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:Vet, V 491 meeting of the Federal Reserve 3oard was held in the office of the - ederal Reserve Board on Wednesday, December 14, 1927 at 10:40 a.m. Z PRESEITT: Governor Young :latt Mr. Hamlin 7::r. Miller James 1,:r. Cunningham Eddy, Secretary ;.r. jicCiellanci,.1sst. secretary The minutes of the meeting of the Pederal Reserve Board held on December 13th were read and approved as amended. The Governor reported that Mr. Gilbert, 3111.-)ervisor of ai;xaminations, has received back from the printer the standard form of report of examination prepared in his office by direction of the Board and that he had suggested to Mr..Gilbert that the form might be given a trial in connection with the investigations which are to be made by the z'ederal Reseve Bank of Richmond in connection with the proposed consolidation of the Bank of Cheraw, S. C. and the Bank of Chesterfield County, Chesterfield, 3. C., which consolidation was brought to the attention of the Board at its moetins yesterday, and also in connection with an examination Of the Commercial and Savings Bank of Florence, 3. 0., if made by the Pederal Reserve Bank of Richmond in connection with the proposed reduction 14 its ca9ital, also considerel by the Board at yestvrday's meeting. discussion ensued as to whether or not it would be necessary for the Federal Reserve 3ank of Richmond to assess the cost of these investigations against the institutions examined, in view of the fact that they will be used by the Board to determine the utility of its proposed new examination report form. Followinp: the discussion, Mr. Hamlin moved that the Governor Young's suggestion that the report approve Board 492 • -2- 12/14/27, form prepared by :Ir. Gilbert be used in connection with the proposed .aidhmond investigations and that the cost of such investigations be not assessed against the state member banks. 0 ct Carried. II:v. James then moved that the Board in its forthcoming. Annual Report recommend to Congress an amehdment of the provision of Section 9 of the Federal aeserve Act that expenses of all Federal Reserve examinations of state member _banks shall be assessed ap;ainst and paid by the banks examined. Carried. Er. Hamlin then moved that the Law Committee be instructed to prepare for submission to the Board a form of amenament to -Section 9 in accordae with the above action. Carried. At this point, Mr. Cunningham joined the meetin. Jeport of Committee on Examinations on application of The johocton State Bank, Cohocton, K. Y. for membership in the Federal eserve Sys- tem and for 45 shares of stock in the Federal deserve Bank of New York. Attention was called to the fact that the Federal aeserve Bank of New York and the Board's Sub-committee both recommend approval of the application subject to the conditions of membership set out in the Board's Regulation H, Series of 1924, while Counsel suggests that the Board may, If it wishes, impose the conditions of membership which are to be included in its new Hegulation H, Series of 1927. Following the discussion, upon motion by Yr. James, it was voted to approve the application subject to the following conditions: (1) Except with the permission of the Federal Reserve any Board, such bank or trust company shall not cause or permit or business its of character general the in made be to change in the scope of the corporate powers exercised by it at the time 493 -3- 12/i4/27 of admission to membership. (2) Such bank or trust company shall at all times conduct its business and exercise its powers with due regard to the safety of its depositors. (3) Except after applying for and receiving the permission of the Federal Heserve Board, such bank or trust company shall not acquire an interest in any other bank or trust company, through the purchase of stock in such other bank or trust company. (4-) Such bank or trust company shall maintain its loans within the limits prescribed by the laws of the Jtate in which it is located. (5) Such bank or trust company shall reduce to an amount equal to 10 per cent of its capital and surnlus all balances in excess thereof, if any, which are carried with banks or trust companies which are not members of the Federal aeserve System, and shall at all times maintain such balances within such limits. (6) Such bank or trust company may accept drafts and bills of exchange drawn upon it of any character permitted by the laws of the State of its incorporation; but the aggregate amount of all acceptances outstanding at any one time shall not exceed the limitations imposed by section 13 of the Federal :ieserve ct, that is, the ar;gregate amount of acceptances outstanding at any one time which are drawn for the purpose of furnishing dollar exchange in countries specified