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95 A meeting of the Federal Reserve Board was held in the office of the Federal Reserve Board on Thursday, August 16, 1928 at 10:30 a.m. PRESENT: Governor Young Mr. Platt Mr. Miller Mr. James Mr. McIntosh Mr. Eddy, Secretary McClelland, Asst. Secretary held on The minutes of the meetings of the Federal Reserve Board Aufmst 14th and 15th were read and approved. ions of The Governor reported that in accordance with the instruct the Board yesterday he invited Mr. Kenzel, Deputy Governor of the Federal nce with the aeserve Bank of New York, to come to Washington for a confere Board today but that Mr. Kenzel could not conveniently do so. Paul M. Warburg Mr. Miller reported a telephone conversation with Mr. for meeting any regarding the proposals under consideration by the Board from the seasonal strain upon the future credit situation which may develop requirements of credit. Open Market Consideration of the report and recommendations of the and James exInvestment Committee was then resumed and Messrs. Miller granting of any pressed themselves as being unalterably opposed to the purchase of govauthority to the Open Market Investment Committee for the ernment securities. All members of the Board, however, expressed their issue should be belief that any securities offered by foreign banks of can not De resold taken over and absorbed into the System Account if they to the market. from Mr. Cunningham The Governor submitted a letter dated August 11th 96 8/16/28 -2- 11 from which he read the following excerpt: "Personally I feel, with the large crops now coming on that prices are bound to go lower and anything that can be done to assist in bringing a net return to the producer would be helpful. I would favor easing up on the discount rate, but would not favor easing the situation by open market purchases. A lower discount rate would be welcomed by all legitimate business interest. Easing the situation through open market purchases looks like too much effort to help big interest only, and the country would be likely to resent it." Governor Young also presented the following telegram received by Mr. Platt this morning from Mr. Hamlin: "Answering your telephone message I would say that I know only in a general way the report of the Committee. Feel personally that pressure should not be relaxed for sometime at least. Would, however, favor discretionary authority to Committee to buy acceptances as usual, and, in case of sudden emergency, or of conditions under which continuous pressure would injure crop moving and penalize business more than it would be of help in controlling existing tendencies, to purchase securities up to a fixed azI.ount, but, if reasonably possible Committee should consult with Governor Young before buying securities; if not possible, the Committee should have discretionary authority to act." The question of possible reduction in Federal deserve bank rediscount rates, as suggested by Mr. Cunningham, was then discussed and Mr. James moved "That the Federal Reserve Bank of Chicago be requested to reconsider its recent action in increasing its rediscount rate from to 5, with a view of reducing said rate." Mr. James' motion being pat by the Chair was lost, the members voting as follows: Governor Young, "no" M. Platt, "no" Mr. Miller, "no" Mr. James, "aye" Mr. McIntosh, "aye" Governor Younc, than submitted a prouoseu letter to the Acting Chairman -3- 8/16/28 of the Open Market Investment Committee which, during the discussion which ensued, he amended to read as follows: "The Board has reviewed carefully the report of the Open Larket Investment Committee and its recommendations of August 13, and has also considered the verbal discussion which took place during the meeting, and it is in agreement with the Committee that the seasonal requirements of credit will probably develop a strain upon the future credit situation which may react unfavorably upon commerce and industry, and that if such a situation should develop, the System should take some action to relieve the strain. The Board would not care to agree to the purchase of Government securities, except as a last resort. 7e understand from the discussion had with your committee that you favor easing through the bill market, if possible, and through the Government security market only if unavoidable. :lith this understanding, the Board approves the purchase of Government securities by the committee but limits the amount to „400,000,000. If a situation should develop which will require reconsideration, the Board will be glad to meet the committee at any time for that purpose." Governor Young moved approval of the letter as quoted above. 