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96 --) A meeting of the Federal Reserve Board was held in the office of the Federal eserve Board on 2riday, August 12, 1927 at 11:15 a.m. P2E3aiT: Governor Orissinger Platt 1.1r. Hamlin Mr. McIntosh Mr. James 1.1r. Eddy, Secretary Mr. Noah, Asst. zAcretary The Governor presented a report of the Committee on District 45 on ' letter dated August 11th from the Chairman of the 2edera1 Reserve Bank of Richmond, with reference to housing, personnel, etc., for the branch of that bank to be established at Charlotte, N. C.; the Committee recommending (1) that the Board give its approval to the plans and proposal of the Richmond bank in the matter of acquiring space in the First National Bank building and equipping same for use of the Charlotte Branch; (2) that it be Tip:gested to the Richmond bank that a 10-inch door be installed in the vault since this seems to meet the requirements of the insurance people and as the use of the vault will be temporary; and (3) that the Riahmond bank be advisei that the matter of approving the purchase of a lot on which to erect a building at Charlotte will be taken up by the Board if and when the _lichmond bank has something definite to submit. Upon motion, it was voted to anprove the recommendations of the Committee. Upon motion, it was also voted to note with approval the report regarding personnel at the branch, made by//. the Managing Director, and transmitted to the Board in Mr. Hoxton's letter of August 11th. Iatter approved on initials on August 11th, under authority granted by the Board at its meeting on July 28th, namely, action of the board of 97 8/12/27 ,deral _teserve 3a_a of Jallas in votim; to establish directors of the 'E, at that bank a rediscount rate of 3 1/2,) on all classes of paper of L11 maturities, effective t:,e first business day following that on which a-0proved by the Federal _Reserve Board. FormallY approved, Lr. Platt not voting. -r. Platt submitted the fol1owinG7 statement in connection with the above matter: "I am unwilling to approve the reduction of the rediscount rate in the Dallas district from 4 to 3 1/2 per cent at this time; first, because it was not made in response to any local demand or because of any local condition but because of the Board's request for uniformity at a lower rate; and, second and chiefly, because in reducing its rate the Dallas reserve bank, in my opinion, surrenders one of the greatest advantages of the regional system - namely, the opportunity of attractin funds from the east by maintaining a rate higher than the eastern rates. I think the Board's request for uniformity is a mistake. It cannot be denied, I think, that a higher rate does attract funds. Jertainly that is true of international rates, and no one doubts the efficiency of the hi-her rate in London in attracting funds from Iran York. If it is not also true to some extent as to Federal reserve districts, then there is little or no advantage in the regional plan of the Federal _eserve System as compared with the discarded Aldrich plan which provided for uniform rates. I believe its truth can be demonstrated throurzh a study of the movements of plold from week to week through the Gold settlement Fund. Several of the leading financial writers, when the reduction of the Kansas City rate was announced, stated that the result would be to promote -her. a flow of funds to New York so long as the New York rate remained hi accomplish. to seeking was Certainly that was not what the Board :ihen rates are uniform throughout the Federal Iteserve System it is clear, I think, that the New York rate is relatively high and serves to attract funds from most of the other districts, particularly from the western and southern districts. The tremendous accumulation of funds in New York at the present time, as sham by the Brokers' Loan fires, took place under uniform rediscount rates maintained for a considerable period, and, in my opinion, such an accumulation could not have been made so easily. if western reserve rates had been maintained somewhat above the New York and other eastern rates. Four nor cent at a time of fairly abundant supplies of funds and of softening interest rates is not a low rate for New York, Boston or Philadelphia, but it is a low rediscount rate for Dallas, and for several other western distriets. Conditions in the New York and Boston districts (disregarding the speculation in the stock markets) had for several weeks pretty clearly indicated the wisdom.of reduction, quite apart from the Later- 98 -3- 8/12/27 "national financial situation which prov.ided an additional reason. Everything that we sought to accomplish was accomplished by the • reduction of the New York and Boston rates. The lowering of rates in the agricultural districts which at this time need money for crop moving is a more gesture, possibly harmless but also possibly dangerous. It has been acclaimed by a few writers as an effort to help the farmers but every farmer who borrows money must know that it does not lower the interest that he pays. It has been said the lowered local rediscount rate compels big banks in the large cities of the vest to grant lower rates to their country correspondent banks, particularly to the non-member banks whose officers have been tola that they can obtain from their city correspondents every service the Federal Reserve can give them. This may be true, but we are generally notinterested in non-member banks and I have nevor seen any evidence that these small banks, whether members or non-members, pass on a reduction of rates to a their customers. Furthermore, there is plenty of evidence that small the tempts profit, low borrowing rate, with a high spread