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1552 A meeting of the Board of Governors of the Federal Reserve SYstem was held in Washington on Thursday, August 20, 1936, at 11:00 rp. PRESENT: Mr. Mr. Mr. Mr. Mr. Ransom, Vice Chairman Broderick Szymczak McKee Davis Mr. Morrill, Secretary Mr. Carpenter, Assistant Secretary Consideration was given to each of the matters hereinafter referred to and the action stated with respect thereto was taken by the 130ard: The minutes of the meeting of the Board of Governors of the Federal Reserve System held on August 19, 1936, were approved unanimously. Telegram to Mr. Moore, Chairman of the Federal Reserve Bank of Sat Francisco, stating that the Board approves the establishment withoUt change by the bank today of the rates of discount and purchase in itS existing schedule. Approved unanimously. Telegram to Mr. Austin, Chairman of the Federal Reserve Bank Of Philadelphia, referring to his telegram of August 19, 1936, in which he advised that because of the lack of a quorum a meeting of the board of directors of the bank was not held on that date and no action was taken on the bank's existing schedule of rates of discount and purchase. The proposed telegram called attention to the Board's letter of January 1936 (X-9427), and requested advice as to what steps had been taken 1553 8/20/36 -2- to establish rates of discount as required by Section 14(d) of the Federal Reserve Act. Approved unanimously. Letter to Mr. Harrison, President of the Federal Reserve Bank of New York, prepared pursuant to the action taken at the meeting of the Board on August 19, 1936, and reading as follows: "Reference is made to your letters of July 31 and August 18, 1936, with respect to the action of the directors of your bank in fixing, subject to the approval of the Board of Governors, a salary for Mr. Sailer for the period beginning September 1, 1936, and ending December 31, 1956, at the rate of $30,000 per annum and to the discussion of this matter at the meeting of the Board on August 19, 1936, when you were present. "The Board has considered this matter carefully in view of your statement of the desire of your board of directors that Mr. Sailer be retained for an additional period up to December 31, 1936, and of your need for his assistance during this period in working out the plans of your bank for reorganization of personnel and functions and effecting economies in its operation because of the fact that he has been the officer of your bank directly charged with responsibility for administrative functions and has an intimate knowledge of the details of organization, budgets and expenditures of the bank which you feel will be especially helpful to you as President of the bank. "The Board has requested me to advise you that in view of the special circumstances thus presented for consideration it approves the payment of salary at the rate of M,000 per annum to Mr. Sailer for the additional period covered by the action of your directors beginning September 1 and ending not later than December 31, 1956, with the definite understanding that he will retire on or before the latter date, that there will be no further request for approval of any compensation for him, and that this action is final." Approved unanimously. Memorandum dated August 14, 1936, from Mr. Broderick submitting 1554 8/20/36 -3- the report received from the Federal Reserve Bank of Atlanta covering the survey made by the bank of its operations and organization pursuant to the Board's letter of March 25, 19361 X-9532, as well as a draft of a letter to President Newton, reading as follows. The memoand letter have been previously circulated among the members of the Board for their consideration: "The Board has reviewed the report of the survey made of the operations of the Federal Reserve Bank of Atlanta, a copy of which was recently transmitted to the Board. "In the Board's letter of March 25, 1936, it was stated that the Board had in mind a procedure looking toward the placing of the chairmanship largely upon an honorary basis with the thought that the ministerial duties with respect to the issuance of Federal Reserve notes and the holding in custody of collateral therefor would actually be be Performed by Assistant Federal Reserve agents who would comexperienced in such work and who would receive salaries asbe to bilities mensurate with the duties and responsi a sumed. In this connection, there is attached a copy of with Dallas, letter to. Mr. Walsh, Federal Reserve Agent at respect to the duties to be performed by him as Chairman and Federal Reserve agent on an honorary basis. The Board would expect the principles and procedure set forth in the Reletter to Chairman Walsh to be followed at all Federal serve banks. that "The Board's letter of March 251 19361 also stated of transfer the in the procedure contemplated would result re heretofo work, the bank examination work and the research departbanking the handled by the Federal Reserve agents, to functions ments with the understanding, however, that such supergeneral the would, as heretofore, be conducted under vision of the Board of Governors. the conditions "In order to acquaint you more fully with ion and reexaminat under which it is contemplated that the condithese banks, search work will be transferred to the With respect terms. tions are set forth below in general to the examination function, the plan contemplates that: Federal 1. All appointments of examiners at the to the subject be Reserve banks will continue to 1555 8/20/36 -4- "approval of the Board of Governors. 2. The examination department will continue as a separate unit. 3. The examination department will be under the supervision of a Vice President to be designated by the bank after consultation with the Board. 