Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, December 5, 1927, Volume 14, Part 4

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425

A meeting of the Federal Reserve Board was held in the office of the
Federal deserve Board on Monday, December 5, 1927 at 11:00 a.m.
PRESENT:

Governor Yuma'
Platt
Mr. Hamlin
Ir. 1,1111er
Mr. James
Mr. Cunningham
Mr. Eddy, Secretary
:::r.- Lls24Clelland, Asst. 3ecretary

The minutes of the meeting of the Federal 2,eserve 3oard held on
November 3uth ,:ere read and approved.
Latter approved on initials on November 30th, namely, application
of the Catonsville National Bank, Catonsvi2le, Md. for original stock
(68 shares) in the Federal Reserve Bank of _lichmond, effective if and
'llen the Comptroller of the Currency issues a certificate of authority
to commence business.
Formally approved.
Letter dated Decembdr 1st from the .issistant Secretary of the
Z' A
'°Lteral

'Reserve Bank of New York and telegram dated December 1st from

the Chairman of the Federal Reserve Bank of ban Francisco, both advisinF7

that at meetings on that date the boards of directors made no chances
ill the banks' existinr; schedules of rates of discount and purchase.
“ithout objection, noted with approval.
Report of Jo. aaittee on 3alaries and :]xpenditures on letter dated
"vember 26th from the Chairman of the ';ederal _teserve '3aak of Jallas,
questing approval of the action of the board of directors of that bank
in granting extended leave of absence up to December 1:3th, with full pay,




1

126

to :A-ss Larguerite Ferqlson, an employee of the

ccounting Department;

the Board's Committee recommonci.inr, ai)proval of the salary payment involved.
Approved.
Report of Committee on

.alaries and '.xpenditures on letter dated

.ovember 2..:th from the Chairman of theederal

eserve Bank of Dallas,

requesting approval of the action of the board of directors of that bank
in granc extended leave o, absence up to Jecember 31st, with full Day,
to 4l1s5 Erin Humphrey, an employee of the Jervice Department; the Board's
Committee recommending approval of the salary payment involved.
Approved.
.teoort of ,;ommittee on Examinations on letter dated hovember 28th

1•

from the 2edera1 —eserve ,.gent at Cieveland, recommendiniz approval of an
aPplication of the Cleveland Trust Company for pennission to establish a
branch at or near the corner of Pawnee i.venue and East 165th 3treet,
Cleveland; the Board's Committee also recommending approval.
Approved.
Latter approved on initials on December 2nd, namely, telegram to
the Chairman of the Federal Aeserve Bank of San i'rancisco, waivirr, for
the year 1928 in the case of all branches of that ban'i: the requirement
°I' the Board's Regulations regarding directors of Branch federal reserve
ballks that at least one o; the directors aripointed by the bank shall
reside outside of the city in which the Branch is located.
formally approved.
Letter dated December 3rd from the Comptroller of the Currency, re—
to the Board's letter of October 31st requesting the views of his




12/5/27

Office with respect to certain plans alleged to be under way by national
banks in connection with the handling of real estate mortgages under the
provisions of the McFadden kct; the Oomptroll,:r statinc; that while he
is not particularly enthusiastic about national banks engaging in the
business of issuing and selling, participating certificates against real
estate loans, his office is taking the position that it sees no legal
Objection to national banks carrwing on this business, under certain
restrictions, if their boards of directors see fit to do so.
1:oted.
Letter dated December 2nd from the Chairman of the Open Market
Investment Committee, advising that total shipments and ear markings
of gold on the present movement no:/ amount to t128,500,000, while
the total of gOvernment securities purchased as an offset amounts to
,A4,000,000, leaving.a net balance of .A4,500,000 against which no oarchases have been made; the Chairman also referring to certain probable
shifts in the open market account incident to the December 15th Treasury
operations and stating that it may be desirable to have a meeting of the
:..arket Investment Committee within the next two or three weeks.
Noted.
Letter dated irovember ;30th from the Chairman of the federal ":,eserve
Bank of ktlanta, with reference to the matter referred to that Dank by
the Board on September 20th, namely, a suggestion of the President
Of the ::_arine Bank and Trust Company of :jew Orleans that the local
Branch Federal keserve bank be permitted to make advances to member
banks against the pledge of 60-day sterling bills on prime English