of banks into unsound advances or investments which got both themselves and their customers into difficulties. It may be said that I should have expressed disapproval of the first reduction made - the reduction at Kansas City. That reduction, however, was determined upon by Governor Bailey and his directors during my absence abroad and came throurh before I had opportunity to study the local situations. I had also sufficiently expressed my disagreement with the plan for a new uniformity at a , with the western districts at the Open 2Iarket lower rate beginnins Committee Leeting of July 27th, the day after my return. If th4 reluction to 3 1/2 per cent already made by Kansas City, 3t. Louis and Dallas, as well as by Boston, New York and Cleveland, is made also by the remaining banks in the System, or by most of them, then uniformity will have been restored but on a lower level. The New York rate will then again become relatively the highest and will continue to attract funds to New York from other districts." Letter dated August 11th from the Assistant Secretary of the Federal that date Reserve Bank of New York, advisin?; that the board of directors on made no change in the bank's existin schedule.of rates of disopunt and purchase. Noted. Telegram dated Auc,list 11th from the Chairman of the Federal Reserve Bank of Alchmond, advising that the board of directors on that date made no Change in the bank's existing schedule of rates of discount and purchase. 99 8/12/27 WWI Noted. 1:amorandum from Counsel dated August 8th, with reference to the Clayton ;let application of r. Louis 2. Kraemer, involving the aeading National Bak and the Colonial .2rust Company, both of Jaeadim:, Pa.; Counsel recommending that the Board refuse the application temporarily, advise the applicant that on the evidence before it it cannot permit him to serve the banks, Lila request him to furnish the Board with additional information, and farther )s advises the Board of his desire that unless the applicant within taeatj da: to submit such additional information, the Board's refusal beco::,e final. Upon motion, Counsel's recommendations were approved and the application temporarily refused, with opportunity to the applicant to furnish additional information. L:emorandum from Counsel dated August 9th, with reference to the Clayton Lot application of 1r. Scott 2. Ennis, involving the California Wational Bank and the Farmers and L:echanics Bank, both of Sacramento, California; Counsel recommending that the Board refuse the application temporarily, advise the applicatt that on the evidence before it it cannot Permit him to serve the banks, and request him to furnish the Board with additional information, and further that unless the applicant within twenty days advises the Board of his desire to submit such additional information, the Board's refusal become final. Upon motion, Counsel's recommendations were approved'and the application temporarily refused, with opportunity to the applicant to furnish additional information. •, 2.1amorandum dated Aui;ust 11th from the Secretary, requesting authority to employ a clerk in the Gold Llettlement 2und Divigion, with salary at the. 100 8/12/27 rate of froTla by the ,200 to )1,400 per annir.a, to fill the vacancy caused L. Hou -hton. resignation of -oprovod. Letter dated It5;ust 10th from the Federal Reserve Agent at New York, in voting to referring to the action of the Board on Auust 12, 1926, d, N. J., grant full trust powers to the Citizens National Bank of Englewoo on condition that it would increase its capital at least .100,000 within year; the next six months, which time was on September 11th extended to one the letter statin that the bank (now the Citizens National Bank and Trust „150,000 to Company of Englewood) has increased its capital from 200,000 and its surplus from ,200,000 to ;,300,000, of which ,j125,000 was paid in ,nd they ,000 transferred from undivided profits, and now feels that are in good. faith meeting the condition imposed, although, technically the capital account was increased only ,;50,000; the Agent requesting the advice as to any further action which should be taken by him in IT4ttor. After discussion, it was voted to advise the Federal aeserve Agent that the Board feels that the action of the Citizens National Bank and Trust Company of Englewood in , increasing its capital account in the amount of ,150,000 it upon imposed n conditio the fulfills as above stated, at the time its fiduciary application was approved. Board held on August The minutes of the meeting of the Federal Reserve 11th were then read and approved. REPORTS OF a2AIDING Oa:MIMES: Dated, August 12th, Recommending a change in stock at Federal Reserve Bank as set forth in the L).::iliary Minute Book of this date. Recommendation approved. 101 Jont'd) ' arlroval of the application of Li'. Harru eharchill for permission to serve at the same time as Director and ..Lctinr7 ,, ,,ashior of the First National Bank of Oradell, i. IT., and as officer of the 0hase National Tank of the Jity of New York, H. 7. .ecommendation approved. 4.)ak„3d, 4uPust Stn, 2..econrnend1n;; approval of the aoplicatioa of i.H. 7. Foster for permission to serve at the same time as director and officer of the Union National Bank, Bartlesville, kla., and as director of the iashin' Trust Camlanj, ,;esterly, A.1. _,ecohnendat ion a:!proved. iLtot.„, aoproval of the a.00lioation. of : t. . at 9th, q for psrmissian to serve at tho Lame _ior of the Third National Bank, Colqmious, Ga. and as director of, the Atlanta and Lo :f National Bank, A.tlanta, Ga. 2,ecommern2ation approved. Dated, u-ust The meetin —PDrOVea: adjourned at 12:05
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