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180 A meeting of the Board of Governors of the Federal Reserve 8Y.8ten was held in Washington on Thursday, February 1, 1940, at 11:00 PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chaiman Ransom, Vice Chairnen Szymczak Davis Draper Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary Mr. Clayton, Assistant to the Chairman Mr. Thurston, Special Assistant to the Chairman Mr. Wyatt, General Counsel Mr. Paulger, Chief of the Division of Examinations Mr. Cagle, Assistant Chief of the Division of Examinations Mr. Chase, Assistant Counsel Chairman Eccles read the following letter received by him this from the President of the United States: the 4.:In view of my veto last year of the Bill extending for ending interlocking bank directorships and Vie dir w of the apparent hope on the part of some of these extectore that s ' ome method could be devised for a slight ItoZel°11 of the final date, I am writing to you and the ; 0 tell you that I have no objection to a short exaa7 three months but no longer than four months. 'a give ample time to make the necessary arrangertient ss thet -;., AS said in my veto message, I honestly believe erte ;"e intent of the law should be definitely Put into e1 cv, especially because so much time has already htld Chai,'Juan Eccles then stated that during conversations which he With seri "ors Wagner and Glass on January 30 and 31 they raised the 18L 2/1/40 cillestion of the possibility of a further extension by the Board of the Perini,ssion granted by Regulation L, Interlocking Directorates thider the Clayton Act, for the continuation of certain interlocking be. directorates, that they both desired that the extension be pranted, etc" that yesterday afternoon Senator Wegner got in touch with the White House atzain, following which the President called him (Chairinan Chairman Eccles said that after outlining briefly for the of the President the position in which the Board found it41r with resPect to a further extension, the President stated that he woiad send El letter to the Board immediately suggesting an extension of thll" r°111" months. bz.e, ntiring the discussion which ensued Mr. Morrill read, at Mr. e 141% " lest, the following statement which had been prepared by 40111)rEq3e'r setting forth his position with respect to a further extenr the Permission granted by Regulation L: be if should a 4 months' extension under Regulation L lit ad? it 1„.: According to some proponents of this extension, ' 130Earri Provide time for the banks to readjust their Thiz-s in accordance with the so-called 'new situation'. ineritcluestion of requesting additional time for readjust4tte. 1 bank boards has been discussed at every cut-off 19zg, 't was discussed on January 1, 1939, on August 1, d now on January 31, 1940. You remember that the wElsLt'" advanced for the extension on January 1st, 1939, 1/leate hat the banks needed more time so that they might 3'atuathe necessary changes of their directors at the e nnual meetins:s of their respective boards. The .11ren for extensions on August 1, 1939, end now -41a17 31, 1940, are on the surface more or less 1.82 2/1/40 "different, but essent ially they are the same. "If we grant this 4 months' extension now, it will un doubtedly be asked for again on June 1, 1940, and if are any indication of future behavior, it will lbe e asked for just as persistently on June 1, 1940, as it 'las been on the three previous occasions. Every time this ” c -off date approaches, we are told: 'But this time we tell the banks that we mean business'. We have 0 11111eadY notified the banks accordingly on two separate Ticleasions before. How seriously have they taken it? theY have taken it so lightly that in New York City today h ere are 31 directors of big banks who, if they really rta taken our regulation seriously, would have retired ' cln their respective boards over a year ago. In this of 31 men, there are 4 who represent a large private ai7 end another large bank or trust company. There are 8,2° 4 men who repres large ent trust company and a s" pu ither bank or trust company. It is obvious that in tekte Of repeated extensions, this law is not being el,sin seriously by some of the largest and most influ4tial banks in New York City. sio "2- Other proponents of this request for an extenela 11 advocate it on the ground that it will give Congress det°13P(TunitY to pass legislation extending the cut-off may remember that Congress did pass such legthe 1-0" - )n at its last session. The bill was vetoed by whi .reaident. Have we received any information recently thieu would indica te that the President will not veto ,etsi llew bill for the same reasons that he advanced Then e similar bill last July? If not, that useful 0se will be served by granting this 4 months extenexte, °111Y to have Congress pass a bill granting a further the ;;s1.