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A neetin
of the 7ederal deserve Board was held in -Jashins-ton on
aclaY, December 15, 1932, at 11:10 a.
PRESENT:
11,0
Governor Meyer
Lir. Hamlin
Mr. Miller
Mr. Tames
Mr. Magee
Morrill, Secretary
Licaolland, Assistant Secretary
Mr. Harrison, Assistant to the Governor
1:1±. iiyatt, General Counsel
1re Paulger, Chief, Division of Exardnations.
Mx, George I. Eorris, Governor of the 7edera1 {eserve Bank of Phila.as also present and submitted to the Doard a statement Showinc,
tEtt
at the close of business on December 13
4tiklal
1932, the Atlantic City
Bank, the Chelsea-Second National Bank and 1.rust Company, the
'`tqllitable Trust
Company, and the Guarantee Trust Company, which institutions
tIle result of absorptions and mergers thirin7, the latter part of 1951 of
tIlll'teet
banking institutions in Atlantic City, Yet Tersey, owed the 7ederal
-a rve
ank of Philadelphia „;5,143,812.52 and that :,3,931,987 of such
bort
°W14g. was in the form of member bank collateral notes secured by paper
%' 1,114
aloproximately .::,300,000 has become ineligible because the statements
or
the 1,
u orrowers show such a small excess of
assets over current
44ba.
ltleL; that the individual loans have in fact becem capital loans.
eryl
,
_
-4-- Ilorris briefly outlined the circumstances leading up to the
Qbzl°11-.)-4'
1°1-1s and mergers referred to, and stated that it has been necessary
e Peaeral reserve bank to cooperate with the banks in assisting them
to
ttle
to
al-lt of their unsatisfactory condition.
He stated that ordinarily
eral
reserve bank would charge the notes secured by ineligible paper
thCr
uoerve accounts of the banks but that the banks have obtained
-„,rs '-rora. time to tile from the Reconstruction 7inance Corporation and
12/15/32
-2-
the uo
rporation has taken the position that it will not rinke advances to
the banks to
enable them to retire borrwings from the irederal reserve bank.
ilecaso outlined the efforts of a connittee, representin: the member banks,
tosecare additional denos its in the amount of approximately . 2,0 .
and
at"ed that the Reconstruction finance Corporation has agreed, in the event
the
c'udttional deposits are obtained, to mike further advances to the nenber
1)411k8 Of between ;1,000,000 and
2,000,000 which it is believed will be
441'fi0ient to take care of the seasonal decline of deposits during the next
411Z
tionths.
Governor rorris stated that the Federal Reserve Bank of Philadelphia
4eilla to be faced with three alternatives: (1) continue to hold against
teraber bou„_
ll collateral notes paper which is technically inelij_ble, (2) make
44411cee to the member banks in accordance with the provisions of section
1°(b) Of the Federal Reserve Act for the purpose of removing the collateral
llete
8ecured by ineligible paper or (3) require the banks to retire their
llote
to the
extent that they are secured by ineligible collateral, which
course would undoubtedly result in the closing of the banks.
Governor
stated that he feels some concern as to his responsibility in this
and would like to have the benefit of the Board's views.
'tEttoci
ttitlez,
3
He also
as another reason for presenting the matter to the Board, that the
Ilecierve Board's examiners, at the tine of the recent examination of
llagelphia bank, called attention to the bank's holding of ineligible
collateral to mollber bank notes.
4 general discussion of the situation presented by Governor rorris
kE4leci) arld it was expressed as the opinion of the members of the Board that
of all the circumstances, including the fact that Governor rorris
12/15/32
_3_
4(1 8tated that the paper referred to was eligible when accepted, it was
151‘eferable for the Federal Reserve Bank of Philadelphia to continue to
41
'17 it until it is liquidated in an orderly way, rather than resort to the
151'°cedure of retiring it by a section 10(b) advance.
