Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, December 3, 1928, Volume 15, Part 2

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324
A meeting of the Federal

eserve Board was held in the office of the

Pecl"al Reserve Board on Monday, December 3, 1926 at 10:45 a.m.
PRESENT:

Governor Young
Mr. Platt
Yr. Hamlin
Mr.
Mr. James
Mr. Cunningham
Yr. Eddy, Secretary
Mr. McClelland, Asst. Secretary

The minutes of the meeting of the Federal Reserve Board held on November
27t11 were read and approved.
Matters approved on initials on November 30th and December 1st, namely,
4PPlications of the Lefcourt-Normandie National Bank, New York, N. Y. and the
and 120 shares)
FirstilatiOnal Bank in Poultney, Vt., for original stock (1800
the Federal Reserve Banks of New York and Boston, respectively, effective
If

of authority
-"t1 when the Comptroller of the Currency issues a certificate

t0 c°1amence business.
Formally approved.
namely, letter to the ChairMatter approved on initials on November 30th,
to arranFrements made
°f the Federal Reserve Bank of Philadelphia, referring
conference of business
(11'1134 to send :;:r. J. F. Dewhurst of that bank to the
nt of
stlIt isticians in Geneva, Switzerland; the letter confirming the appointme
4

to

American delegation
Jewhurst by the secretary of State as a member of the
the trip will be met by
"le conference, and advising that the expenses of

leave of absence with pay
th6 Department of State and that the Board approves
r. Dewhurst for the duration of the trip.
Formally approved.
30th, namely, letter dated
Matter approved on initials on November




325
12/3/28

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30th from the Comptroller of the Currency, recommending approval of a
4111417 of 415,000 per annum for Mr. E. Willey Stearns, appointed Chief National
4WkExaminer of the United States.
Formally approved.
Telegram dated December 1st from the Chairman of the Federal Reserve Bank
"New York, advising of the election of Mr. Charles E. Mitchell as Class A
1)iteetor and the re-election of Mr. William H. Woodin as Class B Director of
the bank, both for terms of three years beginning January 1, 1929.
Noted.
Telegram dated December 1st from the Chairman of the Federal Reserve Bank
°faichmond, advising of the re-election of Mr. James C. Braswell as Class A
BIrector and Mr. E. C. Graham as Class B Director of the bank, both for terms
"three years beginning January 1, 1929.
Noted.
Telegram dated November 30th from the Chairman of the Federal Reserve Bank
(4 Chicago, advising of the election of Mr. Edward R. Estberg as Class A Direct41 44d the re-election of Mr. S. T. °repo as Class B Director of the bank, both
'terms of three years beginning January 1, 1929.
1'1)1
Noted.
Telegram dated December 1st from the Chairman of the Federal Reserve Bank
t laluieapolis, advising of the re-election of Yr. Paul J. Leeman as Class A
l)itector and Mr. Paul M. Myers as Class B Director of the bank, both for terms
°I* three years beginning January 1, 1929.
Noted.
Reserve
Telegram dated November 30th from the Chairman of the Federal




sX2(3

12/3/25

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Ballk Of liansas city, advising of the re-election of Mr. Frank W. Sponable as
Class A Director and Mr. J • LI. Bernardin as Class B Director of the bank, both
10r terms of three years beginning January 1, 1929.
roted.
Telegram dated December 3rd from the Chairman of the Federal Reserve Bank
Of Dallas, advising of the re-election of Mr. W. H. :Patrick as Class L. Director
4/la the election of Mr. It. S. Cleveland as Class B Director of the bank, both
f°1 terms of three years beginning January 1, 1929.
Noted.
aeport of Committee on Salaries and Expenditures on letter dated November
4th from the 3eoretary of the Federal Reserve Bank of Chicago, transmitting
of abliSt Of employees for whom the directors of that bank authorized leaves
sellce with pay, on account of illness, during the period from October 26th to
11(Ivember 22nd, where the total of such absences since January 1, 1928 has

ex-

eeecied thirty days; the Board's Committee recommending approval of the salary
PaYlnents involved.
Lpproved.
his resigLetter dated November 27th from Mr. Claude Gilbert tendering
4tion as Supervisor of Examinations of the Federal Reserve Board.
Upon motion, Mr. Gilbert's resignation was accepted
effective at close of business November 30, 1928.
at Philadelphia,
Letter dated November 30th from the Federal Reserve Agent
re

cIllesting approval of the designation of Messrs. Howard M. Barnes and Glenn K.
special assistants to Examiners.
of the Bank Relations Department, as




Approved.

