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1.165 A meeting of the Board of Governors of the Federal Reserve em was held in Washington on Friday, August 20, 1937, at 2:Z0 p.m. PRESENT: Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak Davis Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary Consideration was given to each of the matters hereinafter rererrea t° and the action stated with respect thereto was taken by the 130Eird: The minutes of the meeting of the Board of Governors of the Peder al Reserve System held on August 19, 1937, were approved unani- Telegrams to Mr. Sanford, Assistant Secretary of the Federal ilese1"7.e Bank of New York, Mr. Austin, Chairman of the Federal Reserve 1461'6c of Ph iladelphia, and Mr. Taylor, Cashier of the Federal Reserve 1114k Of C leveland, stating that the Board approves the establishment Witho„ change by the New York bank on August 19, 1937, and by the 11111"elPhia and Cleveland banks today, of the rates of discount and 1311rehase in their existing schedules. Approved unanimously. There was presented a telegram dated August 20, 1937, from -ewt°111 President of the Federal Reserve Bank of Atlanta, statth " , for the reasons set forth in the telegram, the executive c°111allttee of the bank, under authority of the board of directors, had 1166 8/20/37 -2to establish a rate of 1 Paper percent on rediscounts of eligible for member banks and advances to member banks under the provi- sions 0, 1 Sections 13 and 13a of the Federal Reserve Act and a rate of 2 palace nu on advances under Section 10(b) of the Federal Reserve Act, ettecti ve upon approval by the Board of Governors. The rates fixed by the executive committee of the Federal Reserve Bank of Atlanta were approved unanimously, effective August 21, 1937. There was also presented a telegram dated August 20, 1937, rr, vra lair. Young, Vice President of the Federal Reserve Bank of Chicago, stating that, for the reasons set forth in the telegram, the executive c()Tlittee of the bank, under authority of tae board of directors, had l'oted "0 establish a rate of 11- percent on rediscounts of eligible paper N, eillber banks and advances to member banks under the provisions of --13 and 13a of the Federal Reserve Act, effective the first busize„ following that on which approved by the Board of Governors. The rate fixed by the executive committee of the Federal Reserve Bank of Chicago was approved unanimously, effective August 21, 1937. In connection with the above, the following statement for the Areaa ' setting forth the reasons for the Board's actions, was approved 411111113101.1siy: th 7Phe Board of Governors today approved the action of e d Chi irectors of the Federal Reserve Banks at Atlanta and ti engo in reducing the discount rate from 2% to 14%, effecti've in the 6th and 7th Federal Reserve Districts, respecVelY, on August 21, 1937. 1167 8/20/37 "The Board's approval was based upon the view that the re.11cti0n of discount rates at this time would assist in carry' TIC out the System's policy of monetary ease and make Federal eserve bank credit readily available to member banks for the " commodation of commerce, business end agriculture, without ancouraing member banks to borrow outside of their districts ?r to liquidate their portfolios in order to be in a position .to Meet the needs of present or prospective borrowers. "The reduction in discount rates, which have had little Or n° Practical effect during the period when excess reserves were ebnormally large and widely distributed throughout the Ystem, brings the rates into closer relation with the interest rate structure generally prevailing, and affords to Femler banks the benefit of rates, on advances made by the ,ederal Reserve bank, which are in line with those available trl the money market. During the extended period when ex.et,e_ss reserves of the banking system were between two and ursee billions of dollars, the occasion did not arise except in rare instances for member banks to borrow from the 17eral Reserve banks, and the discount rates were accordinoperative as a practical matter. a result of the continued progress of the recovery "As Inov demands of agriculture, industry and commerce for accommodation have steadily increased and at the present ti ,!te are augmented by seasonal requirements, particularly ' lo'h relation to crop movements. While excess reserves, folm wing the action of the Board in increasing reserve requiret4t5, remain at an unusually high level of approximately ' 'ai 0,000,000 at present for the System as a whole, they are i 8tributed preponderantly among the country banks and not Xi the money centers. The reduction of the discount rates sh the two large agricultural districts of Atlanta and Chicago (311-1d serve to assist the member banks to utilize credit direct( ; 14"ailable in these districts in order to meet banking re' j I'aents in connection with crop movements and business needs. It is the Board's view, therefore, that at this time the Eederal Reserve System can best discharge its public reìrnsibility and promote the continuance of recovery by making ertrssible for member banks to obtain accommodation from Fedplo Reserve banks at rates which will encourage them to emir funds to meet the