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2035 A meeting of the Board of Governors of the Federal Reserve SYstem was held in 'Washington on Thursday, December 27, 1945, at 11:00 a.m. PRESENT: MT. Mr. Mr. Mr. Ransom, Vice Chairman McKee Draper Evans Mr. Carpenter, Secretary Mr. Connell, General Assistant, Office of the Secretary Mr. Morrill, Special Adviser Mr. Thurston, Assistant to the Chairman 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 Federal Reserve System held on December 21, 1945, were approved unanimously. The minutes of the meeting of the Board of Governors of the Federal Reserve System held on December 26, 1945, were approved and the actions recorded therein were ratified unanimously. Memorandum dated December 26, 1945, from Mr. Paulger, Director Of the Division of Examinations, recommending, for the reasons stated t herein, that the Board rescind its action of December 5, 1945, accepting the resignation of Charles E. Fischer, an Assistant Federal Reserve EXaminer. Approved unanimously. Public Official Schedule Bond with the National Surety Corporadated December 18, 1945, to become effective January 1, 1946, in 2036 12/27/45 —2- the total amount of $105,000 covering Messrs. Bethea, Nelson, Bass, Mrs. Kramer and Miss Lally, of the Division of Administrative Services, in accordance with the action taken by the Board at its meeting on October 15, 1945. Approved unanimously. Letter to Mr. Leach, President of the Federal Reserve Bank of Richmond, reading as follows: "In accordance with the request contained in your letter of December 17, 1945, the Board approves the ap— pointment of Hugh C. Singleton as an assistant examiner for the Federal Reserve Bank of Richmond. If the appoint— ment is not made effective January 1, 1946, as planned, Please advise us." Approved unanimously. Letter to Mr. Evans, Vice President of the Federal Reserve Bank of Dallas, reading as follows: "In accordance with the recommendation contained in your letter of December 19, 1945, the Board of Governors extends to February 15, 1946, the time within which the First State Bank of Corpus Christi, Corpus Christi, Texas, may accomplish membership." Approved unanimously. Letter to Mr. Fletcher, First Vice President of the Federal Re— serve Bank of Cleveland, reading as follows: "This refers to your letter of December 12, 1945, enclosing a letter addressed to the Board of Governors by Mr. Reuben B. Hays, Executive Vice President, The First National Bank of Cincinnati, Ohio, dated December ] .-0, 1945, requesting the Board's opinion as to whether it is permissible for a member bank operating in Ohio 2037 12/27/45 -3- "to pay and absorb the intangible tax assessed by the State of Indiana against a resident of Indiana upon his deposits in the Ohio bank. "As you know, on June 22, 1945, the Board addressed a letter to all member banks regarding the procedure which would be followed in determining whether the absorption of exchange charges involves a payment of interest. As to questions whether other practices involve a payment of interest on demand deposits, it has long been the general policy of the Board not to undertake to pass upon such questions in advance except on the basis of facts developed by the examiner in the course of examinations of the mem,ber bank involved. The question raised in the present case is a question of that kind and, therefore, one to which this policy should be applied. "The Board fully appreciates the natural desire of any member bank to be informed in advance whether practices followed by it involve a violation of the law. However, the question whether a specific practice such as that re— ferred to in the present case constitutes a payment of in— terest cannot ordinarily be determined until after a con— sideration of all the facts and circumstances of each par— ticular case as developed in the course of examinations, and it would not be feasible for the Board to issue advance rulings upon questions of this kind." Approved unanimously. Letter to Mr. Day, President of the Federal Reserve Bank of 811 Francisco, reading as follows: "Reference is made to your letter of November 29, in which you refer to the tests that were conducted by the Board in 1920 on vault construction and suggest that it might be desirable to conduct similar tests at the present time in view of the probability that a number of Federal Reserve Banks will find it necessary to enlarge their vault facilities. . "This matter was discussed informally with representa— tives of the Bureau of Standards and with others who are well informed on the subject and we find that they are in agreement in the opinion that there is little likelihood that any tests on vault construction at this time would 2038 12/27/45 —4— "be productive of fruitful results. "In the circumstances, it does not appear that the Board would be warranted in making such a survey at this time." Approved unanimously. Letter to the Presidents of all the Federal Reserve Banks reading as follows: "Recently the Board had under consideration the question whether currency in denominations of $500 and above forms an essential or desirable part of our currency circulation and, if not, what steps should be taken looking toward its elimination. "After reviewing the matter in some detail the Board decided to discontinue any further printings of these notes and to ascertain from the Federal Reserve Banks their views as to the desirability of the continued issuance and circulation of such notes. In considering this matter the Board had before it suggestions that: "(1) Currency in denominations of $500 and above is not necessary for hand to hand circulation; "(2) Large denomination currency lends itself readily to undesirable uses, such as black market transactions or other illegal dealings, including the concealment of wealth or income to evade taxes; "(3) Any legitimate use of large denomination currency can be adequately taken care of by other means; and "(4) In the long run discontinuance of the issuance of large denomination currency would have no appreciable effect upon the volume of currency of other denominations in circulation. In this connection, since February 1945 the circulation of currency in the denominations of $500 and over has shown a steady decline. This is, no doubt, due largely to the Treasury Department's request to the banks to report on Form TCR-1 the deposit or withdrawal of large denomination bills. "It was hoped that this subject could be discussed at the last Presidents' Conference, but the matter was not formally considered by the Board in time to have it placed on the agenda. Accordingly, it will be appreciated if you Will advise the Board whether you concur in the suggestion 2039 12/27/45 -5- "that steps be taken looking toward the elimination from circulation of currency in denominations of 500 and above and, if so, the means by which you think this could best be accomplished. If you do not concur in the suggestion, the Board will be much interested in the reasons for your nonconcurrence and particularly in examples of the specific Purposes you think are usefully served by the larger denomination bills." Approved unanimously. Thereupon the meetingadjourned.
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