Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, August 11, 1926, Volume 13, Part 2

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A meeting of the Federal Reserve Board was held in the office of the
Board on Wednesdk, Ausust 11, 1926 at 11:30 a.m.
PRESENT:

Governor Criss inger
Mr. Platt
Mr. Hamlin
Mr. James
Mr. McIntosh
Mr. Eddy, Secretary
Mr. Noell, Asst. Secretary
Mr. McClelland, Asst. Secretary

The minutes of the meeting of the Federal Reserve Board held on July
23rd were read and approved.
The minutes of the meetings of the Executive Committee held on July 27th
4nd on August 3rd, 4th and 6th were read and upon motion the actions recorded
therein were ratified.
Mr. Platt stated t:at although he voted in favor
of approving the minutes of the meeting of the Executive
Committee held on August 4th he qaestioned the propriety
of including therein the detailed report of the statement
made by Dr. Goldenweiso2 with reference to the New York
rate situation.
Mr. Hamlin then referred to the fact that the Board has been orerating
fOr

the last month or more mainly thxlmlh _E.xecutive Committee meetings due to

inability to maintain a quorum for regular Board meetings.

He inquired Inhether

the Board would have any objection to requesting the Attorney General for an
°Pinion as to the rigit of the Board by regulation to fix four members as its
qUoram„
Upon motion by Mr. James, the Law Committee was
requested to prepare and submit to the Board a letter
to the Secretary of the Treasury auggesting that the
Teinion referred to be requested.

•

Telegram dated August 6th from the Secretary of the Federal Reserve




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Bank at Cleveland, advising that the board of directors on that
day made no
change in the bank's existing schedule of rates of discount and purchase.
Noted.
Bond of Mr. Joseph Vion Papin, Acting Assistant Federal Reserve Agent
at the Federal Reserve Bank of St. Louis, dated August 2, 1926, in the amount
Of 450,000.

Approved.
Memorandum from Counsel dated August 10th, requDsting authority to
employ an additional stenographer temporarily for a period of six weeks
at a salary not to exceed 4450 per month.
Approved.
Memorandum dated August 7th from the Chief Telegraph Operator, approved by the Secretary, recommending the appointment of Mr. William J. Walsh
as telegraph operator, effective August
16th, at a salary of 4465 per month.
Approved.
Letter dated August 5th from the Federal Reserve Agent at San
Francisco, transmitting and recommending approval of an application of the
Pacific Southwest Trust and Savings Bank for an extension of six months in
which to establish the branch in the vicinity of Santa Monica Boulevard. and
Fairfax Avenue, Los Angeles, approved by the Board on February 15, 1926.
Upon motion, it was voted to grant an
extension of six months from August 15th.
11

Letter dated August 6th from the Chairman of the Federal Reserve
Baak of New York, advising that the Bank of the Manhattan Company expects to
absorb the Greenpoint Bank of Brooklyn as of August 14th, and thereafter to




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operate it as a branch, and has purchased 72, of the stock of the Bronx
Borough Bank which it will continue to operate as a unit bank.
Noted.
Letter dated August 6th from the Chairman of the Federal Reserve
Bank of New York, with reference to the proposed consolidation of the Central
Mercantile Bank and the National American Bank, both of New York City, which
Will be effected under state charter.
Noted.
Tulemorandum from Counsel dated August 9th, with reference to the action
Of the Board at its meeting on August 4th in voting
to temporarily refuse the
Clayton Act applications of Liessrs. C. Walter Lotto, 7111mer A. Cadmus, George
71. Renkel and.Albert H. Slater, involving the Broadway National Bank and the
National Bank of America, both of Paterson; N. J., with the usual opportunity
to the applicants to present additional
evidence on the question of substantial
competition ; Counsel recommending that in accordance with the recommendation
Of

the Federal Reserve Agent at New York these gentlemen be advised that the

Board will not require an adjustment of their directorships until at the end
Of

the year, and further, that they be given until September 7th to notify

the Board in case they wish to present additional evidence in support of their
aPplication, the Board's refusal, effective at the close of the year, not to
become definite until that date.
Upon motion, the recommendations of
Counsel were approved.
Letter dated August 5th from the Deputy Governor of the Federal
Reserve Bank of New York, advising that the last renewal of the .,40,000,000