by the Federal Reserve Board shall not exceed 50 per cent of its capital and surplus, and the aggregate amount of all other acceptances, whether domestic or foreign, outstanding at any one time shall not exceed 50 per cent of its capital and surplus, except that the Federal aeserve Board, upon the application of such bank or trust company, may increase this limit from 50 per cent to 100 per cent of its capital and surplus: Provided, however, nat in no event shall the aggregate amount of domestic acceptances outstanding at any one time exceed 50 per cent of the capital and surplus of such bank or trust company. (7) The board of directors of said bank or trust company shall adopt a resolution authorizing the interchange of reports and information between the Federal reserve bank of the district in which such bank or trust company is located and the banking authorities of the State in which such bank is located. 9 12/14/27 r 12th from The Secretary then presented a memorandum dated Decembe submitting in the Director of the Division of ilesearch and Statistics, on November 18th a accordance with the resolution adopted by the Board 1921 the total for quarterly iates be inning with January table showin the amountheld,by the Treasury, stock of monetary r;old in the United States, by the Federal eserve bunks and in circilation and the amount3he1d ear showing net gold imports and • marked Tor foreiz_n accoun,as well as a table exports since 1921. 'Mon motion, copies of the above memorandum were ordered distributed among all members of the Board. • letter dated Report of Committee on Salaries and 2xpenditures on City, requesting December 9th from the Federal Reserve Agent at Kansas ee of that bank in voting approval of the action of the Executive Committ to extend for a period of three months from Decemoer 1st, with full pay, leave of absence on account of illness granted T.Ir. R. P. Smith, Board's Coittee recomSpecial officer and watchmanat the bank; the mending approval of the salarY payment involved. Approved. with ref3rence to the Memorandum from Counsel dated December 5th, H. 2uechter for permission to serve Clayton Act application of Lr. August Lincoln :ational Bank of Cincinnati, at the same time as a director of the , Ohio and the Oakley Bank of Ohio, the First lational Bank of ITorwood Cincinnati; Counsel statin that Mr. Tuechter is also serving; as a director ati, from Jhich he is willin=--; to resim Of the Morris Plan Bank of Cincinn application to serve the three other banks if the Board approves his 495 -5- 12/14/27 with which he is connected. In his nemorand-am, Counsel suggested that if the rioard approves Er. 2uechter's anqication to serve these three oanks it do so on condition that he sever his connection with the ::orris Plan Bank of Cincinnati. Upon motion, it was voted to approve Mr. Tuechter's • . application and the matter of advising him was referred to the Governor with power. In connection with the above arplication, Mr. James referred to the amendment to. the Clayton Act desired by the Board which would permit the Board's authority in the matter of granting interlockini7 directorates to rest upon the question of the public interest, rather than upon the absence of competition between banks involved in such interlockinir, directorates, and would also extend the Board's authority with regard to interlocking,' directorates so as to include non-member institutions. He moved that the Law Committee prepare for submission to the Board a recommendation to Congress covering the proposed amendment. Carried. The Jecfeta:7 then presented schedules submitted by all Federal .eserve banks except Mew York settinr forth salaries pronosed by the boards of directors to be paid during the year 1928 to all employees of the banks and their branches who do not hold official nositions, including adjustments made by the directors durin7 the year 1927 in the salaries of employees receiving less than ,,22500 per annum. He presented a summary of ' he adjustments at each bank, setting forth the total number and amount of increases proposed; both for employees receiving less than •J2500 per annum and those receivinc; ,2500 or more per annum, as well as a comparison Of the proposed unofficial payroll of each bank for the year 1928 with the actual amount of salaries paid to employees during the years 1924 to 1927. He stated that each schedule has been submitted to the members 4.96 12/14/27 -6- 11 of the Board's Committee on Salaries and ExiDenditures and that no objections were raised to any of the proposed salaries. The summaries presented by the Secretary were considered individually, and upon separate motion it was voted in the case of each Federal Reserve bank to approve all adjustments made by the directors during the year 1927 in the salaries of employees receiving less than c;2500 per annum and all the salaries proposed, effective January 1, 1928, both for employees receiving less than .