12/3/28

-4-

the Federal iieserve
Telegram dated November 30th from the Chairman of
414k of San Francisco, requesting that the Board suspend for the year 1929
the Provision of the by-laws of the several Branches of that Bank that at
/east one of the directors appointed by the Bank shall reside outside of the
Oit

in which the Branch is located.

The Secretary stated that the Board

waived the requirement in question for the year 1928 in view of the fact
thet the directorates of the San Francisco Branches consist of but five members,
Upon motion, it was voted to waive the requirement
for the year 1929 also.
Federal deserve Bank
Letter dated November 27th from the Governor of the
ipf Dallas, referring to a request received from the New York Evening Post for
44 expression of his views, for publication, in regard to the business outlook
to
shall, of course, decline to do
1929; the Governor stating that while he
t148,

in

that has been adopted in
accordance with the well established policy

perhaps he could partially meet
l'earci to predictions, it occurred to him that
synopsis of present economic
thew ishes of the newspaper by giving them a brief
the Board
e04aitions in the Eleventh District, copy of which he submitted to
to
proposed statement has been read
review. The Secretary reported that the
reports
the Directol- of the Board's Division of liesearch and Statistics who
th4t he sees nothing objectionable therein.
, the Governor
After considerable discussion, upon motion
, as follows:
Talley
or
Govern
to
letter
was authorized to address a
of November 27th with
"I acknowledge receipt of your letter
Post for an expression
regard to the request of the New York Evening
s outlook for 1929 and
of your views, for publication, on the busines
courtesy in submittinp; the
1 dish to express my appreciation of your
matter to the Board.




cr.1(7,:c:)

12/3/28

-5-

"In part you have anticipated the obvious objections
to the request when you state that you shall decline to express any views as to the business outlook, in accordance
with the well established policy that you have adopted with
regard to predictions but we are inclined here to think that
in view of the significance which might be given to a statement emanating from a Federal 'Reserve official under present
conditions, it would be best not to issue anything, even in
the nature of a review of the past year. If I read your letter correctly this appears to be in harmony with your awn view.
However, your article has been examined and in the event
you should decide to publish it certain slight textual changes
are suggested. In the first sentence it is believed that the
phrase 'at high tide' mL4ht better be changed to 'at a high
level' and at the end of the third paragraph the words 'and
stability' should be omitted.
As requested by you the article is returned herewith."
Mr. Hamlin then suggested that a circular letter
be addressed to all Federal Reserve banks, advising that
without raising any question as to the right of a Federal
Aeserve bank to issue a statement regarding banking and
business conditions in its District, the Board desires to
place uoon record its feeling that predictions as to the
future are ill advised.
After discussion, the Governor was requested to prepare and submit to the Board draft of a letter to all Federal Reserve banks along the lines of Mr. Hamlin's suggestion.
Letter dated December 1st from the Chairman of the Federal Reserve Bank of
""aelphia, advising that representatives of the outlying Philadelphia banks
have applied to the Board for a reduction in their reserve requirements
like to meet with the Board on Thursday, December 13th at 12:00 o'clock,
if convenient.
Noted, with approval.
Letter dated November 28th from the Secretary of the Federal Reserve Bank
c411cla York, transmitting copies of communications with the National Bank of
p
'1-a outlining the terms and conditions which will govern the relationshi
41
'
November 26th.
hetvieen the institutions, authorized by the Board on




Noted.

12/3/28

-6-

Letter dated November 28th from the Deputy Governor of the Federal
deserve Bank of New York, advising that sales have now been made from the
°Pen :.arket Investment .1ccount totalling „i38,800,)00, the exact amount of

the United States securities taken over on November 19th and 20th from a
f"eign correspondent.
Noted.
Letter dated November 26th from the icting Secretary of the Open MarCommittee, transmitting copies of minutes of meetinrs of the
CernMittee held on November 13th and 15th, as well as the meeting of the ComInittee and the Governors' Conference in joint session with the Board on November 3.6th.