4. The budget for this function will be subject to advance approval of the Board of Governors. "The Vice President in charge of examinations will be designated as an examiner for the Federal reserve bank and the Board would expect that official to be responsible directly to the president of the bank and not to another Vice President or other officer. The Board notes with approval the proposed plan to elect Assistant Federal Reserve Agent Clark a Vice President and to place the bank examination department under his supervision. It is understood that your directors propose that Mr. Clark as Vice President will continue to receive a salary at the rate of A7,500 per annum and the Board approves a salary for Mr. Clark as Vice President at that rate for the balance of the current year as and when fixed by your directors. The Board approves also the designation of Mr. Clark as an examiner for the Federal Reserve Bank of Atlanta. TiThile it is expected that the President will keep himself deinformed of the activities and policies of the examination than other partment, it is contemplated that correspondence, that relating to policy matters, would be carried on by the in charge Board and its staff directly with the Vice President of examinations. This procedure would be similar to that about generally followed with respect to other correspondence routine operating matters. that "After the transfer is made the Board will expect work tion examina the present policy of decentralization of continue, under the ultimate responsibility of the Board will ReFederal the by ed that the examination work will be conduct Board, the by adopted serve banks under the general policies work of the and that general supervision of the examination the Board's by ed exercis be to System as a whole will continue Division of Examinations. department has "In the past the Federal Reserve agent's by the various made tions examina had custody of the reports of to certain le availab made been agencies, which reports have es in ted employe designa to and certain officers of the bank the of bank. ents departm the Credit and Discount and other 1556 8/20/36 -5- "When the bank examination department is transferred to the Federal Reserve bank instructions should be issued providing that the bank examination department will continue to have custody of reports of examinations, and proper safeguards should be established in order to preserve the confidential character of such information and to insure that the reports will be made available to officers or employees of other departments only when justified in the performance of their duties. "The principles to govern the operations of the research and statistical organizations after their transfer from the agent's department to the bank are outlined in the following paragraphs which supersede those transmitted with the Board's letter of August 11, 1926, X-4646. "Scope and purpose The purpose of the work of the research and statistical divisions of the Federal Reserve banks is to collect and digest information bearing on the problems with which the Federal Reserve System is confronted, either as a matter of current operation or as the basis of Federal Reserve policies. "These divisions should provide a necessary service to the officials of the banks and to the Board of Governors of the Federal Reserve System and should also be useful to the general public. Owing to the joint usefulness of these services the Board expects its Division of Research and Statistics to keep in close touch with the activities of similar departments at the Reserve banks, and expects full cooperation in the System's work in this field. "When a new project in the research and statistical field is in contemplation at a Reserve bank it should be worked out in cooperation with the Board's Director of Research and Statistics, except as to projects of small scope which involve no considerable expense. From time to time the Director of the Board's Division of Research and Statistics may find it necessary to request_the cooperation of one or more Federal Reserve banks on research studies. "Publications The Board wishes to continue the present practice under which all publications of the Federal Reserve banks dealing with matters of more than local interest are submitted to the Board of Governors and issued only with the approval of the Board. "Budget and personnel The budget of the statistical and analytical function should continue to be subject to the advance approval of the Board and all 1557 8/20/36 -6- ”appointments of persons to supervisory positions in the statistical and analytical function should be subject to the approval of the Board. The Board would expect the person in charge of the research and statistical functions to report directly to the President of the bank and not to a Vice President or other officer. "It is further contemplated that any work heretofore handled by the Federal Reserve agents in connection with administration of the Securities Exchange Act of 1954 will also be transferred to the banking departments with the understanding that this work, like the examination work and the research work, will, as heretofore, be conducted under the general supervision of the Board of Governors. The conditions of transfer contemplated by the plan do not include any specifications as to whether the reserve bank shall have a separate unit for doing this work, as this would appear at present to be necessary at only a few of the Federal Reserve banks, but it is expected that all appointments or assignments of persons to supervisory positions in handling this work at each Federal Reserve bank will be subject to the approval of the Board of Governors. "Your proposed recommendation to the directors of the bank as to changes in salaries of officers as of January 1, 1937, has been noted. Any recommendations made by your directors in this connection will be considered by the Board when