°11 which in turn will undoubtedly be vetoed by pr esident? which"- There is a very simple, effective method by (;est to Solve this difficulty. It is the method sagIt tea in the veto of last year's bill by the President. law:for Congress to change the basic provisions of the tO (4,8 enacted many years ago. If Congress will do this, should present itself in properly administerthis, ' e statute. But if Congress has not and will not do tenptithen it seems to me that we are deliberately atto circumvent the expressed will of Congress by have t ITellY 'ranting these extensions that in essence ' e effect of nullifyinn. the obvious intent of the stetut e. 183 -athe President personally communicates with the 7 1.1, erd conce-rming an extension of this statute and permits saY in our statement to the public that we are making extension with his knowledge and consent, I feel that v17.a.ould accede to his wishes. If, however, the statement we release to the public does not indicate the exi„e_sEed consent of the President mentioned above, I should to vote 'no' on this resolution." Mr. Pansom stated that he had talked over the telephone with melt ee late yesterday and that the latter indicated that in the '"111 .1 1. E3v -ces he would favor emending 'Regulation L to extend the per perFre nted Year. t by the Board for a further period of six months or a Consideration was Flven to the statement that would be released the Press in the event action were taken by the Board and question tIls raised whether the Board would be at liberty to quote the Presicielltes letter in such a statement. Chairmen Eccles left the room to Eitie erta4 the attitude of the rhite House on this Point and upon his ret11111 8q.ci that he had been advised that the Board could use the letter 1. pg waY it saw fit. Thereupon Mr. Szymczak moved that the following resolution be adopted: rem. "PISOLVED, That Regulation I" Interlocking Bank Dibe amended, effective edjatC8 Under the Clayton ely, follows: ttot :}. BY changing the date 'February 1, 1940' in sec,)k/a) to the date 'June 1, 1940'; and tiot By changing the date 'February 1, 1940' in secoke) to the date 'June 1, 1940'." Mr. Szymczak's motion was put by the Chair and carried unanimously. 184 -5Approval was also given to the following Press statement, with the understanding that it would be released immediately and that a coPY thereof would be sent by telegraph to each Federal Reserve bank: "The Board of Governors of the Federal Reserve System qiended subsections 3(a) and 3(e) of its Pegulation L c, ating to interlocking bank directorates under the a3rtort Act, effective immediately, so as to extend until rune 1 1 1940, the time during which certain persons vho mlv? been serving member banks may continue to serve a t1111°er bank and not more than one other bank. This final extension was made at the request of Set raii,!tOr livagner, Chairman of the Banking and Currency Comofv' ' tee of the Senate, and of Senator Glass, senior member hat Committee, and upon receipt of the following letter the President addressed to the Chairmen of the Board: 'In view of my veto last year of the Bill extendinF the time for ending interlocking bank directorships and in view of the apparent hope oT1 the part of some of these directors that some Method could be devised for a slight extension or the final date, I 6M writing to you and the Board to tell you that I have no objection to a short extension -- say three months but no longer than four months. This will Five ample time to !flake the necessary arrangenents. As I said in veto message, I honestly believe that the int:" of the law should be definitely put into ej"feet, especially because so much time has alreadY elapsed.'" At this point Messrs. Thurston, Wyatt, Paulger, Cagle and Chase 4 the tneetin and the action stated with respect to each of the 'ettezis hel,etnefter referred to was then taken by the Board: The minut es of the meeting of the Board of Governors of the 'ecl''1,ea Reserve System held On January 31, 1940, were approved unani- 185 2/1/40 -613°11ds) in the amount of .i.- 10,000 each, executed under date of Zak, -P117 19) 1940, by Jere V. D. Stryker as Assistant Federal Reserve ARent, and by Norman C. Cooper and Robert V. Bullock as Alternate A8sistEllt Federal Reserve Agents, all at the Federal Reserve Bank of New york. Approved unanimously. Memorandum dated January 31, 1940, from Mr. Morrill recommend1113°11 the s et stc i o s, f Mr. Goldenweiser, Director of the Division of Isea'rcia and .r ta Setclui e secretary th, that Mrs. Vera R. Glaser, a stenographer in S Office, be transferred to the Division of Research and StEttisti, _s e with salary at the rate of :-1,800 per annum, effective as ()r l'el)rt11"'Y 1, 1940. The memorandum also recommended that the salaries clt the rollowirw stenographers in the Secretary's Office be increased, "rective February 1) 19401 From Lida B. Sloan Margaret Lee Higdon Lucy E. Rawller Claire A. Bastable 1,620 1,620 1,680 To 1,300 1,800 1,300 Approved unanimously. 