Ordered circulated.
Memorandum from Counsel dated November 26th with reference to applicati0n of the National City Bank of New York, for permission to establish branches
14 Balboa and
Ancon, Canal Zone; Counsel stating that the application is in proper
legal form and that he knows of no legal reason why it should not be granted.
Upon motion, the following was ordered spread upon
the minutes:
"THE NATIONAL CITY BANK OF NEW YOAF, having on or about
November 23rd, 1928, filed an Application with this Board for
the purpose of obtaining authority to establish Branches in
,1:coN, CANAL ZONE, and the said Application having
B,UB02"_ and ,
ond it appearing that the said Application
considered;
been
the laws of the United States of America
under
is properly made
THEiiEFO;iE, IT IS
Na::,
granted,
be
should
and
OiiDE.ItED, that the said Application be and it hereby is
approved, and that the said Bank be and it hereby is authorized
to establish Branches in BALBOA and ANCON, CANAL ZONE."
Ale Secretary then submitted draft of reply to letter dated November 22nd
rl'°114 R*ean, Taylor and Company, New York City, requesting information as to the




12/3/28

dates

-7-

When the directors of the various Federal Reserve banks hold their meetthe proposed reply setting forth the provisions of the by-laws of the
Reserve banks relating to meetings of the boards of directors.
l'A‘ter discussion, upon motion, it was voted to
reply to the above inquiry that inasmuch as each Federal Reserve bank fixes the dates for its directors'
meetings, the Board feels that the request for the information should be addressed to the Federal Reserve
banks themselves.

Letter dated November 28th from the Secretary of the Governors' Conference,
t ing informal action of the recent Conference in voting that it would be
IDNferable, if agreeable to the Federal Reserve Board, to have each Federal Rese1"7e bank submit changes in the salaries of officers to the Federal Reserve Board
approval before the middle of December, in order that the Board might
I
1°1' "
hava

an opportunity to act upon such chances before January 1st; the letter stat-

ille the Conference felt that if this procedure is followed it would still be posaible and desirable for each Federal Reserve bank to appoint its officers annualat the first meeting of the board of directors in January and to fix the sal'4

at that time at the figures recommended and approved during December.
Discussion then ensuea of the present procedure
which was instituted by the Board in August 1927.
Following the discussion, the Governor was requested
to
to prepare and submit to the Board draft of a letter
the
to
relative
e
Conferenc
'
Governors
the
of
the Secretary
above matter.

g draft of reply to
Llemorandum from Counsel dated November 23rd, submittin
Agent at Boston, inquiring
ltter Uated November 19th from the Federal Reserve
1. may lawfully establish
'1115ther the Industrial Trust Company of Providence, R.
Aonsocket Branch and continue its
11"°°/leocet, A. I. a branch of its existing
reply stating that in the
1111/perehip in the Federal Reserve System; the proposed




331
12/3/2a

-8-

°Pinion of the Board, the Industrial Trust Company may not now establish the
1317°Posed additional branch and continue its membership in the System.
Upon motion, the proposed letter was approved.
1:emorandum from Counsel dated November 23rd, submitting draft of reply to
letter dated November 21st from the Federal Reserve Agent at Boston, inquiring
7Illether the Union Trust Company of providence, A. I. while continuing as a member

the Federal Reserve System may lawfully purchase all the assets of and

op ate
as a branch a national uank located in Woonsocket, R. I.; the proposed
t'ePlY stating that the question has been referred to the Board's Counsel who
"With the conclusion reached by Counsel for the Federal Reserve Bank that
4418

,

may not
the Union Trust Company, while a member of the Federal Reserve System,
ln
the present main office
'4134 purchase the assets of and maintain as a branch
Of a
national bank located in ';ioonsocket.
.
Upon motion, the proposed letter was approved
meeting
The Governor then presented the matter ordered circulated at the
Governor of
°1111°vember 13th, namely, letter dated November 8th from the Deputy
the
inquiry made under
Federal Reserve Bank of New York with reference to an
4ta
Investment Trust, New York
Of October 17th by the First Federal Foreign
C ity
value" contained in Section
'as to the interpretation of the phrase "market
11 of
security for debentures of Edge
the Board's Regulation K, relating to
Perations, as applied to retail installment paper which arises from sales
Or

s to their buyers, and against which
-"Lerican merchandise by foreign merchant

thpk
advances to the foreign merchants
'zirst Federal Foreign Investment Trust makes
14
face value of such paper; the Deputy
t11°11nta equal on the average to 75,0 of the
'
Investment Trust should not
suggesting that the First Federal Foreign