There was then presented a letter dated December 14, 1932, from the
al .Reserve
Agent at Philadelphia, referring to the Board's letter of
er 20, 192, requesting that the agent advise the Pennsylvania Company
tor
'
443uranees on Lives and Granting Annuities that the Board had denied its
teq3.1
est for Permission to acquire the stock of a bank to be located in
ktkzo
PenrzylVallia; Ur. Austin's letter stating, in response to an
111q4.2,
1-Y Lade by the Board's Division of 1:xaminations, that pursuant to
t o
—"Y granted by the board of directors of the Pennsylvania Company,
'0 was transferred fram the surplus account of the company on rovanber
_
962: and made available to certain trustees who were directed to sube -or, and hold under a declaration of trust for the benefit of the
lolders of the -Pennsylvania Company, 2,455 shares of the stock of the
L,
Ajja.
Ine Trust Company of Ardnore, Which company was organized and opened
ot the
iness on Uovember 15, 1932.
The letter also stated that the officers
riew comDany, all of whom were formerly officers of the Pennsylvania
ot
11Y, hays discussed with the 'Federal reserve agent's office the subject
rQberShip in the 2edera1 Reserve System and that it is likely that an
111)11etion- will be submitted in the course of the next few weeks.
ttittle
.
Ei the ensuing discussion, reference was made to the statement con14 the Board's letter of October 20, 1932, that the effect of the
'''Lltion and ownerahip by a member bank of substantially all of the
to
of%
- a bank located beyond the limits of the city in which such bank is
537
1v15/32
-4-
ittlated would be practically the sane as the establishment of a branch of
Itic}1 bank beyond the limits of the city in which it is located and therefore
'4°111c1 be contrary to the spirit and purpose of the provisions of section 9
at tlie
Federal deserve Act. The feeling was expressed by several members
the Board that the plan which had been adopted was merely a different
bet)lcd
Or accorrplishing the same purpose and was subject to the same
°Ilieet•
1°11. They also expressed the view that since the Board's action in
to the former proposal had been ca.u.iunicated to the Pennsylvania
Cotipn„
-4-Y a proper regard for the Board's position in the matter should have
4ei
led it to present the matter again to the Board before proceeding with
the
new Plan.
Governor I:orris stated, upon inquiry, that the 7edera1 Reserve Bar2-:
at
Illiladelphia and the i'ederal reserve agent had notice of the proposed
'
ilzation of the new bank, under the aispices of the Pennsylvania Company,
ie it
was opened on November 15, and that he understood that the plan
ot d
e - aad been formulated by its counsel, although Governor I:orris
t)e 0
'
r&11Y did not know, Prior to this meeting, the exact rranner in which
tjae
et°ek of the new institution is held.
There was also discussion as to the action which should have been
te
bY the itiederal Reserve Bank or Philadelphia and the Federal reserve
)a't
UPri lec., .rning of the proposed organization of the bank.
It was ex-
ANzz
ecl es-3 the feeling of the members of the Board that the Federal reserve
- office particularly, should have reported the matter to the Board
171tholit.
delay, and that the Governor or the agent should have called to the
It tin,
0:7 the member bank the advisability of ascertaininn, the Board's
ttitia
5e2ore proceeding with the plan that was adopted. It was also
588
lr'V15/.62
-5-
icated that, in view of the circumstances surrounding the organization
he new bank, the Board would not be disposed to admit it to menbership.
At the conclusion of the discussion, the Federal reserve agent's letter was referred to counsel
for further consideration and report to the Board.
Governor Norris then left the meeting.
The minutes of the meeting of the Aderal Reserve Board held on
NIQelinber
6, 1_932, were approved.
The Board then considered and acted upon the following Letters:
Telegrams dated December 14, 1962, from the Chairman of the ?J'ederal
"
.e. Bank of Boston and December is, 1952, from the Chairman of the FedReserve Ralf,: of Richmond, both advising that at meetings of the boards
o
41rectors on
the dates stated, no changes were made in the banks'
e:qatin,
--- schedules of rates of discount and purchase.
'ithout Objection, noted with approval.
Reply to a letter dated December 3, 1932, from the loederal Reserve
eAt
Atlanta transmitting copies of letters addressed to the Governor
c/t tls
"s bank by l*r. Robert S. Parker, General Counsel, and advising of the
tElvoz
ble action of the executive committee with regard to the payment of
tee
o
l,200 toi.ir. Howard B. Shofner, attorney, who was retained in
'eet.
with the indebtedness of T. H. Harrison acquired by the !y'ederal
- bank from the 7irst National Bank of lr,urfreesboro, Tennessee, which
411aDe d a
11-e-k on January 25, 1932. The reply stated that the Federal Reserve
46
NN,
aPPIsoves the payment of the fee tont*. Shofner.