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creditsextended to the Bank of Poland expires on August 25, 1926, and that
the bank has been requested to grant a renewal of this credit or part of it;
the Deputy Governor stating that the directors have voted to renew the present credit for a period of three months only, an the same terms and conditions
as the old credit but at a rate of interest to be determined' on or about
August 25th.
After discussion, upon motion by Mr. James,
it was voted to approve a three month extension as
authorized by the New York directors.
Letter dated July 20th from the Federal Reserve Agent at Atlanta, transmitting, with the approval of the Executive Committee of that bank, application of the Citizens and Southern Bank of Savannah, Ga. for permission to
establish a branch office at East Point, Ga.; together with another letter
from the Federal Reserve Agent transmitting copy of a communication from

the President of the Citizens and Southern Bank, advising of the decision
Of that institution not to take over the Bank of East Point, informal ap-.
Plication to do so having been favorably acted upon by the Executive Committee
Of

the Board at its meeting on July 14th.
Mr. Platt submitted correspondence regarding
the above application with the Chairman of the
Federal Reserve Bank of Atlanta, and. moved that the
application be approved as an exception to the Board's
Regulations on the ground of public necessity.
Mr. Platt's notion being pat by the Chair
was 1ost, Mr. Platt voting "aye".
Matter approved on initials of nembers of the Executive Committee on

44gast

7th, namely, telegram dated August 6th frmm the Governor of the

Pederal Reserve Bank of Dallas, requesting approval of the earmarking of an




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additional ,A,500,000 of gold coin for account of the Federal Reserve Badk
Of New York for a period of sixty days, under the same terms as the transaction approved by the Board on July 27th*
Formally approved*
Letter dated July 30th from the Secretary of the United States Civil
Service Commission, requesting that the Board issue at this time a warning
against political assessments and activities on the part of its employees.
Noted, with approval*
Letter dated August 5th from the Federal Reserve Agent at Boston, adVieing of a meeting of the Executive Committee of the Federal Reserve Agents
Conference held in Chicago on August 3rd and enclosing a tentative program
for the Fall Conference; the Agent advising that early in October he will
come to Washington and confer with the Board regarding the final program.
Beferred to the Executive Committee*
Memorandum from Mr. James dated Augast 7th, submitting letter addressed to him by the Federal Reserve Agent at Atlanta, with reference to
consideration at a meeting of the Executive Committee of that bank from
which he was ausent, of an expense voucher in the amount of zi.i
i 505.21 submitted
bY five clerks who accompanied the recent currency shipment made by that
bank to its Havana Agency*
Ordered circulated.
Memorandum from Counsel dated August 5th, submitting draft of reply
to letter dated July 26th from the Federal Reserve Agent at San Francisco,
with reference to membership in the System of the Lake County Loan and




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• Savings Bank of Lakeview, ,Ore., the bank's charter having
expired on
Jaltaary 11, 1925 and new charter not having been issued until June 18,
1926; the proposed reply stating that the Board is of the opinion that
the bank formed under the charter which was issued on June 18,
1926 does
not succeed to the membership in the Federal Reserve System of the
bank
formed under the charter which expired on January 11, 19, and that it
Will be necessary for the new bank to make application for rrembership
in the usual manner.
Upon motion, the proposed reply was
approved.
Dr. Gold.enweiser entered the meeting and stated that in accordance
With the Board's action of Aur
.-,u:st 4th he had proceeded to Boston and conferred with Governor Harding and Chairman Curtiss of that bank, regarding
the pamphlet descriptive of the operations of the Federal Reserve System
Which the bank proposes to distribute to the member banks in
its District
Bald. to their customers.

He stated that the swgestions which he made to the

Board and repeated to Messrs. Harding and. Curtiss were all adopted and that
as the pam9hlet now stands it seems to be in satisfactory shape.
After diwussion, upon motion by Mr.
Hamlin, it was voted to aoprove ti 3 issuance
of the pamphlet in its revised form.
Dr. Goldenweiser also reported that he had comnunicated with the
Chairnan of the Federal Reserve Bank of Richmond, regarding that bank's

1

Proposed re-issuance of its book "Questions and Answers on the Federal
Reserve System" and stated that a manuscript of the revision would be




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submitted to him before publication.
Dr. toldenweiser also eubmitted manuscript of an address delivered
recently before the Industrial Club of Chicago by the Federal :ieserve Agent
at New York. He stated that the organization wished to publish the address
In Pamphlet form and that he saw no Objection.
Upon motion by 1.1r. Platt, it was voted
that the Board should interpose no objection to
its publication.
Dr. (ioldenweiser then referred to the amendment approved by the
Board on Augast 3rd to its principles governing research and statistical
ftrk in the Federal deserve System and stated that he had Thiry] it necessary
In advising the banks of this amendment-to make certain minor changes in
the language of other portions of the principles.

He read the revised

Principles to the Board.
Upon motion, it was voted to approve the
principles as read and that they should be transmitted to all Federal Reserve Agents.
Dr. Goldenweiser referred to the Board's action of February 9,
1926 in requesting his Division to prepare a full report with respect to
losses to depositors in connection with failed banks throughout the country.
He stated that this matter was receiving attention in the Division, that
illformation was being assembled but that it was not yet in shape for submission.
At this point, Dr. Goldenmiser left the meeting.
'.he Secretary than presented copy of reply made undsr date of
411.gust 10th to letter dated August 9th from the Chief Clerk of the Treasury
Derartmont, with reference to the proposal of the Treasury to allot to the




86
Board 1300 square feet of additional space in the Treasury building; the
Secretary's reply stating that in discussing the matter infonually with the
members of the Board the question was raised as to whether or not 1300 square
feet of additional space will enable the Board to move any one of its important units into the Treasury Building and that he was requested to state
that the Board will at its next meeting officially request the Treasury
DePertment to allot to it at least 2500 square feet of additional space.
Upon motion by Mr. James, it was formally
voted that the Board should request the Treasury
Department to allot not less than 2500 square feet
of additional space to the Board.
Memorandum from Mr. James dated August 5th, with reference to an apPlication of the Polk County National Bank, Bartou, Fla., approved by the
41zeoutive Committee of the Federal Reserve Bank of Atlanta, for the privilege
Of mdiscaunting with the Federal Reserve Bank eligible paper of certain
Ilan-taember institutions; Mr. James stating that he is willing to vote' in
favor of granting the application on one condition - that the paper offered
Shall be strictly eligible and that it shall likewise be good and collectible
and. with the understanding that the paper is not to be taken subject to retewal and that the privilege granted shall not extend for a period exceeding
82 X months fram August 1st.




After discussion, upon motion by Mr. Platt, it
was voted to authorize the Federal Reserve Bank of
Atlanta to rediscount for the Polk County National
Bank, for a period of not to exceed six months from
August 1st, paper which is eligible, good and collectible, acquired from the following non-member
.
banks:
Lee (Jaunty Bank, Title and Trust Company,
Ft. Myer, Fla.
First Trust and Savings Bank, Avon Palk, Fla.

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Frostproof
State Bank
Commercial
State Bank

.3tate Bank, Frostproof, Zla.
of Dundee, Dundee, Fla.
Bank and Trust Company, Haines City, Fla.
of Boca Grande, Boca Grande, Fla.

Letter dated August 7th from the Assistant Federal Reserve Agent at St.
Lois, acknowledging the Board's letter of August 3rd, instructing that
bulak, in view of the recent opinion of the Attorney General of the State
of Missouri, to make examinations at least once a year of the state banks
in Missouri that are member's of the Federal Reserve Bank of St. Louis, the
exPenses of such examinations to be borne by the banks examined; the Assistant Federal Reserve Agent advising that arrangements are being made fora
conference between the Attorney General of Missouri and Counsel for the
Pederal Reserve Banks of St. Louis and Kansas City, and it is possible
that the Attorney General's opinion will be modified in such a way that
former relations with the State Banking Department can be resumed.
Noted.
Letter dated August 6th from the Federal Reserve Agent at Kansas City,
acknawledging the Board's letter of August 3rd, instructing that bank, in
Iriew of the recent opinion of the Attorney General of the State of Missouri,
to make examinations at least once a year of the state banks in Missouri
that are members of the Federal Reserve Bank of Kansas City,the expenses of
.Tach examinations to be borne by the banks examined.
Noted.
Memorandum from Counsel dated July 13th, submitting drafts of letters
to the Federal Reserve Agent at Kansas City, he Elgin State Bank, Elgin,
ITebraska, and the Guarantee Fund Commission of the State of Nebraska, advising
of a hearing to be hold before the Board at its offices in Wadhington at whidh