1.1r. James moved, as a substitute for the Governor's motion, that the letter be approved in the following form: "The Board has reviewed carefully the report of the Open Uarket Investment Committee and its recommendations of August 13, and has also considered the verbal discussion which took place during the meeting, and it is in agreement with the committee that the seasonal requirements of credit will probably develop a strain upon the future credit situation which may react unfavorably upon commerce and industry, and that if such a sitIstion should develop, the System should take some action to relieve the strain. The Board would not care to agree to the purchase of Government securities, except as a last resort. We understand from the discussion had with your committee that you favor easing through the bill market, if possible, and through the government security market only if unavoidable. If a situation should develop which will require reconsideration, the Board will be glau to meet the committee at any time for that purpose." 8/16/28 -4— After further discussion, Mr. James' substitute motion was put by the Chair and lost, the members voting as follows: Mr. Miller, "aye" Mr. James, "aye" Governor Young, "no" Mr. Platt, "no" Mr. McIntosh, "not voting" Governor Young's original motion was then put to a vote and carriea, the members voting as follows: Governor Young, "aye" Mr. Platt, "aye" Mr. McIntosh, "aye" Mr. Miller, "no" Mr. James, "no" Telegram dated August 15th from the Chairman of the Federal Reserve Bank of Boston, advising that the board of directors at a meeting on that date made no change in the bank's existing schedule of rates of discount n d purchase. Without objection, noted with approval. Report of Executive Committee on letters dated August 15th from the Comptroller of the Currency, recommendinr approval of a salary of ,3,000 Per annum each for Messrs. Grady T. Witt and W. W. Pierce, National Bank Examiners assigned to the Eleventh Federal Reserve District; the Board's Committee also recommending approval. 4proved. Report of Committee on Salaries and Expenditures on letter dated August 13th from the Deputy Governor of the Federal Reserve Bank of New York, transmitting a list of employees for whom the directors of that bank approved leaves of absence with pay on account of illness during the 1928 has Month of Ouly, where the total of such absences since January 1, 99 -5_ 8/16/28 ng approval of the exceeded thirty days; the Board's Committee recommendi salary payments involved. Approved. the appointment of Report of Oommittee on District 411 recommending Branch of the Federal Mr. John LI. Bennett as a director of the San Antonio F. E. Scobey, resigned, Reserve Bank of Dallas for the unexpired term of Mr. ending December 31, 1930. tor of Upon motion, Mr. Bennett was appointed a direc g endin term ired unexp the for h the San Antonio Branc December 31, 1930. Federal Reserve Letter dated August 13th from the Chairman of the ed by the board Bank of Atlanta, transmitting copy of a resolution adopt Of directors of that bank at its meeting on August 10th, that, subject to of operation of the the approval of the Federal Reserve Board, the period ed six months from October revolving currency fund at Miami, Fla. be extend and empowered to 2, 1928, and that the officers of the bank be authorized Atlanta with renew the agreement on behalf of the Federal Reserve Bank of the First National Bank of Miami, Fla. to act as custodian for a fund of s from October 2, 41,500,000 in Miami for an additional period of six month s government obligations 1928, to be secured by the deposit of United State at their face value to the extent of 1l0 of the amount of currency on hand. to apAfter discussion, upon motion, it was voted ncy curre ving revol Miami the of prove the continuance al Feder the advise to and 1929 1, fund until January rewhich ency emerg the if that ta Reserve Bank of Atlan Jand beyon ds exten fund this of quires the maintenance ed to further uary 1, 1929, and at that time it is desir will feel Board the fund, the of extend the operation city under e reserv a as Miami g natin justified in desig Section 11 (e) of the Federal Reserve Act. 100 8/16/28 -6On this motion, Yr. James requested to be recorded as voting "No" and Mr. :liner as "Not voting". James made the following statement: "I voted 'No' on the proposal to renew the Revolving Fund at Miami, as I did when the Fund was first established, because as I see it the whole plan is equivalent to lending the First National Bank between a half million and a million dollars without interest (Reports of examination show vault cash at First National Bank of Miami September 28, 1926 - y1,025,031.61 and on June 15, 1928 4272,120.18). If the Fund is to be continued, then, in my opinion, Miami should be designated as a deserve City in order to preserve equity in the service to mmber banks." Matter approved on initials on August 14th, namely, telegram dated August 14th from the Governor of the Federal Reserve Bank of :Anneapolis recommending approval of a proposal of the Metals Bank and Trust Company, Butte, Montana, to purchase the assets and assume the deposit liability of ;;. A. Clark & Brother, Bankers. Formally approved. Memorandum from Counsel dated