Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, August 18, 1939, Volume 26, Part 3

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1019

A meeting of the Board of Governors of the Federal Reserve
81r8tem

WRS

held in Washington on Friday, August 18, 1939, at

11:00 a.m.
PRESENT:

Mr.
Mr.
Mr.
Mx.
Mr.

Eccles, Chairman
Ransom, Vice Chairman
Szymczak
Davis
Draper

Mr. Morrill, Secretary
Mr. Bethea, Assistant Secretary
Mr. Carpenter, Assistant Secretary
Mr. Thurston, Special Assistant to
the Chairman
Mr. Dreibelbis, Assistant General Counsel
Mr. Piser, Senior Economist in the Division
of Research and Statistics
There were presented telegrams to Mr. Young, President of
the

-cederal Reserve Bank of Boston, Messrs. Kimball, Post, Hays,

d, and Stewart, Secretaries of the Federal Reserve Banks of
1)111al
'
W York) Philadelphia, Cleveland, Chicago, and St. Louis, respectilrelY) Mr. Thomas, Chairman of the Federal Reserve Bank of Kansas
CitY, and Mr. Hale, Secretary of the Federal Reserve Bank of
Francisco,

stating that the Board approves the establishment

171111out change
by the Federal Reserve Banks of St. Louis and
S" Francisco on August 15, by the Federal Reserve Banks of New York,
ele\reland, Chicago, Kansas City and San Francisco on August 17, 1939,

11(1 bY the
Federal Reserve Banks of Boston and Philadelphia today,
or th

e rates of discount and purchase in their existing schedules.




Approved unanimously.

1020
8/18/39

-2There were then presented memoranda dated August 17, 1939,

*0111 the Personnel Committee recommending that, subject to contilimstion of their willingness to accept, Charles P. McCormick,
Baltimore, Maryland, and Paul V. Eames, Minneapolis, Minnesota, be
IPPointed as
Class C directors of the Federal Reserve Banks of
Richmoba and Minneapolis, respectively, for the unexpired portion

or the
three-year terms ending December 31, 1941.
Approved unanimously, with the understanding that Mr. Lassiter, Chairman of the
Federal Reserve Bank of Richmond, and
Mr. Coffey, Deputy Chairman of the Federal
Reserve Bank of Minneapolis, mould be
requested to ascertain whether Messrs.
McCormick and Eames would be willing to
accept the appointments.
At this point Messrs. Thurston, Dreibelbis, and Piser left

the meeting
and the action stated with respect to each of the
Zatters

hereinafter referred to was then taken by the Board:
The minutes of the meeting of the Board of Governors of the

ifis41‘al Reserve System held on August 17, 1939, were approved
114a41Mous1y.
Memorandum dated August 15, 1939, from Mr. Morrill recomItielictillg that, for the reason stated in the memorandum, Samuel B.
kaize
'Ir., be appointed as a page in the Office of the Secretary,

With
841arY at the rate of ;4a,080 per annum, effective as of the

4te
1-113°n which he enters upon the performance of his duties after
havi
11 Passed satisfactorily the usual physical examination.




Approved unanimously.

1021
8/18/39

-3Memorandum dated August 18, 1939, from Mr. Carpenter,

Assistant Secretary, recommending that, for the reason stated in
the meraorandum, Mrs. Helen Jones be appointed on a temporary basis
1'131
'a period of one week beginning AuguO 21, 1939, as a telephone
°Perator in the Office of the Secretary, with salary at the rate
Of
§18.00 per week.
Approved unanimously.
Memorandum dated August 15, 1939, from MT. Carpenter,
Assistant Secretary, recommending, for the reasons stated in the
Zenl°rand11111) (1) that the Board make no further payments to the
etj.
system on behalf of Mr. Currie and Mrs. Myer during the
Isriod of
their leave of absence without pay with the understanding
that
they will make no further contributions during such period,

zlila (2)

that the Board authorize the payment to the retirement system,

1113°4 their

return to active service, such amounts as may be necessary

t° restore
the benefits to which they would have been entitled as a
l'esiat of the Board's regular contributions if their membership had
4°1tinued, it being understood that they will also make such payments
tile retirement
system as will be necessary to provide the benefits
to wilich they would have been entitled as a result of their regular
eszltributions if their membership had been continuous.
The recommendations were approved
unanimously.
Memorandum dated August 16, 1939, from Mr. Goldenweiser,
1)11'ecto-r.
of the Division of Research and Statistics, recommending
that
ror the reason stated in the memorandum, Mrs. Louise Sissman,