needs of agriculture, industry emmerce.” Ch(tirmen Eccles stated that if, during his absence from Washington, °r to t he remaining Federal reserve banks, which now have in effect a poy on rediscounts of eligible paper for member banks and advances N41 : er banks under the provisions of sections 13 and 13a of the Federal e Act, voted to reduce such rate to 1;11;L, he would be in favor of N)t,rovEt 1 by the Board of the reduced rate. 1168 e/20/3? -A- Memorandum dated August 13, 1937, from Mr. Thomas, Assistant Direct°r of the Division of Research and Statistics, recommending that Miss No v•Elder, Chief Draftsman in the Division, be granted an additional ay.. ' of absence with pay on account of illness for a period of thirty days. eApproved unanimously. There was submitted a recommendation from Messrs. Spurney and ,I,cint that Miss Maple T. Young, who had been selected in accordance th e authority granted by the Board on July 12, 1937, and who had 1)(eda satisfactory physical examination, be appointed as a charwoman 14 th e Board's new building, with salary at the rate of 50V per hour, efrective 88 of August 20, 1937. Approved unanimously. Letter to Honorable A. Harry Moore, United States Senate, readfollows: "Reference is made to your letter of July 31, and to the G inclosed copy of a letter dated July 29, 1937, from Mr. trrge E. Brunner, Mayor of Camden, New Jersey, regarding ig candidacy of Mr. Herbert McAdams, an employee of the yeaerel Reserve Bank of Philadelphia, for the position of *laY-°r of the Borough of Clementon, New jersey. "Soon after the Federal Reserve System was established, the 4, 441erd adopted a resolution which provided that persons ulu'ing political or public office in the service of the w ted States, or of any State, territory, county, district, 484tical subdivision, or municipality thereof, or acting 81 Iflembers of political party committees, could not con; es:tent,_ -LY with the spirit and underlying principles of the eraerel Reserve Act serve as directors or officers of FedReel reserve banks. In 1935 the Board advised the Federal theerve Bank of Philadelphia in connection with another case t While the resolution related specifically to directors officers it felt that the principle applied also to em°Yeee of the Federal reserve banks. "The Board is of the opinion that officers and employees erel reserve banks should feel free to render such publie Dom!ervice of a nonpolitical character as they may be in a -"ion to perform without interference with their duties at ej or Fed 1169 8/20/37 -5- "the bank, but the Board has consistently ruled that whenever a position, or the appointment or election thereto, was i.ot free from party politics or involved political activity la order to obtain or retain the position, an officer, directOr or employee of a Federal reserve bank should not occupy tn8 Position while retaining his connection with the bank. "It appears that the position of Mayor of the Borough Of Clementon is clearly of a type which is within both the ePirit and the letter of the Board's resolution and that the Proval of exceptions to the general rule in cases :moll as the Present one would inevitably lead to the practical nullilication of the resolution." ? Approved unanimously, together with a letter to Mr. Sinclair, President of the Federal Reserve Bank of Philadelphia, reading as follows: "Reference is made to your letter of August 3, 1937, addressed to Chairman Eccles, with respect to the candidacy : f I Mr. Herbert McAdams, an employee of your bank, for reeetion as Mayor of the Borough of Clementon, New Jersey. "Mr. Brunner, Mayor of Camden, New Jersey, addressed a lett er to Senator Moore which was similar to that written by h alM under date of July 29, 1937, to Senator Smathers, and under Of July 31 Senator Moore forwarded to the Board a copy hlr. Brunner's letter to him and asked that favorable con' t deration be given to the reauest that Mr. McAdams be permitalcl to stand for reelection as Mayor of Clementon. There is m' o 'tached a copy of the letter being sent today to Senator in reply to his communication, and, if you should wish do so, the Board would interpose no objection to your send14j1 eoPY thereof to Senator Smathers with your reply to the er which he addressed to your bank under date of July 30, 1937,n eter Telegram to Mr. Thomas B. McCabe, President, Scott Paper Company, Pennsylvania, reading as follows: tor "Board of Governors has appointed you class 'C' direcI5or or Federal Reserve Bank of Philadelphia for unexpired a l'tlon of term ending December 31, 1939. Please wire formal ceePtence collect." Approved unanimously. Telegram to Mr. Clarence Roberts, Editor, The Farmer Stockman, 1_170 814V37 -6City, Oklahoma, reading as follows: ho "Board of Governors has appointed you director of Oklama City branch of Federal Reserve Bank of Kansas City for unexpired portion of term ending December 31, 1938. Please wire acceptance collect." Approved unanimously. Letter to Mr. McLarin, Vice President of the Federal Reserve 114141( or Atlanta, stating that the Board approves the changes in the Personnel classification plans of the Birminghekm, Jacksonville, Nash111e end New Orleans branches, and the Havana Agency, of the Federal Re8erve Bank of