the salaries fixed for the officers of other Federal Reserve banks are considered at the first of the year. "With respect to the statutory duties of the Federal Beserve agent, there is attached a copy of a letter being addressed to Mr. Martin today in connection with the appointment of an Assistant Federal Reserve agent, and an Alternate Assistant Federal Reserve agent at the bank. "It is not expected that the Assistant Federal Reserve agent will be charged with responsibility under section 30 of the Banking Act of 1933. The Vice President in charge of examinations should be charged with the responsibility of keeping the Federal Reserve agent advised of violations of law by directors and officers of State member banks and of unsound banking practices in order to enable the Federal Reserve agent to comply with the requirements of that section regarding the issuance of warnings to the directors and officers involved and the certification of facts in such cases to the Board of Governors. "Effective when Mr. McCravey has executed the customary bond as Assistant Federal Reserve Agent in accordance with the Board's separate letter of this date to Mr. Martin, or as soon 1558 8/20/36 -7- "thereafter as is convenient, the Board authorized the transfer to the bank, in conformity with this letter, of the nonstatutory duties previously performed in the Agent's department. Please advise the Board by wire, for its records, the date upon which the transfer is effected." The proposed letter was approved unanimously together with the letter to Federal Reserve Agent Martin referred to therein which read as follows: "Referring to your letter of August 17, 1936, the Board approves the appointment of Mr. J. R. McCravey, Jr. as Assistant Federal Reserve Agent at the Federal Reserve Bank of Atlanta at a salary of $4,000 per annum, effective as of the date the non-statutory functions of the Federal Reserve Agent are transferred to the bank. It is understood that before entering upon his new duties, Mr. McCravey will execute the 0 usual oath of office and surety bond in the amount of $50,00 see to l Counse and that such bond will be examined by your on that its execution complies fully with the rules printed of , should bond the reverse side of the bond, Form 182. The apfor Board the to course, promptly thereafter be forwarded proval. an "It is assumed that you will wish to appoint also abthe in act Alternate Assistant Federal Reserve Agent to is Board sence of the Assistant Federal Reserve Agent. The posithis prepared to approve the appointment of someone for be made. tion upon your recommendation that such appointment ant Assist The primary duties of the employees designated as with tion connec Federal Reserve Agent and Alternate will be in the and the issuance and retirement of Federal Reserve notes such in d engage not when and or, custody of collateral theref Reserve Agent work, they may be designated by the Federal m such other work perfor to with the approval of the President their duties as with istent in the bank as will not be incons Assistant FedAssistant Federal Reserve Agent and Alternate eral Reserve Agent, respectively." a In connection with the above matter Fedletter to Mr. Newton, President of the folas g readin a, Atlant of eral Reserve Bank lows, was also approved: chart of the "It has been noted from the organization ed that Vice propos is it that a Atlant of Federal Reserve Bank 1559 8/20/36 "President Conniff will have general supervision of the Fiscal Agency and Safe-keeping Departments including purchases and sales of Government securities for the account of member banks, while Assistant Cashier Schuessler, who it is understood is Mr. Conniff's brother-in-law, will have immediate supervision of such functions. "The Board feels that, as a general policy, such a close relationship between an officer in immediate charge of work of the kind referred to and his supervising officer is undesirable, and that a change in the arrangement would be advisable. The Board is sure that you will recognize the wisdom of such a change, and it will appreciate receiving advice as to the action taken to bring it about. "Of course this suggestion does not reflect in any way Upon either of the officers involved, nor does the Board question in any way their honesty or integrity or their devotion to their duties and to the bank, and it is requested that when you advise them of the reason for the change you make this point clear to them." Letter to Mr. Walsh, Federal Reserve Agent at the Federal Reserve Bank of Dallas, reading as follows: your "In accordance with the recommendation contained in apthe s approve letter of August 10, the Board of Governors pointment of Mr. I. J. Reed as Acting Assistant Federal ReBank serve Agent at the Houston Branch of the Federal Reserve appoint of Dallas, with the understanding that before the in n ment becomes effective Mr. Reed will resign his positio the Auditing Department of the bank and thereafter will be responsible to retained on the Agent's payroll and be solely him. In addition to performing duties in the Agent's Departl of the ment Mr. Reed may be detailed by you, with the approva inconbe not shall President, to perform such other work as Reserve sistent with his duties as Acting Assistant Federal in the Reed Mr. for Agent. Approval of the salary proposed AsActing of position the new position is not necessary, as peryour in for provided sistant Federal Reserve Agent is to Mr. sonnel classification plan and the salary to be paid . Reed is less than the maximum fixed for that position nt Assista Acting as "Before entering upon his duties the usual oath execute Federal Reserve Agent, Mr. Reed should , 40,000 and such of amount of office and surety bond in the that it combond should be examined by your counsel to see reverse side of the the on plies fully with the rules