Approved.
Reply, approved by five members of the Board on December 14, to
dated November 10 and December 5, 1932, from the Federal Reserve
14/15/32
4gclat at Atlanta with regard to the continuously deficient reserves of the
411111 iTational Bank
Erwin, Tennessee.
The reply stated that, in view of
t% 4...4-arormation submitted and the agent's reconnendatioh, the Board will
te41% no action in the matter at this time other than to forward copies of
the
Cent's letters to the Acting Comptroller of the Currency for the infor-
katiQ4
of his office.
Approved.
Letter to the 7ederal Reserve Agent at St. Louis referring to
44411„
.
'uant Aderal Reserve Agent 6tewart's letter of December 6, 1932, to the
aeserve A3ent, which the latter left with the Board on December 8,
194
't°gether with a letter dated December 1, 1932, from the Cashier of
tIle
e'r ers and Traders Bank, Iberia, Eissouri, requesting permission to
`Iral7 from mellberahip immediately under the voluntary notice filed by the
—lder date of ally 2, 1932.
The reply stated that, in view of all the
ances involved, the federal Reserve Board waives in this case the
ent of six months notice of intention to withdraw, so as to permit
4417. to withdraw from, merberdhip immediately.
Approved.
Reply to a letter dated November 17
1932, from the President of
Dank, New York City, New York, outlining the activities which it
(31)°sed to carry on at an agency vihich the bank desires to establish in
ot
illatown section of New York City, aid requesting approval by the Board
establishnont of the agency.
The reply stated that the Board grants
01,Tal, subject to the limitations and conditions: (a) that the
131)1
'
°114 to be performed by the agency will be limited to those described
President"s letter, (b) that the agency will be established and
12/15/32
-7-
for business within six months from this date, and (c) that the
aellelr will be discontinued whenever the Board may deem it advisable and
84411 so
require.
Approved.
Reply to a letter dated December 6, 1932, from. the Governor of the
'el Reserve Bank of Atlanta inclosing a copy of the contract entered
bite between the Atlanta bank and the Republic of Cuba in accordance with
411therity granted in the Board's teleGram of October 20, 1932, under
klicla credit in Hew York City in the amount of .400,000 was made available
to Ltiq,
'e Republic in exchange for a like amount of Cuban gold coin which is
"e repurchased by the Republic in accordance with the terms of the conCt
The reply noted from Governor Black's letter that in the future the
tAz 1
evied by the Alban Government uPon receipts given by the Havana Agency
tor
c"le transfers sold in Havana, will be based upon the mount of the
co .
'lesion received by the agency rather than upon the face amount of the
t srer.
The reply also noted that a contract is beinf-, drawn covering an
E1*
e ellt by the Federal Reserve Bank of Atlanta with the :epublic of Cuba
to
e)cchan7:e circulating notes of the United States for American silver coin,
any,
kci st
-Elved that it does not ap.)ear from the letter what limitations, if
klE1 to 1,
u e placed upon the amount of such exchanges or upon the period for
.
/1111
the Proposed contract is to be effective, and that it will be
44reciated if, before the contract is executed, the Governor will advise
33c)ar'a
as to its more important terms and conditions, or if feasible,
4111)111:it0.. copy of the proposed contract to the Board.
The reply called
Ittelltion to the fact that the powers exercised by the L,ederal Reserve Bank
l'41°..alita through its az,ency in Havana, which are set out in the resolution
541
_a_
12/15/32
4dopted :/
the
the ?odcral Reserve Board on January 27, 1927, as amended by
Board?.
resolution of January 4, 1929, are subject to such dhangps and
84e4 further rules and regulations as the Federal Reserve Board may prescribe
to tine.
Apurcved.
Er. Harrison then reported to the Board that he had been advised by
4t,
L. B. Iil1iais, Deputy Chairman of the 1
-1edera1 Reserve Bank of Cleveland,
the.+ _
"whlle he is much better he feels that it would be unwise for him to
titte,s,
'4412,t to cone to Washington this week and that he will arrange to be here
04 1,1z
"day of next week for a nieetinc_: with the Board.
Thereupon the meeting adjourned.
@FedFRASER