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12/5/27

banks, 111th
with documents attached; the Chairman stating that after referring
the matter to the Board of the New Orleans
Branch his directors have voted
that the Federal ,ieserve Bank of

tlanta should not at this time make

the advances in question.
ho ted.
Lemorandum from Jounsel dated 1:ovambr 30th, aubmittin,7 draft of
reply t) letter dated Lovember 26th from the Federal 'ieserve Agent at
Bo3t0n, with resinct to an inquiry by the Old Colony r1rust Company of
Boston, a member bank, as to whether it may establish and operate a

branch in a foreign country; the proposed reply expressing the opinion
that

under Jction 9 of the Federal

eserve ..ct a state member bank

r114Y not, since February 25, 1927, lawfully establish a branch in a
foreign country and continue
to hold stock in a Federal Reserve bank.
Discussion ensued during which it was pointed out
that while the opinion of Counsel may be a correct
technical interpretation of the Act, it was hardly the
Latent of Congress to deprive state member banks of the
privilege of establishing foreign branches since the
same privilege is specifically granted to national banks.
Following the discussion the proposed letter to the
Federal ieservegent ,;as referred back to the Law Commit tee.
Aeport of Executive Committee on memorandum dated I,:ovember 30th from

the Acting comptroller of the Currency, recommending approval of an applic4,.
3-On

of The First National Bank of Olanta, ). C. for permission to reduce

its capital stock from .50,000 to .:25,000 on condition that no money be
"Lained to the shareholders but that doubtful and undesirable assets, to
be Passed unon by the National Bank Examiner, to the amount of the proposed




L.
-5-

12/5/27

reduction, be withdrawn from the bank and trusteed for the benefit of
shareholders at the date of reduction; the Board's Committee also recomMendinLc approval.
Approved, subject to the condition recommended
by the -cting Comptroller.

:eport of ixeutive Committee on memorandum aated Jecember 2nd from
the Corn troller of the Currency, recommend.inC approval of an application
Of

?he :irst _ational Bank of Dublin, Ca. for 1r:1-mission to reduce its

capital from ,200,000 to . 100,000 on con„Lition: (1) That the amount of
the roduction be carried to surplus account and that out of this account
a pproximately „450,000 of losses and doubtful paper be charged off; and
(2) That the bank increase its capital to ..200,000

on the same date; the

Board's Committee also recommending approval.
Approved, subject to the conditions recommended by
the Comptroller.
Letter daued iovember 28th addressed to the Secretary of the Board
by Honorable ,eorge H. Tinkham, member of Congress, requesting the names
Of the members of the Board who voted in favor of and the names of those
who voted aainst the recent reduction in the ,iscount rate of the Federal
deserve Bank of Chicano.




Jiscussion enbued raring which it was pointed out
that it has been the past policy of the Board to furnish
information such as that requested by Congressman Tinkham
only upon receipt of proper request from Congress or some
committee thereof.

-6-

12/5/27

Following the discussion, Yr. Miller moved that a
letter be prepared to Congressman Tinkham for the signature of the Board's Secretary, advising him of the Board's
policy in matters of this kind but stating that as so much
publicity has already been given to the vote of the Board
with raspect to the Chicago rate, his inquiry has been
referred to Mr. Hamlin who will take the matter up with
him personally.
Jarried.
'ho Crovernor then presented the matter which ';as ordered circulated at
the meeting on November 30th, namely, article on the subject of the 'Federal deserve _System in 1927" prepared by the _ssistant Federal aeserve
.1gent at Lew York for publication in the _-_merican Year ;ook.
Following a discussion, Mr. Hamlin moved that the Doard
interpose no objection to the publication of the article on
condition that there be eliminated therefrom a reference to
declining commodity prices in European centers.
Mr. Hamlin's motion bein7, put by the Chair was lost on a
tie, the members voting as follows:
Governor Young, "aye"
Mr. Platt, "aye"
Mr. Hamlin, "aye"
Mr. Miller, "no"
Mr. James, "no"
Mr. Cunningham, "no"
Further discussion ensued during which some members of
the Board expressed doubt as to the propriety of anyone connected with the Federal Reserve System publishing a review
of the operations of the System during a calendar year prior
to the publication Of the Annual Report of the Board.
Mr. Hamlin then moved that the Board interpose no objection
to the publication of the article unsigned and with the understanding that in any reference to the author, it is to be stated
that the article is written on his own responsibility.
This motion, being put by the Chair was lost on a tie,
votinc;. as follows:
members
the




