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A, meeting of the Board of Governors of the Federal Reserve 8Ystem was held in Washington on Friday, August 26, 1938, at 10:30 a• M. PRESENT: Ransom, Vice Chairman Szymczak Davis Draper Mr. Mr. Mr. Mr. Mr. Morrill, Secretary Mr. Carpenter, Assistant Secretary Mx. Thurston, Special Assistant to the Chairnan ead, Chief of the Division of Bank Mr. Operations Mr. Dreibelbis, Assistant General Counsel There were presented telegrams to Messrs. Kimball and Post, Secretaries of the Federal Reserve Banks of New York and Philadelphia, l'aePsctively, Mr. Leach, President of the Federal Reserve Bank of Pichmi, A ' 41u s Mr. MeLarin, Vice President of the Federal Reserve Bank of -Atlanta, Messrs. Young, Stewart and Powell, Secretaries of the FedReserve Banks of Chicago, St. Louis and Minneapolis, respectively, Gilbert, First Vice President of the Federal Reserve Bank of Dallas, erld Mr- Sargent, Secretary of the Federal Reserve Bank of San Francisco, "Etting that the Board approves the establishment without change by the l'etlersl Reserve Bank of San Francisco on August 23, by the Federal Re)3allks of New York, Richmond, Chicago, St. Louis, Minneapolis and -as on August 25, 1938, and by the Federal Reserve Banks of Phila.41Ph1s and Atlanta today, of the rates of discount and purchase in their existing schedules. Approved unanimously. 880 8/26/38 Mr. Morrill reviewed briefly the further developments which had taken place in connection with the closing of the Havana Agency of the Federal Reserve Bank of Atlanta as set forth in memoranda which had been PrePered for the files on August 23 (three memoranda), August 24, and A4gust 25 (two memoranda). Reference was also made to a letter dated Ang4st 25, 1938, from Mr. Parker, First Vice President of the Federal Reserve Bank of Atlanta, inclosing a letter dated August 24 from Mr. l'rezer, Manager of the Havana Agency, in which he stated that in accordance with instructions issued by the Federal reserve bank he had itetructed Dr. de Cells, Cuban attorney engaged by the bank to do the necessary legal work in connection with the closing of the agency and to Proceed with the closing of the agency as soon as possible, and that 111** de Cells had advised that there was considerable work to be done betore legal notices to the proper government offices could be presented) that this work would require a week or ten days, that it would be n ecessary to set a definite date for the closing and that October 1 Or is was suggested in that connection. Mr. Parker had advised in 4 telephone conversation on August 25 that in his opinion October 1 " W the earliest practicable date on which the agency could be closed end that if this met with the approval of the Board he would advise 1pr. de Cells to proceed accordingly. Mr. Morrill was requested to advise by telephone that October 1, Parker Mr. 1938, would be satisfactory to the Board as the closing date. 881 8/26/38 _3Mr.Smead reviewed briefly the discussions which had taken Place at a meting of the Standing Committee on Collections of the Conference of Presidents which was held in Richmond on Wednesday, Angust 24, 1938, and outlined the tentative conclusions reached by the Committee with respect to changes in the check collection services rendered by the Federal reserve banks. At this point Messrs. Thurston, amead and Dreibelbis left the raeeting. Thereupon the action stated with respect to each of the matters hereinafter referred to was taken by the Board: The minutes of the meeting of the Board of Governors of the liederal Reserve System held on August 23, 1938, were approved unanitpUsly. Letter dated August 25, 1938, to Mr. Fry, Vice President of the Federal Reserve Bank of Richmond, reading as follows: "This refers to your letter of August $ to the Board in which you request that the Form 105b (Schedule 0) submitted by the Wachovia Berk & Trust Company, Winston-Salem, North Carolina, in response to the Tune 30, 1938 call for condition reports be amended by the inclusion of another affiliate, the Winston-Salem Hotel Company, WinstonNorth Carolina, and to a copy of your letter of XulY 22, 1938 to the member bank in the same connection. "It appears that the member bank on June 30, 1938 owned 2,582 shares of stock of the Winston-Salem Hotel Company, that these shares constitute more than a majority Of the shares of the affiliate voted at the last election of its directors, and that, accordingly, the Winston-Salem Hotel Company was an affiliate of the member bank under 8 8/26/38 -4- "the terms of Section 2(b)(1) of the Banking Act of 1933. Reference to the examination report of the bank as of June 20, 1938 indicates that the Wachovia Bank & Trust Company was carrying these 2,582 shares on its books at 50,891.22, which amount exceeds the limitations given in the terms of waiver of affiliate reports printed on Form F.R. 220b. If that was also the situation on June 30) 1938, e report of the tinston-Salem Hotel Company should have been submitted and published as of that date. Since, however, no useful purpose would be served by haythe affiliate now render and publish a report as of June 30, 1938, the Board waives a report as of that date. The member bank should be advised that if the affiliation exists at the time of the next call a report on Form F.P. 220 should be rendered and published