1022
8/18/39

-4-

JUnior economist in the Division, be granted leave of absence without
PaY for a period of 112 days beginning October 12, 1939, and that, as
well as continuing her own contributions to the Retirement System of
the Federal
Reserve Bfinks while she is on leave without pay, Mrs.
Sisaxan assume the Board's contributions beginning with the first full
PaYr°11 period after the expiration of the annual leave to which she is
611titled.
The recommendations were approved unanimously.
Letter to the board of directors of "The Iron and Glass Dollar
"
8 ings Bank of Birmingham", Pittsburgh, Pennsylvania, stating that,
subject to
conditions of membership numbered 1 to 3 contained in the
1114rd's Regulation H and the following special conditions, the Board
441"as the bank's application for membership in the Federal Reserve
S3rstell. and for the appropriate amount of stock in the Federal Reserve

Lank

of

Cleveland:

"4.

Such bank shall make adequate provision for depreciation in its banking house.

"5.

At the time of admission to membership the paid-up
and unimpaired capital of such bank shall be not less
than $200,000.

"6.

Prior to admission to membership, such bank,
has not already done so, shall charge off or
wise eliminate estimated losses of $2,620.18
in the report of examination of such bank as
15, 1939."




Approved unanimously, together with
a letter to Mr. Fleming, President of the

if it
otheras shown
of July

1023
8/18/39
liederal Reserve Bank of Cleveland, reading
as follows:
"The Board of Governors of the Federal
Reserve System approves the application of 'The Iron
and Glass Dollar Savings Bank of Birmingham',
Pittsburgh, Pennsylvania, for membership in the Federal Reserve System, subject to the conditions prescribed in the enclosed letter which you are requested
to forward to the Board of Directors of the institution.
Two copies of such letter are also enclosed, one of
Which is for your files and the other of which you are
requested to forward to the Secretary of Banking for
the Commonwealth of Pennsylvania for his information.
"It is assumed that unless one of the
exceptions in the statute or the Board's Regulation L
is applicable, you have advised the applicant bank
that, under the provisions of section 8 of the Clayton
Act, Directors Tames A. Griffith and Henry Menschke,
Who are serving also as director, and president and
director, respectively, of the Hilltop Bank of Pittsburgh, may not continue to serve both institutions
after the expiration of one year from the date of their
last election as directors of the applicant bank, or
after February 1, 1940, (if they have been serving in
these capacities since prior to the enactment of the
Banking Act of 1935), whichever is later. It is assumed
.
411at, in connection with the services of Director
xenschke as vice president of the First National Bank,
Castle Shannon, PennsylvRnia, you have considered the
question whether Castle Shannon is 'contiguous or
adjacent' to Pittsburgh.
"It is assumed also that, if the bank comPletes its membership, the savings accounts listed on
Page D(a) of the report of examination as apparently
not conforming to the definition of savings deposits as
contained in the Board's regulations, will be brought
into conformity with the regulations.
"When the bank previously applied for member8114, there were submitted, in addition to the organization papers accompanying the present application,
copies of documents relating to an increase of the
authorized capital of the bank from 4p225,000
to $500,000
and, it appears therefrom that there may have been other
"tlon taken relating to changes in the authorized
capital and not covered by the documents submitted with




1024
8/18/39

-6-

"either application. While, in view of the action taken
by the bank's board of directors on June 28, 1939, and
Proposed to be taken by its shareholders on September 13,
1939, and with the understanding that the capital of the
bank has never been actually increased to an amount in exce83 of 472,700, it is believed unnecessary to request
the submission
of copies of the missing documents relating
t° changes in the authorized capital, it will be appreciated if you will obtain advice from the State authorities with respect to whether there have been any other
smendalents to the bank's charter not covered by the doeuIllents submitted and, if so, furnish copies thereof."
Letter to the board of directors of the "Bank of Elizabeth",
Elizabeth, Pennsylvania, stating that, subject to conditions of membership numbered
1 to 3 contained in the Board's Regulation H and the
fc)110I
'
li ng special condition, the Board approves the bank's application
for

membership in the Federal Reserve System and for the appropriate

eiblc)1 flt of stock in the Federal Reserve Bank of Cleveland:
"4. Such bank shall make adequate provision for depreciation in its banking house and furniture and
fixtures."
Approved unanimously, for transmission through the Federal Reserve Bank of
Cleveland.
Letter to Mr. Sihler, Assistant Vice President of the Federal
115erve Bank of
Chicago, reading as follows:
"Reference is made to your letter of July 27,
1939
, regarding the inqairy of the Board of Trade of
t
he City of
Chicago, a national securities exchange,
with respect to section 4(f)(2) of Regulation T.
"thile not entirely clear, it appears that the
--irY raises a question regarding the status of a




1.025
8/18/39
-7"capital contribution loan originally complying with
Clause (A) of section 4(f)(2) of the regulation, but
Which ceases to comply with that clause. The views of
the Board with respect to this question have been incorporated in the attached statement for the press
regarding 'Capital Contribution Loans Between Members
Of a National Securities Exchange', which you will note,
however, is not to be released until the date specified
on the statement.
"You will note that, although the borrower does
not hold a membership in the Board of Trade, the ruling
states, in effect, that he is a 'member' of that exchange.
This statement is made because the borrower's firm is a
member firm of the Board of Trade and, as pointed out at
Page 90 of the February 1938 Federal Reserve Bulletin
and Page 1042 of the December 1938 Federal Reserve
Bulletin, the definition stated in section 3(a) of the
Securities Exchange Act and incorporated in section 2(a)
of the regulation provides that if any partner of a
brokerage firm holds a membership in a national securities exchange every partner of the firm is a 'member' of
the exchange for the purposes of the regulation.
"It seems possible that a question as to the
Possible application of section 4(f) (8) may be involved.
Accordingly, certain comments regarding this section are
included in the statement. As there indicated, the
instances where
such a loan could qualify under section
4(11(8) are rather rare, and the point is mentioned
merely for such consideration, if any, as it may seem to
"Leserve in the light of all the facts of the particular
0 8e it

Approved unanimously, together with
a letter to the Presidents of all Federal
Reserve Banks, reading as follows:
"There is attached a copy of a ruling which will
lp published in the Federal Reserve Bulletin regarding
Capital Contribution Loans Between Members of a NationEll Securities Exchange'.
"It will be noted that the attached ruling is in
1e form of a statement for the press which, however,
la not to be released until the time specified on the
statement."

9




1026
81181V39

-8Letter to the Presidents of all Federal Reserve banks,

1'641:ling as follows:
"There is enclosed for your information a summary
Of the bank relations reports submitted by the Federal
Reserve banks for the month of July 1939 in response to
the Board's letter of August 25, 1936 (X-9680).
"In reply to the Board's inquiry made last month
as to whether the banks considered the summaries of
sufficient value to warrant their continuance and, if
80, whether they mould prefer them in shortened form or
letters have been received from ten of the Federal
Reserve banks. All but one express the desire to have
the reports continued. One bank doubts their value and
suggests that they be discontinued - at least temporarily
until a need of them becomes apparent. A majority of the
banks seemed to prefer having the summary in brief form,
though it was pointed out by others that shortening the
suMmarY tended to make it lose much of its value.
"In view of the foregoing, it has been decided to
continue the preparation and distribution of the
s
ummaries."
Approved unanimously.
Letter to Mr. Walter Lichtenstein, Secretary of the Federal
Advisory

Council, prepared in accordance with the action taken at the

nleSt1143 of the Board on August 16, 1939, and reading as follows:
"Receipt is acknowledged of the letter sent to
the Board by your secretary under date of August 14,
1939, advising that the next meeting of the Federal
Advisory Council will be held in Washington on
October 8, 9, and 10, 1939, And requesting a list of
!he topics which the Board of Governors desires the
'°nncil to discuss at that time.
"In your letter of Tune 7, 1939, you stated
that the Council did not contemplate publishing at
that time the memorandum with respect to the easy
111048Y policy which was presented to the Board of Goverra at the meeting with the Council on June 6 and that
he Council planned to take the matter up for further
e°118ideration at its September meeting. The Board will




1_027
8/18/39

-9-

"be prepared to discuss this subject with the Council
at the next meeting and believes that it would be
desirable to devote the greater part of the time of
the joint meeting of the Board and the Council on
October 10 to a detailed consideration of the various
aspects of the subject.
"We shall be pleased to make the usual arrangeAlents for a luncheon for the Council on Monday,
October




Approved unanimously.
Thereupon the meeting adjourned.

-ecretary.