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12/5/27
Governor Young, "aye"
Mr. Platt, "aye"
Li.. Hamlin, "aye"
Mr. Miller, "no"
Mr. James, "no"
Mr. Ounntngham,."no"
A further discussion ensued following which Mr. Hamlin moved that the Assistant Federal Reserve Agent at New York
be advised that without assuminP; any responsibility for the
article the Board will interpose no objection to its publication by him, but is unwilling to have the title of Assistant
Federal Reserve Agent used in connection therewith.
This motion being put by the Chair was lost on a tie, the
members voting as follows:
Governor Younrs., "aye"
Mr; Platt, "aye"
4r. Hamlin, "aye"
Mr. Miller, "no"
Mr. James, "no"
Mr. Cunningham, "no"
Lotter dated December 1st from the Federal

eserve Agent at New York,

with reference to an investigation conducted by him of the organizers of

the proposed United States Foreign Financiar-; corporation, ::hich has anplied
to the Board for a charter under Section 25 (a) of the Federal „ieserve Act;
the Agent settinr: olt detailed information regarding the several organizers,
11(1 statinc: his conclusion that it appears that their experience and busiliess qualifications an: not such as to give reasonable assurance of success
Of

a banking corporation of the type proposed.
Discussion ensued during 'which the Governor called attention to the fact that several of the organizers are
among the management of the World Exchange Bank of New York
and that the Federal Reserve Bank, of New York is deferring
action on an application by that institution for membership
in the Federal Hese/iv° System. The Governor expressed the
opinion that it.would be advisable to yithhold action on
it
the application for the Edge Act charter at least until




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-8-

can be determined what action will be taken by the
New York bank regarding the State bank under similar
management.
After discussion, the matter of the application to
organize the United States Foreign Financing Corooration
was referred to the Governor with power.
The Secretary then announced that all Federal deserve banks, except
an Francisco, have advisei the 'ioard of the results of their elections
Of Class

and B directors as follows:
Boston
Class A
.31ass B

- Edward S. Kennard, re-elected
- Charles C. Washburn, re-elected

New York
Class
'Class B

- Delmer Runkle, .re-elected
Samuel W. Reyburn, re-elected

PhiladelohiClass
Class B

- George J. eily
- Arthur C. Dorrance

Cleveland
Class A
Class B

-

Sams, re-elected
S. P. Bush

-

Charles E. Aieman, re-elected
Edmund 3trudwick, re-elected

-

H. Lane Youn7
J. A. 1- :_cCrary, re-elected

.dchmond
Class A
Class B
Atlanta
Class A
Class B
Chicago
Class A
Class B




- George M. Reynolds, re-elected
- August H. Vogel, re-elected

/133
12/5/27

. Louis
ilass
.lass 3

- :lax B. Nahm
- .Aolla _ells, re-elected

“ianea,)olis
Jlass
;lass B

,arl j.
John J. Owen, re-elected

Kansas City
Class A
Class B

-

C. C. Parks, re-elected
Thomas C. Byrne, re-elected

Class A
Class B

-

J. H. Frost, re-elected
Lilam
J.

Dallas

Noted.

-3-1 2LTS OF STANDING C0MMITT1I:]3:
Dated, December 2nd,
3rd,
5th,

Recommending chanms in stock at Federal Reserve
banks as set forth in the n.uxiliary Minute Book
of this date.
Recammendations arTroved.
Dated, Uovember 29th, Recommending action on applications for fiduciary
Towers as set forth in the A.uxiliary Linute 300k
of this date.
Recommendations approved.
patej., December 1st, Recommending approval of the application of Mr.
Fred Swenson for permission to serve at the same
time as director and officer of the Pacific National
Bank, Los Angeles, Cal. and as director and officer
of the Graham National Bank, Graham, cal.
Recommendation approved.
Dated, December. 3rd, Recommending approval of the application of
:)'_eyer for permission to serve at the
George
same time as director of the Second Nati ,nal Bank
of Allegheny, Pittsburgh, Pa. and as director of
the Dollar Savings and Trust Company, Pittsburgh,
Pa.
Recommenuation approved.
1)ated, December 3rd, Recommending approval of the application of Mr.
W. L. Guckert for permission to serve at the same
time as director and Vice President of the Second
National Bank of Allegheny, pittsburgh, Pa. and as
director of the Dollar Savings and Trust Company,
Pittsburgh, Pa.
Recommendation anproved.



12/5/27

-10-

li,g2OATS OF 3.2A:DI1', C0LEII2TES: („;ont,d)
. Dated, December 3rd,

Aecammenling aeproval of the application of :Ir.
J. B. Orr for permission to servo at the same time
as director of the second National Bank of ,alegheny,
Pittsburgh, Pa. and as director of the Dollar Savins
and Trust Company, Pittsburgh, Pa.
Recommendation approved.

The meeting adjourned at 1:00 p.m.

•

.4q)Proved: