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1182 A meeting of the Board of Governors of the Federal Reserve System was held in Washington on Tuesday, August 24, 1937, at 11:00 a.m. PRESENT: Mr. Ransom, Vice Chairmen Mr. Szymczak Mr. McKee Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary Mr. Thurston, Special Assistant to the Chairman Mr. Wyatt, General Counsel ALSO PRESENT: Mr. J. J. Thomas, Chairman and Federal Reserve Agent at the Federal Reserve Bank of Kansas City Mr. Thomas stated that at the meeting of the board of directors the -eueral Reserve Bank of Kansas City on August 5, 1937, there Were Presented the letters addressed by the Board of Governors to him date of July 14, as Chairman of the board of directors of the bikk, slid under date of July 29, to President Hamilton, with respect to th e Provisions of the by-laws of the bank regarding the composition 8114 it& • -etinEe of the administrative and executive committees of the bank, El(1 t 4- the board of directors had requested him to visit Washington the - Purpose of discussing the matter with the Board and reconciling the vi "12 of the board of directors and the views of the Board of Gayas expressed in its letters to Messrs. Thomas and Hamilton. Mr. Thomas referred to the organization of the executive cam44ttee Prior to the creation of the administrative committee in January St 4" ated that provision for daily meetings of the administrative coinwhich were in lieu of daily meetings of the executive committee, ecie in order to afford the directors an opportunity to be at the 1183 8/4/37 betk a sufficiert length of time each year to become thoroughly sc- (141ated with its operations. Fe also said that the directors felt that • they Could not become sufficiently familiar with the work of the 131- by attendance at the regular meetings of the board of directors to 41"le them to discharge the responsibility placed upon them by the Fedel R• eserve Act to supervise and control the affairs of the bank. He 443 referred to the extended territory covered by the Tenth Federal 11"erlie District and to the practice of selecting directors representao• f different parts of the district which resulted in some directors tel ne 4. considerable distances to attend meetings with accompanying beater traveling expenses. Mr. Thomas reed, and filed with the Board, a digest of the 1)r"eeclings of meetings of the administrative committee of the Kansas eitYb ilk from August 4 to 17, 1937, as evidencing a need for daily bleetit'e8 of the committee. Mr. Ransom stated that it appeared that 13r"ti " 11Y all of the actions listed in the digest could have been liehdaed by the officers of the bank and presented for ratification at t4reElliar meetings of the board of directors. Mr. Thomas said that the board of directors of every large banking institution has a camrtlittee which meets at the bank almost daily to handle important matters calling for attention and that the directors of the Federal ReEtink of Kansas City felt that their responsibility called for qtallar meetings at the reserve bank. The members of the Board pointed clt however, that the daily meetings of committees of commercial banks 1184 81E4/37 8re usually held for the purpose of passing on applications for credit ellIcill°t for the purpose of operating the bank, that the Federal reserve blik was making practically no loans at the -oresent time, and that, therefore, there was no necessity for such frequent meetincs of the adMitastrative committee. Mr. Ransom referred to the position taken by the Board of Goyernor s that the chairman of the board of directors of a Federal reserve balak and, in his absence, the Deputy Chairman, and, in the absence of both ' the third Class C director should serve as chairman of the executive coramittee and stated that the organization of the executive camiltittee and administrative connAttee, which exercises the duties of the eceelltive committee at the Kansas City bank, did not provide for the Ole" C directors serving as chairman of either committee except in rottitio ll with the other directors and that in view of the public character the Class C representation on the board of directors of the Federa' reA -erve banks, meetings of the committees should not be held with- Class C director being present. Mr. Thomas agreed that the chair- or the board of directors should be chairman of the committees but at6ted that the changes which were made in the by-laws in 'January were tril4cle it his absence and inasmuch as they affected his relation to the %'4ittees he felt he could not with propriety question the changes. There ensued a discussion of the matters referred to above as 11S of the amount expended annually by the Kansas City bank for tees e "eXPenSCS Of directors. At the conclusion of the discussion, Mr. Thomas asked what 1185 81/4/37 -4- ``IllEgestions the Board had to make with respect to a solution of the pl atter. Mr. Ransom stated that the Board felt that the holding of fregilent meeti nt- s of the board of directors when there was no apparent jiletification therefor and the continuation of an arrangement under a Class C director was not present at meetings of the executive adElinistrative committees were regarded by the Board as (1) inef"" organization resulting in needless expense, (2) inadequate Nresentation of the public interest because of non-attendance by 448 C directors at meetings of the connittees, and (3) lack of unders't"dillg on the part of the directors that their responsibility is to ete the policies of the bank and to leave the daily operating detliols in the hands of the bank's officers. Mr. Ransom also said that Mr. Thomas should return to Kansas Citad discuss the entire matter with the directors in the light of tile "rd'' letters of July 14 and 29, 1937, and in the light of the 11(lit8 considered at this meeting, following which the board of directc)4 ehould take action to correct the unsatisfactory elements of the .4t1lEtti on. At this point Messrs. Thurston, Wyatt and Thomas left the meet4d consideration was then given to each of the matters hereinafter l'ed to and the action stated with respect thereto was taken by BOEtrd Memorandum dated August 24, 1939, from Mr. Bethea, Assistant 8/24/37 -5- SecterY, recommending the employment of William H. Malone, Philip D. be and James H. Macklin as porters in the new buildirw, each with 44417 at the rate of 41,080 per annum, effective as soon as their 8"1 ces may be required after having passed satisfactorily the usual PhYsical examination. Approved unanimously. Letter to "The First National Bank of Kings Mountain", Kings 1()1.111tain) North Carolina, reading as follows: "The Board of Governors of the Federal Reserve System has m given further consideration to your application for per/141E1810n to exercise limited fiduciary powers, end grants you .Illitlic3r1t3, to act, when not in contravention of State or '"al law, as trustee under a certain deed of trust to sedebt executed by Palmetto Yarn Mills, Inc. and further "scribed as a trust accepted by you on July 12, 1937, the ! :tercise of such right to be subject to the provisions of , 1111e Federal Reserve Act and the regulations of the Board of 7srnors of the Federal Reserve System. "This letter will be your authority to exercise the ridum ti ' 4-arY powers granted by the Board pending the prepara4 or a formal certificate covering such authorization, 'Ich will be forwarded to you in due course." X Approved unanimously, together with the following letter to Mr. Fry, Vice President of the Federal Reserve Bank of Richmond: atd "Reference is made to your letter of August 6, 1937, inclosures, in regard to the application of 'The First Nati c onal Bank of Kings Mountain', Kings Mountain, North for permission to act as trustee under deeds of t to secure debt, which was disapproved by the Board 4 J-111Y 30, 1937. it is understood that the bank, acting on the assumpt4 :n r that its application would be approved, accepted appointes trustee under a deed of trust given by the Palmetto ' 11-1 Mills, Inc. to secure en issue of bonds, and asks that 1187 8/24/37 -6- "the Board reconsider the application and permit it to act es trustee in this one instance. The Board has given further consideration to the matter, and in view of all the circumtences and since the bank apparently has acted in good faith, 'es granted it permission to act as trustee under such deed of trust. A copy of the letter to the bank advising of the B°ard's action is inclosed herewith for your files. "The grant of this restricted power does not represent ellY change in the Board's views as expressed in its letter to Yo of July 30, 1937, and is not to be regarded as establishflg a precedent for any similar case which may arise in the t1lre. Should the bank at some later date desire to acquire ' 13-Y other trust business it will, of course, be necessary for l at to submit a new application for trust powers to the Board , 314 be granted additional authority before accepting any such gusiness." Letter to the representative members of the Federal Open Market ec°1111tt ec, reading as follows: "As you know, the last paragraph of section 10 of the Federal Reserve Act, as amended, provides that the Board of Governors shall keep a record o.f actions taken by the Federal uPen Market Committee upon questions of policy relating to (3,Pen. market operations, and that a copy of the record shall 'e included by the Board in its annual report to Congress. "In order to expedite the publication of the annual ren , , ort for the year 1937, there have been prepared drafts Of entries for the record covering actions taken by the 6deral Open Market Committee at its meetings on January 2e March 15, April 4, May 5 and June 9, 1937. Copies of these11e drafts are attached. As was the case with the open rket policy record for the year 1936, entries relating to certain actions, Each as organization of the Federal Open erket Committee, readjustments of participations of Federal reserve banks in the System account, and authority to the eleelltive committee to permit fluctuations in the System ac; between statement dates, have been omitted from the , 2 e ord for the reason that they are not regarded as matters the kind which it was intended to include in the record omiere of such relative unimportance as to justify their et The drafts of entries have been prepared in subentially the same form as the entries contained in the record for the year 1936. "In order that the record may be placed in final form 1188 8/24/37 -7- "as Promptly as possible, it will be appreciated if you will review the drafts and advise not later than September 13 Whether you have any comments or suggestions to make with respect thereto. "A letter identical with this is being sent to the . "her representative members of the Federal Open Market C ommittee." Approved unanimously. Letter to Mr. Harrison, Chairman of the Presidents' Conference, reaclitg as follows: "As you know the Presidents' Conference at its meeting on November 18, 1936, voted to accept the report and !PProve the recommendation of the Standing Committee on ?ollections that the absorption of postage on direct sendbe discontitued by every Federal reserve bank in the Interest of uniformity. "The Board recently made inquiry of the Federal Re!rve Bank of Kansas City as to the present situation at that bank with respect to the absorption of postage on °h letters forwarded by member banks direct to other Fedreserve banks, and a copy of the reply of the Kansas oltY bank is attached hereto. It is suggested that this erating problem be again referred to the Standing Committee on Collections for consideration." j Approved unanimously, together with a letter to Mr. Hamilton, President of the Federal Reserve Bank of Kansas City, reading as follows: "Reference is made to your letter of August 14, 1937, regard to the inquiry contained in the Board's letter J-une 16, 1937, as to the present situation at your bank respect to the absorption of postage on cash letters warded by member banks direct to other Federal reserve uquaks in With . "The Board has suggested to President Harrison, as Oh luelrman of the Presidents' Conference, that this operat04 Problem be again referred to the Standing Committee 11 Collections for consideration." There was submitted a recommendation, which had been approved by the p eraonnel Committee, that the Board authorize the purchase of 4/3 d Steel pitchers, and the cleaning, scouring a7irigs including cutting and binding for repairing and andpipes, of one carpet, listed in purcha e order Nos. 1964, 1965 1969 and 1970, at a total pet of $109.91. Approved unanimousl Thereupon the meeting adjourned. Assistant Secretary.
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