4es_ ttlem -,ora d /1 um dated January 27, 1940, from Mr. Carpenter, Assistant rA -collimending, for the reason stated in the memorandum, that q .. Itltb, m tiltl, eCrEtrY be appointed as a file clerk in the Secretary's Office, 411- IrY at the rate of .1,32.0 per annum, effective as of February 186 -7l'19407 subject to her passinn: satisfactorily the usual physical exam- Approved unanimously. Memorandum dated January 25, 1940, from Mr. Goldenweiser, tirector of the Division of Research and Stati sties recommending, 1'01' the reason stated in the memorandum and with the concurrence of the Secretary's Office, that Miss Margaret Johnston, a file clerk in the Seer s Office, be transferred to the Division of Research Nid Statistics as a stenographer, with salary at the rate of el,440 1)eli effective as of the date upon which she enters upon the 15"t"lialice of her new duties. Approved unanimously. Letter to the board of directors of the "Jersey State Bank", hi1101 Illinois, stating that, subject to conditions of memberrillInbered 1 to 3 contained in the Board's Regulation H and the r°1101t-' j1.11R rot. I. Ettrib special conditions, the Board approves the bank's application ership in the Federal Reserve System and for the appropriate 41°1111t stock i_ 114. the Federal Reserve Bank of St. Louis: } 11 ,(3 PeYment or distribution shall be made by such to the trustee for waiving depositors and cont ributing stockholders, pursuant to the plan under Which the bank was reopened in 193-, except -th the Prior approval of the Federal Reserve -Dank of St. Louis. V tts , ri to admission to membership, such bank, if it -8 /lot already done so, shall charge off or othere eliminate estimated losses of '9,476.44, as 187 -8"shown in the report of examination of such bank as of September 11, 1939, made by an examiner for the Federal Reserve Bank of St. Louis." Approved unanimously, together with a letter to Mr. Martin, President of the Federal Reserve Bank of St. Louis, reading as follows: tem "The Board of Governors of the Federal Reserve Sys„tPproves the application of the 'Jersey State Bank', se'°tYville, Illinois, for membership in the Federal Ree, T7e 8Ystem, subject to the conditions prescribed in the 1:10sed letter which you are renuested to forward to the iXd of Directors of the institution. TWO copies of such tre also enclosed, one of which is for your files other of which you are recuested to forward to the oo .c Accounts for the State of Illinois for t I 1: r=i r T-'4 mit,"In accordance with the recommendation of your camto eel the Board has prescribed a condition of membership Dej equire the ban2, to obtain the approval of the Reserve trti„before making any distributions or payments to the ' Tt vs'ee for waiving depositors and contributing stockholders. cuas not been the practice of the Board to prescribe such hovZition generally. It has been prescribed in this case, th ' - ", in view of the fact that you anticipate that more 1,84/1 the ordinary degree of supervision of the bank's afEtd,,l's is needed. It is assumed, of course, that in the fZli atration of the condition the Reserve Bank will give de eIld Proper consideration to the rights of the waiving 13°2J-tors. "In view of the unfavorable factors which have been , , 1111 ,0Z4ssed in the report of examination and the presentation thWandum sabmitted with the application, it is understood Y°u intend to advise the management of the bank, in Adema euler President Chauman and Executive Vice President atd eE to what will be expected in the way of improvement "You will follow the affairs of the bank closely deei'ender such assistance as you can in seeing that the ,Ttool ; c ed Progress is made. In this connection, it is undern elSo that the president of the bank, who owns nearly be ;" Cent of the stock of the institution and is said to rielc?" of substantial means and successful in his own it M:iUld be responsive to a request to make a change ,e active management should that become necessary. 188 -9et "Please advise the Board of the results of the under„ending reached with the management and keep the Board ;remtlY advised as to the progress made by the bank in ting the needed improvements and as to the steps taken Your office to see that such improvements are effected ' Aithout undue delay.” Thereupon the meeting adjourned. keceit_i2op-vLti.e. secretary. Chairman.
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