printed to promptly the Board d bond form 182 and thereafter forwarde 1560 8/20/36 -9- "of Governors for approval. "Please advise if there is any objection to the cancellation of the bond of Mr. D. S. Lawhon as Acting Assistant Federal Reserve Agent as of the close of August 31, 1936, on which date his services will be terminated. In this connection, your letter of August 13, 1936, inclosing copies of your correspondence with Congressman Maverick with respect to the retirement of Mr. Lawhon, has been received." Approved unanimously. Memorandum dated August 17, 1936, from Mr. Vest, Assistant General Counsel, recommending that there be published in the next issue of the Federal Reserve Bulletin, statements in the form attached to the memorandum with respect to the Board's recent rulings on the following subjects: Report by Executive Officer of a Member Bank of His Indebtedness Evidenced by a Note Discounted by Another Bank. Report by Executive Officer of a Member Bank of Indebtedness to Another Bank in its Capacity as Trustee. Deposit of Collateral with Trust Department for Use of Trust Funds in Conduct of Bank's Business. National Bank Not Permitted to Invest Trust Funds in Obligations Executed by an Officer of such Rank as a Receiver. Record of Pending Litigation Required by Board's Regulation F. Approved unanimously. Letter to Mr. Evans, Assistant Vice President of the Federal Re8arve Bank of Dallas, reading as follows: "This will acknowledge receipt of your letter of August 10, 1936, returning the file of correspondence which was loaned to President McKinney in connection with certain charges 1561 8/20/36 -10- "made by banks in Austin, Texas, for cashing out-of-town checks. It is noted that you and President McKinney, before he left on his vacation, had an informal conference on this subject with representatives of the Austin Clearing House Association. "The Board has received a letter dated August 5, 1936, from Mr. Roderick H. Riley, who first presented this matter to the Board in a letter dated October 23, 1935. A copy of the Board's reply to Mr. Riley's latest letter is inclosed herewith for your information. Mr. Riley has advised that his previous inquiry was not based on his experience as a non-depositor availing of a bank's services but as a customer of an Austin store which passed on to him the 40 charge it bore when his out-of-town check was accepted by its bank for collection. You will observe that the Board has stated in its letter to Mr. Riley that the charge made of him was not a charge made by a member bank of the Federal Reserve System and a charge made by a store is not a matter with respect to which the Board of Governors has any jurisdiction under the law. "In view of the advice contained in Mr. Riley's latest letter to the Board, there is now before the Board no complaint and no allegation of violation of law made by any interested party with respect to collection charges imposed by member banks in Austin, Texas. Moreover, the record is not altogether clear as to just what questions might have been involved in the matter on the basis of Mr. Riley's original inquiry of last October. The Board feels that it is undesirable as a matter of policy for it to undertake to pass upon questions of a hypothetical or abstract character or questions with respect to which clear and complete information is not before the Board. In this case, in the absence of a complaint presented by any person directly interested in the determination of the matter or of a statement of an examiner or other official indicating a violation of law, there appears to be no occasion for the Board of Governors to undertake at this time to make any definite ruling on any of the questions which have been under consideration in connection with the matter." Approved unanimously, together with a letter to Mr. Roderick H. Riley, Austin, Texas, reading as follows: "This will acknowledge receipt of your letter of August 1562 8/20/36 -11- 1936, referring to your letter of October 23, 1935, and Board's reply thereto dated November 7, 1935, concerning amount which you were required to pay in connection with collection of a check. "You now advise that your inquiry was based not on your experience as a non-depositor availing of a bank's services but as a customer of an Austin store which passed on to you the lit charge it bore when your out-of-town check was accepted by Its bank for collection. It thus appears that your inquiry arose out of a transaction between yourself and a store and not out of a transaction between yourself and a bank. The charge made of you, therefore, was not a charge made by a member bank of the Federal Reserve System and a charge made by a store is not a matter with respect to which the Board of Governors has any jurisdiction under the law." "5, the the the Letter to the presidents of all Federal reserve banks, reading as follows: ng and "Under date of August 13 the Bureau of Engravi Federal RePrinting advised the Board of Governors of the for printcharge the 1936 1, July serve System that effective t93.50 ing Federal Reserve notes was increased from 86 to for 1,000 sheets of 12 notes each. , is due "This increase in printing costs, it is stated to the and leave to an increase from 15 to 26 days in annual rate the at extension of the 40-hour week and of sick leave Enof Bureau of 1-1/4 days a month to all employees of the graving and Printing." Approved unanimously. Fiscal Agent, Memorandum dated July 31, 1936, from Mr. Foulk, ograph at a net cost l'ecommending the purchase of a new check protect by the Board of the Or 1384.75. The memorandum stated that approval the reason that no proviPurchase of a new machine was necessary for for the Fiscal Agent's sion for such purchase was made in the budget (nfice for the year 1936. Approved unanimously.
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