12/3/28

-9-

be Pe
ent in such
rmitted to take more than two-thirds of the amount of its investm

PIIPer as the market value for the purposes of Suction 11 and that of the total
not more
collateral required for any one issue of the corporation's secured notes
than

50/; should be permitted to consist of foreign retail installment paper.
After discussion, upon motion, the above file was
of a
referred to the Law Committee for the preparation
along
ent
Trust
Investm
Foreign
l
Federa
letter to the First
of
or
the
Govern
Deputy
the
of
tion
the lines of the sugges
:::ew York bank.
—
The Governor then submitted drafts of letters to the Chairmen of the Commit

8
t 8

entatives, prepared
Banking and Currency of the Senate and House of _iepres

14 accordance with the request contained in a letter dated November 30th from
4ellral Counsel of the American Bankers Association, requesting that the Committees defer final action on a bill pending to amend suction 5219 of the devised
such time
"Elltes in the matter of taxation of National banks by states until
4s theLT are in possession of copies of a brief regarding the amendment being
It'eParej by the

also requesting that
merican Bankers' itssociation; the letter

the Board not be called before the Committee regarding the amendment until it
1
has ,
on.
"ad an opportunity of studying the brief in questi
the Governor
Upon motion, the letters submitted by
were approved.
of the First National Bank
Letter dated November 27th from the President
or IT;

fund being maintained at that
Fla. with reference to the currency
ation of Miami as a reserve
the letter also referring to the possible design

T.
Ordered circulated.
circulated at the meeting
The Governor then referred to the matter ordered
04 0

banks in Albany, N. Y. for the
ctober 12th, namely, application of member




3:33
12/3/28

-10-

termination of the designation of Albany as a reserve city.
After discussion, upon motion, it was voted to advise
the applicants that the Board is not inclined to approve
a reduction in their reserve requirements but will be glad,
if the banks desire, to have representatives appear before
it on a date to be agreed upon, not earlier than December
15tn, to furnish the Board with additional information.

The Governor then presented letter dated November 20th from the Executive
"Ilager of the American Bankers' Association, quoting a resolution adopted at
the recent convention of the Association requesting that the Board again permit
he weedy adjustment of reserves by member banks in Federal Reserve Bank and
Bl'elich cities and suggesting that the percentage of reserves be based upon the
1)41111:8' condition at the beginning of the day.
The Governor referred to the suggestion contained in the
brief recently submitted by the Federal Advisory Council in
sugfavor of the weekly computation of reserves and at his
lines
ing
gestion it was voted that a letter along the follow
be addressed to the American Bankers' Association:
November
"This will acknowledge receipt of your letter of
AsBankers
an
20, quoting a resolution adopted by the Americ
are
You
.
sociation at its recent convention in Philadelnhia
a
on
g
workin
advised that the Federal deserve Board is now
reserves weekplan which would permit member banks to report
are
abusing the
rhich
banks
ly and would penalize only those
first part
the
with
nce
accorda
reserve privilege, which is in
ation.
Associ
Bankers
of the resolution of the American
ng would
The Board does not believe, however, that anythi
age
the
percent
that
tion
sugges
be accomplished by adopting the
the
beginat
ion
condit
bank's
of reserves be based upon the
ing of the day
ning of the' day. For instance, if at the beginn
reserve
requirements
its
that
ine
a bank could definitely determ
on would
afterno
the
in
late
r
transfe
would be vb00,000, a wire
posisame
the
y
exactl
s
reserve
its
leave the bank short in
s reof
reserve
amount
the
ed
estimat
it
tion it would be in if
estiof
n
questio
a
much
so
not
is
it
quired. In other words,
having the reserves
mating the required reserves as it is of
there.
to remind the
The Board also thinks it is quite proper
be adopted
may
that
ions
regulat
banks that regardless of the
the member
es,
reserv
in
ncies
deficie
for figuring penalties for
rs
directo
their
ty
liabili
legal
banks are not relieved of any
may have under the present law."