„32500 per annum and for those receiving 2500 or more per annum. The Secretary stated that a schedule of salaries fixed by the directors of the Federal Reserve Bank of New York for employees of that bank and the Buffalo Branch will be submitted to the Board within a few days. Letter dated December 13th from the Chairman of the Federal Reserve Bank Of New York, advising that the Brooklyn Trust Company, Brooklyn, N. Y. is arranging to take over as a branch the Bank of Coney Island, now owned by the National _American Company, and advising also that the Terminal Trust Company ,:hich is also controlled by the National ..--merican Company may later be taken over by the International Germanic Trust Com2any. The Governor then presented a letter dated 1:ovembor 21st, addressed to him by the Governor of the 2ederal Reserve Bank of New York, transmitting and commenting upon a memorandum prepared at that bank with respect to the amount of cold which could be exported from this country without causing a shortage of gold in the United States. The Governor also pres- ented a memorandum addressed to him by ar. Smead, to whom he had referred Governor Strong's letter because of the estimate of y993,000,000 of surplus gold contained in that letter as compared with an estimated surplus of N 782,000,000 given in a memorandum prenared by 22r. Smead under date of November 4th. 497 12/14/27 ••• Upon motion, it was voted that a copy of Governor Strong's letter and enclosure and a copy of Mr. Smead's memorandum of November 28th should be furnished to each member of the Board for his information. The Governor then referred to the discussion at the meeting of the Board on December 5th, with resrect to a memorandum submitted by Counsel under date of November 30th regarding an inquiry made by the Old. Colony Trust Company of Boston as to whether it may establish and operate a branch in a foreign country without affecting its status as a member bank, in which Memorandum Counsel expressed the opinion that a state member bank of the Federal Aeserve System may not, since the enactment of the McFadden Act, 'awfully establish and op2rute a branch in a forei--il country and continue ) Go hold stock in a Federal .aeserve bank. he referreC, to a suggestion made atiring the discussion that the matter mi 7ht be referred to the Attorney General of the United States, and submitted draft oi a letter to the Secretary of the Treasury requesting him to secure an o2inion of the Attorney General. has not yet taken Attention was called tothe fact that. the Board • aefinite action on :ounsel's memorandum which on December 5th was referred beck to the Law Committee. Accordingly, Mr. Cunningham moved that the opinion of Counsel be adopted as the opinion of the Board. Cunningham's motion was put by the Chair and the roll being called,was lost the members voting as follows: Mr. Cunningham, "aye" Lr. James, "aye" G-overnor Young, "no" Platt, "no" Miller, "no" Mr. Hamlin, "no". 498 12/14/27 _8_ Mr. Hamlin stated that he would like to have tranamitted to the attorney General, in connection with the request for the opinion, a memorandalm which he expects to receive from Counsel to the Federal 2,eserve Bank of Boston to the effect that a state member bank may lawfully establish a branch in a foreign country. It was also suggested that the attorney General should be advised of the attitude of the Board in the matter as disclosed by the vote just taken. Upon motion, it was voted that the matter of preparin: 7 a revised letter to the Secretary of the Treasury, requesting him to secure an opinion from the Attorney General, be referred to Mr. Hamlin with power. Letter dated December 13th from the Deputy Governor of the Federal aeserva Bank of New York, advising that exports and earmarkings of gold On the oresent movement have now reached an Li<regate of ,146,000,000, With further anticipated shipments this week of ,,;14 000,000, and that no additional offsottinr47 purchases of government securities have been made for the System account beyond the .45,000,000 previously reported. hi; letter, ov.ir the In r. Case also referred to the probable money market situation pJriOu of the December 15th 2reasucw operations, and advised that the opinion of the board of directors of the Federal Reserve Bank of New York is that it mi ,ht oe well to let the member banks borrow any additional funds that may be needed, which it is estimated may run as hif7h as from ,,;100,000,000 t .:150,000,000, rather than to undertake to ease the situ- ation by making further purchases of government securities. Upon motion, the Governor was authorized in acknowledginF3 the above letter to express the Board's concurrence in the opinion of the directors of the New York bank referred to therein. 