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repr 2sen.tatives of the menber bank are requested to aopear to show cause why
the institution should not be required to surrender its stock in the Federal
lieserve L3ank of Kansas uity aria to forfeit all rights and privileges of membership in the Federal Reserve System because of its failure to maintain with
the Federal .zteserve bank the reserve required by the Federal Reserve Act; the
Proposed letter stating that in the event the member bank desires to waive
:41

its right to appear before the board, it may appear before the Federal Reserve
Agent on a date to be fixed by him, to present such evidence as it may care
to have transmitted to the rederal klesexve board, provided reasonable notice
In advance is given both to the 3o2rd and the Agent of intention to so appear.
Upon motion, the "proposed letters were approved,
after September 7th had been fixed as the date for the
hearing before the Isoard.
_.11.e Governor then reported on the matter referred to him at the
Iteetinp; on July 23rd. and submitted letters exchanged with Honorable iiewton
s

a.ker, with reference to the statement in the amount of „,;35,262.28, sub4.41.

/flitted by him for .1..ee
and expenses in connection with the par clearance case
Of•the Pascagoula National Bank v. Federal Reserve Bank of Atlanta et al; one
Payment of ..,,10,000 having already been made to ?..T.r. 3alzBr•




.. Thereupon ensued a discussion during which
the letters presented by the Governor were read to
the Board by the Secretary.
Following the discussion, Mr. Platt moved
that ti)e board approve Mr. ake r s stat enent as submitted, that it be forwarded to the Federal Reserve
tiarik of Atlanta for -oayment and that the amount thereof
be pro-rated mons. the Federal Reserve banks in the same
manner as in ,)revious cases.
Oarried.

;rt

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At 1:15 p.m. the meeting recessed and reconvened at 2:30 p.m. the
same members being present as attended. the morning session.
The Governor presented the alplication of the Uapitol National Bank
Of New York, New York for permission to act under Section 11 (k) of the
Federal Reserve Act as trustee, e;:ecutor, administrator, registrar of stocks
and bonds, guardian of estates, assignee, receiver and conimittee of estates
of lunatics; together with a letter from the Federal Reserve Agent at New
'Ycez recommending that the application be disapproved for the present and
correspondence oetween the Governor of the board and the Capitol National
_sank

with regard to t1

application.

Mr. Hamlin referred. to the fact

t-lat tne bank in tie rasi, has irequently been deficient in its reserves
and, expressed the opinion that no bank habitually deficient should be grmted
trust powers.
Following the discussion, Mr. Jams moved that the
aoplication be almroved.
Mr. Janes' motion being put by the Ch9.ir was carried
the mem'oers voting as follovs:
Governor Crissinger,
Mr. Janes, "aye"
Mr. McIntosh, "aye',
Mr. Platt, "not'
Mr. Hamlin, "no"

!Vett

The G-overnor then brought up the special order business for today's
Meeting, npmely, the question of the advisability of the Board establishin7
a Division of Dank Examinations for the purpose of examinini state bpinm<3
Which are members of the Federal Reserve System, then in the opinion of the
Board examinations by the Board appear to be necessary.




