolvent Illember banks; the letter advising that the majority report adopted by the e°11ference of Counsel, as well as a minority report prepared by four members °f that conference, was considered with the result that the followinE resoluti0 4 was adopted: "Resolved, that we approve in substance the majority report of the Conference of Counsel, with the understanding that, to assist the Counsel of the Federal Reserve Board in framing the exact language of any amendments that may be found necessary to make the substance of the report effective, each Federal Reserve bank shall be at liberty to call his attention to any local arrangement that might be affected by any such amendments." After discussion, action on the above resolution was deferred until the Board's Counsel shall have prepared and submitted the form of regulation contemplated by the majority report of the Conference of Counsel. 4/9/29 -10- The Ilssistant Secretary then submitted the matter which was referred to re Platt at the meeting of the Board on March 14th, namely, draft of a let- ter to the Uhairman of the Committee on Banking and Currency of the Senate, for the signature of the Secretary of the Treasury, ;:ith regard to 6.E571, a bill to amend Section 7 of the Federal Reserve Act so as to provide that an additional dividend, not to exceed 21 may be paid to member banks by the Federal Reserve banks out of net earnings for the year. He read a notation ?nada thereon by 'Ir. Platt that the bill in question is dead and unless it is ' l eintroduced, there appears to be no reason for addressing a:letter to the 'Satiate Committee. The Governor reported that he discussed the above letter with the illaci rsecretary of the Treasury yesterday, at the same time he discussed the of a letter for the signature of the Secretary of the Treasury to the hairman of the Senate Committee, with regard to 5. 5723, which was referred t0 him at the meeting on Larch 12th. He reported that Mr. ::ills agreed that 4illess the two bills are reintroduced, the Secretary of the Treasury need 11°t address letters regarding them to the Senate Committee on Banking and Currency. The proposed letters were, therefore, ordered filed. liemorandum from Jounsel dated March 23rd, submittin With in accordance the resolution adopted by the Board on '.:_arch 21st, tentative draft of a designated as itegulbtion "M", Series of 1929, designed to enforce tile Principles regarding the proper use of the credit facilities of the FedSystem laid down in the 411 , eaeral Reserve banks. oard's letter of February 2, 1929 to 4/9/29 -11- I After discussion, action on the above matter was deferred. The Governor requested, in case the proposed regulation should came up for consideration during his absence, that he be recorded as disapproving its ador)tion. Xatter approved on initials yesterday, namely, application by the Broadway National Bank, Richmond, Va.,en behalf of the Broadway Bank and Trust Company, aichniond, for membership in the Federal Reserve System and for 195 shares °f stock in the Federal Reserve Bank of Richmond, effective if and when the 4°4cluaY Bank and Trust Company opens for business; the application having been IIPProved subject to the regular conditions of membership set out in Regulation tql„, series of 1928, and the following special conditions: "l• That the Broadway Bank and Trust Company, Richmond, Virginia, shall at the first meeting of its board of directors ratify the action taken in its behalf by the Broadway National Bank of Richmond, Virginia, In applying for stock in the Federal Reserve Bank of Richmond and in accepting the conditions of membership imposed by the Federal Reserve IJoard, and the board of directors of the Broadway Bank and Trust Company Shall pass a resolution accepting such conditions of nembership. 2. That at the time the Broadway Bank and Trust Company, Richmond, Virginia, is authorized to commence business its proposed capital of w300,000 and surplus of .„25,000 shall be fully paid in. 3. That prior to the payment of a dividend the Broadway Bank and Trust Company, Richmond, Virginia, shall carry to its surplus account 11°t less than one-tenth part of its net profits for the preceding divi, "nd period until its surplus fund shall amount to 20 per cent of its capital stock. 4. That it shall within six months dispose of or otherwise secure all loans secured by its own stock. , 5. Except with the parmission of the Federal eserve Board the frcadway Bank and Trust Cemoany, Richmond, Virginia, will not exercise 115' of the following powers which it has under its charter and the laws °f Virgtnia: 4/9/29 -12- 'To guarantee the fidelity and diligent performance of their duty by persons or corporations holdinr! places of private or public profit or trust in all cases where individual bonds are not required by law; to guarantee the title to real or personal estate or become security on any bond given by any person or corporation against loss or damage by reason of any risk assumed, by insuring the fidelity or diligent performance of duty of any person or corporation, or by guaranteeing or becoming surety on any bonds. To guarantee payment of bonds, bills, notes and other obligations." Upon motion, the application was formally approved. Memorandum from Mr. Platt dated March 23rd, referring to the Board's letter Of January 26, 1929 (X-6223) on the subject of examination of member banks 4114 suggesting amendment of the instructions contained in that letter with reaPect to credit investigations of member banks. Ordered circulated. The Governor then announced that he is leaving tomorrow for his trip to the Coast and will be gone for about thirty days. He stated that in case any- thing of an unusual nature should come up, he has instructed the Assistant SeeretarY of the Board to communicate with him. ilEP°'=O-S OP STANDING COLMITTEES: Dated, ecommending changes in stock at Federal deserve Banks as set forth in the Auxiliary Minute Book of this date. Recommendations approved. Dated, April 5th, Recommending action on applications for fiduairy powers 8th, as set forth in the Auxiliary Minute Book of this date. Recommendations approved. Dated, April 5th, Recommending action on an application for admission of a state bank, subject to the conditions stated in the individual report attached to the application, as set forth in the Auxiliary Minute Book of this date. Recommendation approved. April 8th, 9th, 4/9/29 -13- IWORTS OF STANDING COLIMITTEES: (Cont, 0 Dated Dated April 5th, Recommending approval of the application of Mr. George MacDonald for permission to serve at the same time as director of the Chatham Phenix National Bank and Trust Company, New York, N. Y., and as director of the Liberty National Bank and Trust Company, New York, N. Y. Approved. April 9th, Recommending approval of the arplioation of Mr. Matthew S. Sloan for permission to serve at the same time as director of the Guaranty Trust Company of New York, N. Y., as director of the Nassau National Bank of Brooklyn in New York, Brooklyn, N. Y., and as director of the Irving Trust Company, New York, N. Y. Approved. The meeting adjourned at 1:15 p.m. dikau, Assistant Secretary. k pproved:
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