12/3/28

-11-

At 1:00 o'clock p.m. the meeting recessed and reconvened at 2:45 p.m.,
the "me members being present as attended the morning session.
In accordance with the suggestion made at the morning meeting, the
G(3vernor submitted draft of a letter to the Secretary of the Governors' Confer"With reference to the informal action taken by the recent Conference in the
ell

/tatter of the approval of salaries of officers of the Federal Reserve banks; the
final
13r°P°8ed letter expressing the conclusion of the Board that it can not give
IIPProval to compensation either of officers or employees until finally fixed by
the d irectors of the Reserve banks, but stating that if recommendations are made

by

a board of directors for salaries of officers and employees for the following
the Board will express an opinion thereon, reserving final action until

after the compensation has been fixed by the incoming board of directors.
Upon motion, the proposed letter was laid upon the
table until the meeting tomorrow.
FranLetter dated November 27th from the Federal Reserve Agent at San
CO, transmitting and recommending approval of an application of the Monterey
(c)/111tY Bank, Salinas, Cal. for permission to exercise fiduciary powers under
114thority granted by the Superintendent of Banks of California.
Approved.
the Open MarThe Governor then referred to the sugpested revision of
reviewed the past
Investment procedure of the Federal Reserve System and
c311s ideration given to the subject.

He submitted the suggestion of the Governors'

,erence, as amended and adopted by the Joint Conference of Governors and Fed.1 Reserve Agents on November 16th, as follows:
is
"(1) That the Open Market Investment Committee, which
include
to
as
now composed of five Governors, be enlarged so
twelve, provided
the other seven Governors, making a Committee of




335
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12/3/26

"that in case of the inability of any Governor to attend,
an alternate shall be appointed by the Directors of his
bank.
(2) That the Committee of twelve shall select from
its membership an Executive Committee to consist of five
members, which shall carry into effect the policies from
time, to time determined by the full Committee and approved
by the Federal deserve Board.
(3) That it shall be the function of the Open Market
Investment Committee to consider, prepare and recommend
plans with regard to the purchase or sale of securities in
the open market for account of the Federal zieserve System
or participating Federal reserve banks.
(4) That the time, manner, character and volume of
such purchases and sales shall be governed primarily with
the view of accommoaating commerce and uusiness and with
regard to their bearing upon the general credit situation.
(5) That the meetings of the Open Market Investment
Committee, which shall be called either by the Board or by
the Executive Committee of the Open Market Investment Committee shall be held in :iashington or at such other place
as may be arranged by the Chairman of the Executive Committee of the Open Market Investment Committee and the
Executive Officer of the Federal Reserve Board.
(6) That the procedure at meetings of the Open Market
past,
Investment Committee shall be in the future as in the
upon the
to wit: That the Committee shall consider and act
then
recommendations of the Executive Committee and shall
recomthese
s
discus
to
Board
Reserve
l
Federa
the
meet with
as the
mendations with members of the Board for such action
Board may deem proper."
detailed discussion ensued at the conclusion of
which it was the consensus of (minion that it might be
advisable for the Board at the present time merely to
amend the resolutions adopted on March 22, 1923, establishing the Open Market Envestment Committee, so as to
provide that the Committee should "consist of twelve
representatives from the Reserve banks" instead of five
as at present, but formal action was deferred.
A

ii4zoaTs

OF STA:DING COMMITTEES:

ated, December 1st, 10commending changes in stock at Federal Reserve banks
of this date.
Ord, as set forth in the 2.11xi1iary Minute Book
ed.
s
approv
ndation
Recomme
ry powers
Dated, November 24th, Recommending action on applications for fiducia
of this date.
27th, as set forth in the Auxiliary Minute Book
Recommendations approved.




336
12/3/26

-13-

F ST

DING CaUMITTEES: (Qont'd)

4ted, November 27th, Recommending approval of the application of Mr, Albert
Leuly for permission to serve at the same time as Director of the Hudson Trust Company, Union City, N. J.
and as Director of the First National Bank, Secaucus,
N. J.
Recommendation approved.




The meeting adjourned at 5:1