unless waived under the terms of waiver printed on Form F.R. 220b." Approved unanimously. Letter dated August 24, 1938, to the Presidents of all Federal reserve banks, reading as follows: "Inclosed are two copies of the revised form of rePort of examination which the Board has approved for use, effective September 1. A supply of the forms sufficient to Provide for examinations during the next few months is being forwarded by express. Additional supplies may be obtained from the Board's Division of Examinations upon request. Advice of the cost of the forms will be sent to You as soon as possible. "In revising the form of report an effort has been made to conform strictly with the spirit, as well as with the letter, of the recent egreement regarding bank examination procedure as announced by the Secretary of the Treasury and published in the July Bulletin. The agreement refers specifically to the classification only of loans and depreciation in securities, end the definitions Of the loan classifications as set forth in the agreement have been copied verbatim at the head of the schedule on Page 11. On page 3 of the report, however, brief general definitions of the classifications applicable to all types of assets have been given. The definitions of classifications I, III, end IV as shown on page 3 are identical with the definitions incorporated in the revised forms of the 889 e 8/26/38 -5- "Comptroller of the Currency and the Federal Deposit Insurance Corporation. The definition of classification II on Page 3 is similar to that in the Comptroller's report but differs from the definition in the Federal Deposit Insurance Corporation report in that it contains no specific reference to securities, while the Federal Deposit Insurance CorPoration definition includes 'securities which lack recognized investment merit' among the assets to be classified as II. "It will be expected that the classifications of assets by examiners for the Federal reserve banks will be in accordance with the definitions set forth in the report and that the examinations will be conducted in strict conformity with the terms, spirit, and purposes of the agreement. In this connection, it is requested that, especially at first until the use of the revised form is well established, the officers in charge of the bank examination departments review the reports carefully, particularly the classifications of assets, in order to insure that the examinations are being made in conformity with the agreement. "Included in the supplies furnished are some pages without headings but ruled for columns and some blank Pages to be used for such supplomental schedules or comments as may be considered necessary or advisable, thus Providing flexibility in the form of report. One of the Purposes of having the forms printed in Washington, however, is to attain uniformity in the form of reports used 0Y the twelve Federal reserve banks and it is requested, therefore, that no schedules be incorporated in a report Of examination which would be inconsistent with the schedules as Printed in the forms furnished. "Attached is a memorandum prepared by the Board's Division of Examinations with respect to some details in connection with the new form. A separate letter will deal with the appraisal of securities and the classification Of depreciation in securities. "A supply of the forms for use in the examination of trust departments will be forwarded as soon as they are a vEtilable, which, it is anticipated, will be within the next two weeks." Approved unanimously. Letter dated August 25, 1938, to Hon. Morris Sheppard, United tates Senator, reading as follows: 8/26/38 -6- "In response to your letter of August 19, 1938, requesting copies of regulations issued by the Board of Governors regarding political activity and political assessment of officials and employees of the Board, I have been requested to advise you that the Board of Governors has issued no instructions or regulations on this subject. However, the printed circular issued from time to time by the Civil Service Commission relating to political activity of Federal employees has been brought to the attention of officers and employees of the Board and it has always been understood that they would not participate in a political campaign or the collection of assessments of a. political character or otherwise engage in political acother than to cast their individual ballots at the Place of their legal residence in accordance with the registration and election laws of that place. So far as this office is informed this understanding has never been violated." Approved unanimously. Letter dated August 25, 1938, to Mr. Harrison, Vice Chairman Or the Federal Open Market Committee, reading as follows: "In accordance with our previously established policy, there are attached drafts of entries for the policy record covering actions taken by the Federal Open Market Committee at its meetings on March 1, April 22 and April 29, 1938. It will be appreciated if you will review the drafts and advise as promptly as possible whether you have any comMents or suggestions to make with respect thereto. "A letter identical with this is being sent to the Other representative members of the Federal Open Market Committee." Approved unanimously. Thereupon the meeting adjourned.
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