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Thereupon ensued a discussion, during thich the
various members of the Board expressed their opinions
on the question.
During the discussion, Mr. James moved adoption of
the following resolutions:
"MISCUED, That the Board employ a competent bank examiner
for the purpose of analyzing the reports of examination of each
member state bank as they are received by the 3oard and report
to the Board, throu,g4 the chief executive officer, his opinion
of the adequacy of the examination and whether or not in his
opinion the condition of the bank or character of examination
conducted by the State Department or the examination policies
of the State Banking Department, as disclosed by the report of
examination, warrants the Board's directing a special examination be made in accordance with Section IX of the Federal
aeserve Act.
"BE IT FURTHRI RESOLM, in order that there may be available a staff of examiners to conduct such special examinations
of state member banim as maj be found necessary by the 3oand
following the report of the bank examiner referred to in the
nrevious resolution, that the G-overnor be authorized to employ
as and when necessary the services of a sufficiert number of
bank examine i's."
Following; the discussion, Lir. Janes' motion was put
by the Chair and carried, Mr. Platt voting "no".
Mr. Hamlin stated that he voted "aye" on the assumption
that the Board understood his views in opposition to a centralized policy of examination and that by special examinations the
above resolution does not mean gerEral examinations of member
banks as made now by the Federal deserve banks.
lir. Platt stated that he favored the first paragra.ph of
the resolutions, but that he voted "no" because of his o-ppositio-n to the second paragraph.
Mr. Hamlin, Chairma.n of the Law Committee then referred to the hoard's
action at the !meting on August 6th, in referring to jounsel for the preParation of a ruling the Board's recent correspondence with reference to
the recommendation of the last Governors' Conference that ilegulation A be
eznended so as to make eligible for rediscount or purchase by Federal Ileserve




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banks bankers acce:itances drawn by an elevator comfany and secured by a
terminal warehouse receipt of the elevator company which draws the draft.
In making this refereme the Board reqtEsted Counsel to prepare a ruling
along the lines of a suggestion made. by Mr. Hamlin at that meeting that the
Board interpret its Ilegulation A to mean that regular registered. terminal
warehouse receipts constitute documents for comnodities so controlled, by
a third -oarty independent of tha borrower as to make them good and eligible
Collateral.
:Ir. Hamlin stated that he concurred in a recommendation
of the Board's Counsel that the above matter should be given
further considerat ion by the Governors' Conference before
being acted upon by the Board, ani upon motion by him it was
voted that the subject be placed on the program for consideration at the next Conference.
The Secretary thee read. to the lioard a nnmorandum dated August 11th
. setting forth the present status of all articles of unfinished business
carried on the Board's docket following thich he was directed to address
folloa-up memoranda to the members, committees and officers of the Board
to whom the various items were referred.
OF 32AIMING COMITTEES:
Dated, August 6th, Recommonding changes in stock at Federal Reserve Banks,
7th, as set forth in the Auxiliary Minute Book of this date.
Approved.
9th,
10th,
Dated, August 9th, Recommnd.ing action on applications for fichiciary -cowers
as set forth in the Auxiliary Minute Book of this date.
Approved.
Dated, August 9th, .Aecanmending a proval of the application of Mr. George 3.
Eccles for permission to serve at the same time as director
and officer of the First National Bank, Ogden, Utah and, as
director of the First National .3arfx, Hock Springs, 7,1-o.
Approved.




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REPORTS OF STA.NDIrG C01.2IITTP713: (Cont'd)
Dated, Aursust 9th,

Recommending approval of the aPPlication of Lir. M. A.
Browning for permiss ion to serve at the same time as
director and officer of the First National Bank, Ogden,
Utah and as director of the First National Bank, Rook
Spring's, ',7yo.
Approved.
Dated, August 9th, Reccrarending approval of the application of Mr. Chandler
Bullock for permission to serve at the sane time as
director of the Merchants National Bank, 7:omester,
and. as director of the American Trust Company, Boston,
Mass.
Approved..
Dated, August 9th, .decommending approval of the application of Mr. Li. S.
Eccles for remission to serve at the same time as
director nna officer of the First National Bank, Ogden,
Utah, as director of the Deseret National Bank, Bait
Lade City, Utah and as director of the First National
Rock Springs, Wyo.
Approved.
Dated, Au_-,-ust 6th, Alecorrending approval of the application of Mr. F. J.
Hollocher for remission to serve at the same time as
director of the Grand. National Bank, St. Louis, Moo and
as director of the First National Ba:ak, Ulayton,
Approved.
The mooting adjourned at 4:30 o'clock.

4

Secretary
Approved:




Governor