August 13th, submitting draft of reply to letter dated July 19th from the Deputy Governor of the Federal Reserve Bank of New York, stating that an interior bank desires to deposit 100,000 Pounds Sterling in the London branch of a New York City bank with an agreement that the deposit will be repaid at the end of ninety days in dollars at a rate of exchange already determined, and inquiring whether such a dedeposit may be considered as a balance due from a bank and, therefore, the ductible from balances due to banks in calculating required reserves; be Proposed reply stating that the deposit in question can not properly payable deducted from balances due to banks since it is not immediately the end and is a foreign currency balance, not payable in dollars until -7- 8/16/28 Of ninety days. Upon motion, the letter submitted by Counsel was approved. Memorandum from Counsel dated August lath, submitting draft of reply to letter 'dated July 17th from the Assistant Federal Reserve Agent at Kansas City, inquiring whether the liability created by a member bank short in its reserve which purchases Federal Aeserve exchange from another bank having a treated temporary excess and issues its cashier's check therefor should be as "money borrowed" or as "Cashier's checKs outstanding"; the proposed reply stating that the liability should be classified as "money borrowed". Upon motion, the proposed letter was approved. Letter dated August 9th from the Director of Field Survey of the of salaries Personnel Classification Board, referring to a nation-wide study Paid by commercial institutions to persons holding positions analagous to those in Federal employ to be made in connection with a report which the Personnel Classification Board has been directed to submit to Congress, With recommendation, embodying a ciassificaion of the positions of all Federal emnloyees outsicie the District of Columbia; the letter requesting data the cooperation of the Board and Federal Reserve banks in securing 11°th from the Federal Reserve banks and from their members. Upon motion, the Secretary of the Board was directed to transmit a copy of he letter to each Federal Reserve bank with the request that the cooperation recuested by the Personnel Classification EoarL be given. Memorandum from Counsel dated August 6th with further reference to involvthe Clayton Act application of Messrs. Ben Mays and Joe Ledbetter, Bank of ihg tae Grand National Bank of St. Louis and the First National O2 8/16/28 -8- Clayton, Mo., which was disapproved by the Board on June 20, 1928 and later, at the request of Mr. Leduetter, resubmitted to the Federal Reserve Agent at St. Louis; Counsel stating that a letter received from the Federal Reserve Agent advises that he has not changed his recommendation on the applications. Upon recommendation of the Law Committee, it was voted to advise the applicants that the Board cannot reconsider its previous action. Mr. James then referred to the question of Open Market operations Of the Federal Reserve System and moved that at an early meeting of the Board, at which the full membership is present, consideration be given to the advisability of having all Federal Reserve banks represented on the Open Market Investment Committee. Mr. James' motion being pat by the Chair was carried. Mr. Miller then gave notice that when consideration is given to the question of having all banks represented on the Open Market Investment Committee, as provided. in Mr. James' resolution, he will move that all meet- ings of the Committee be conducted under the supervision of the Federal Reserve Board, with the Governor of the Board presiding as Chairman of the meeting. ligpoaTs OF STANDING 00:ZaTTEEa: Dated, August 15th, 16th, Dated, August 15th, Recommending changes in stock at Federal Reserve Banks, as set forth in the Auxiliary Minute Book of this date. Recommendations approved. Recommending action on an application for fiduciary powers as set forth in the Auxiliary Minute Book of this date. Recommendation approved. LLs.O3 8/16/28 -9- ligEORTS OF 3TANDING COMMITTEES: (Cont'd) Dated, August loth, Recommending approval of the application of Er. L. T. Crawley for permission to serve at the sane time as director of the Bank of Wisconsin of Madison, Wis., and as director of the First National Bank of Madison, Wis. Recommendation approved. Dated, August 13th, Recommending approval of the application of Mr. P. B. Knox for permission to serve at the same time as director of the First National Bank, Madison, Wis., and as direotor of the Bank of Wisconsin, Madison, Wis. Recommendation approved. William Dated, August 11th, Recommending approval of the application of Ur. as time same tne at serve to on permissi for H. Taylor phia, Philadel Company, Trust Northern the of director Pa. and as director of the Central National Bank, Philadelphia, Pa. Recommendation approved. The meeting adjourned at 1 15 p.m. Secretary. Approved:
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