199 -9- - 12/14/27 room. At this point, Mr. ,:;:att, the Board's Counsel, enteret the He advised the Board that it would be impossible to arran-e for the issuance ed, Of its new Regulations until after the first of the year, and su7gest ions as "Series therefore, that the Board formally designate the Regulat referOf 1923" rather than "Series of 1927" as they have heretofore been red to. Upon motion, Counsel's suggestion was approved. nt for Mr. Wyatt then submitted a proposed introductory stateme upon the incorporation in the printed aegulations commenting briefly Changes which have been made from the 1924 3eries. Upon motion, the proposed introductory statement was referred to the Governor with power. ::i2P0aT3 02 STL:DI:G COLZMITTEES: Recommending a change in stock at a Federal Reserve bank as set forth in the Auxiliary Minute Book of this date. Recommendation approved. for fiduciary Dated, December 10th, .1ecommending action on applications Minute Book ry Auxilia the 12th, powers as set forth in of this date. Becannendations approved. application of ',Ir. Dated, Decemoer 10th, Recommending approval of the to serve at the same on permissi George O. Lee for National Bank, Boston, First the time as director of of private bankers firm the of Mass., as a member Mass. and as Boston, , Company Lee, Higginson and on Trust Higgins Lee, the director and officer of Company, Boston, Mass. Recommendation approved. the application ofMr. N. Dated, December 10th, Recommending approval of ion to serve at the permiss Penrose Hallowell for ts National Merchan same time as director of the the firm of of member Bank of Boston, Mass., as a , Boston, Company and on private bankers Lee, Higgins HigLee, the of officer Mass. and as director and Mass. Boston, ginson Trust Company, Recommendation approved. _Dated, Dec2ber 14th, 500 12/14/27 -10- 3 .EP0RTS OF STANDING COMMITTEES; (ont'd) JLA d, December 10th, Dated, December 10th, Dated, December 12th, Dated, December 12th, Dated, December 13th, Dated, December 13th, L)ated, December 13th, Recommending approval of the application of 1.1r. Edward H. Osgood for permission to serve at the same time as director of the Atlantic National Bank, Boston, Mass., as a member of the firm of private bankers Lee, Hirinson and Company, Boston, ::ass. and as director of the Lee, Hig,7inson Trust Company, Boston, :lass. Recommendation approved. Recommending approval of the application of Mr. John Eadel for permission to serve at the same time as director of the Bronx National Bak, New York, N. Y., and as director of the Cosmopolitan Bank, New York, N. Y. Recommendation approved. Recommending approval of the application of Mr. John C. Buck for permission to serve at the same time as director of the Woburn National Bank, Woburn, Mass. and as director of the Woburn Cooperative Bank, Woburn, Lass. Recommendation approved. Recommeniing approval of the apnlication of Mr. Leo S. Chandler for permission to serve at the same time as director of the California National Bank, Beverly Hills, Cal. and as director and officer of the California Bank, Los .Angeles, Cal. Recommendation approved. Recommending approval of the application of Mr. Charles A. Keogh for permission to serve at the same time as officer of the Fletcher American National Bank, Indianapolis, Ind., as director of the Belmont State Bank, Indianapolis, Ind., and as director of the Virginia Avenue State Bank, Indianapolis, Ind. Recommendation approved. Recommending approval of the application of 7:.r. Melvin A. Traylor for permission to serve at the :.ame time as director and officer of the First National Bank, Chicago, Ill., as director and officer of the First Trust Joint Stock Land Baak, Chicago, Ill, and as director and officer of the First Trust Joint Stock Land Bank, Dallas, Texas. Aecammendation approved. Recommending approval of the application of Mr. Harold V. Amberg for permission to serve at the same time as officer of the First National Bank, Chicago, Ill, and as director and officer of the First Trust Joint Stock Land Bank, Chicago, Ill. Recommendation approved. ' 501 12/1z1/27 OF 3TAI,;.D1.1:CT Dated, December 14th, -11- (Conttd) _acommenaing approval of the application of :Ir. .2rank3.,. Gordon for pexmission to serve at the same time as officer of the First i:a.tional Bank, as director and officer of the First Chicago, Trust Joint Stock Land 3an.k, Chicago, Ill. and. as director and. officer of the First Trust Joint Stock Land. 3aik, Dallas, Texas. aocomaendation approved. • • The meeting adjourned at 12:30.m. Jecretary. 4pproved:
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