Atlanta, as requested in his letter of August 14, 1937, t°131*°71.40 for increases in the maximum salaries of a total of twelve kssitiens. Approved unanimously. Letter to Mr. Burke, Chairman of the Federal Reserve Bank of 4evelend, reading as follows: dee "The Board of Governors of the Federal Reserve System t_ ided some time ago that surveys should be made of the nk Examination and Auditing Departments at all of the iledeM1 Reserve Banks. There is attached a copy of a reR of the survey of the Audit Department of the Federal 5 4erve Bank of Cleveland recently conducted by the Board's i_eminers Jones and Cagle. An additional copy of the report inclosed for President Fleming. "While the survey indicates that the auditing function ;Le the Federal Reserve Bank of Cleveland in general is being st"ormed adequately and in substantial conformity with the Fe ! nderds recommended by the Conference of Auditors of the ' o el'el Reserve Banks held in Washington last fall, it inttl!Eltes several exceptions to the frequency and scope of uilte which merit consideration. it will be appreciated if you and the auditing com'ee of your board of directors and President Fleming te'u- review this report of survey and give the Board the Ilefit of your reactions to the exceptions referred to r tin 8/20/37 -7- "above and any other statements or conclusions concerning Which you would like to express your views. . "The footnote of the letter transmitting the recommendations of the Conference of Auditors to Mr. George L. Harrison, Chairman of the Conference of Presidents of the Federal Reserve Banks, called attention to the confidential nature of the material contained in that report and other information relative to the auditing activities at the Federal Reserve 8!nks. As the inclosed report refers frequently to the T'ditors' recommendations and also contains other informa1011 of a confidential nature concerning the activities of ' -?he Audit Department of your bank, it will be appreciated lf the report itself is not made available to the bank's em' °Yees end the officers directly in charge of the operating "Partments. Of course, the Board sees no objection to the IlePort, or parts thereof, being submitted to, or discussed with) Your directors and such of the bank's officers as you and Fleming deem advisable." 1 V Approved unanimously. Letter to Mr. Sproul, First Vice President of the Federal Reserve laikk ()Dv New York, reading as follows: r, "Receipt is acknowledged of your letter of August 13, D9 '7, suggesting that since the revised agreements with °reign central banks will not become effective immediately and since you will want to continue to make such purchases ' aor the account of foreign correspondents under existing eements pending the time when the revised agreements ,hall became effective, the wording of the authority granted "Ln o the Board's letter of August 9, 1937 be changed to include atrations during the interim period. In response, you are il"ased that, in accordance with your suggestion, the author'Y granted in the Board's letter of August 9, 1937 is extended to include the oeriod during which the revised agreeients are being made effective. "In this connection, it will be appreciated if you will aernish the Board with copies of the new form of agreement r., lf and when each foreign central bank concerned signieles its acceptance of the changed terms and conditions orerning its accounts with your bank, together with copies the correspondence pertaining thereto." p Approved unanimously. 1172 8/%3/37 Memorandum dated August 17, 1937, from Mr. Morrill recommending the loub lication in the September issue of the Federal Reserve Bulletin, 11144r the following title Find subtitle, of the sumary submitted with tliellierl°rarldum of the report of the Federal reserve committee on accept Ellee Practice submitted by Mr. Burgess, Vice President of the Federal R eserve Bank of New York: "ACcaDTANcE PRACEICE" "The material published below summarizes a report of the Federal Reserve committee on acceptance practice made to the Board of Governors of the Federal Reserve System and to the Conference of Presidents of Federal Reserve Banks." Approved unanimously. Memorandum dated August 19, 1937, from Mr. Owens, Assistant Nlias el) recznmendiag that there be published in the September issue °r th ederal Reserve Bulletin a statement 1.1 the form submitted with the ni elil l'endum containing the text of Regulation M, Foreign Branches '31' Nett °Ilea Banks and of Corporations Organized under the Provisions Or Secti -on 25(a) of the Federal Reserve Act, which was adopted by the un AuEust 14, 1937. Approved unanimously. Mr. Morrill submitted a recommendation, which had been approved bYtl, -4e 'Personnel Committee, that the Board authorize the purchase of lliflg equipment, sprinkler heads, hose, pails, brushes, sersteP1 wool, and the moving of boxes of stored publications llowlocated in the Treasury Building and the Auditors' Building to the -.98W building, as listed in purchase orders Nos. 1906, 1907, 9 1934, 1936, 1937, 1946, 1948, 1949, 1950 and 1951, at a total cq' 4886.68. Approved unanimously. Thereupon the meeting adjourned. tylet-kkj2H7 ecretary. Chairman.
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