Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, February 10, 1944, Volume 31, Part 1

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1_86
A meeting of the Board of Governors of the Federal Reserve
SYStem

was held in Washington on Thursday, February 10, 1944, at 11:30

Et.

PRESENT:

Mr.
Mr.
Mr.
Mr.

Eccles, Chairman
Ransom, Vice Chairman
Szymczak
Draper

Mr.
Mr.
Mr.
Mr.

Morrill, Secretary
Bethea, Assistant Secretary
Carpenter, Assistant Secretary
Clayton, Assistant to the Chairman

The action stated with respect to each of the matters hereinatter

referred to was taken by the Board:
The minutes of the meeting of the Board of Governors of the

Pederal Reserve System held on February 7, 1944, were approved unanikoialay.
The minutes of the meeting of the Board of Governors of the
Peder
al Reserve System held on February 8, 1944, were approved and

the.
'eLlons recorded therein were ratified unanimously.
Memorandum dated February 8, 1944, from Mr. Morrill recommending that
Mrs. Vivienne O. Goebel be appointed as a stenographer in the
Seel'etary's Office on a temporary basis for a period of not to exceed
6° daYs, with
basic salary at the rate of 81,800 per annum, effective
413 °I' the date
upon which she enters upon the performance of her duties
"ter
having passed satisfactorily the usual physical examination.
Approved unanimously, with the understanding that if anything derogatory




187
-2should develop in the investigation of her
references her services might be terminated
immediately.
Memorandum dated February 7, 1944, from Mr. Paulger, Chief of
the n4
-4-vision of Examinations, recommending that the temporary appointment

of Mrs. Elizabeth

B. lauchope as a stenographer in that Division

be made
permanent, with no change in her present basic salary at the
rate
Of $1,620 per annum, effective February 15, 1944.
Approved unanimously.
Memorandum dated February 7, 1944, from Mr. Paulger, Chief of
the 13ivision of Examinations, submitting the resignation of Marion E.

ght as an
Assistant Federal Reserve Examiner, effective as of the
elq4rati0n on March 11, 1944, of his accumulated and current accrued
annual
leave, and recommending that the resignation be accepted as of
the _,
kuose of business on that date or at an appropriate earlier date
It ann
ual leave is taken before February 10, 1944, the date upon which

he
eApects to leave the Board's service.
The resignation was accepted as recommended.

the

Memorandum dated January 29, 1944, from Mr. Morrill, submitting

l'es- nation of Miss Annie Bates as a cafeteria helper in the Secre*Lahr
ti t s npp.
'lice, to become effective as of the close of business on
aa

rY 4, 1944, and recommending that the resignation be accepted
or that
date.




The resignation was accepted.

18S
2/10/44

—3Letter to Mr. Treiber, Secretary of the Federal Reserve Bank

of Nevi York, reading as follows:
"The Board of Governors approves the appointments
of Messrs. Arthur G. Nelson, Edward J. Noble, William H.
Pouch, and Francis B. Reynolds as members of the Indus—
trial Advisory Committee for the Second Federal Reserve
District to serve for terms of one year each, beginning
March 1, 1944, in accordance with the action taken by
the Board of Directors of the Federal Reserve Bank of
New York, as reported in your letter of February 4, 19h4.
"It is noted from your letter that, owing to the
continued small volume of applications for 13—b loans,
the directors consider it inadvisable at this time to
alpPoint a new member of the Committee to fill the vacancy
caused by the death of Mr. Beach in May 1941."
Approved unanimously.
Letter to the board of directors of the "New Cumberland Bank",
n

1/4,umberland, Pennsylvania, stating that, subject to conditions of
illealber8111-P numbered 1 to 3 contained in the Board's Regulation H, the
BoarA
aPproves the bank's application for membership in the Federal
Reser
Ire System and for the appropriate amount of stock in the Federal
"e Bank of Philadelphia.

The letter also contained the following

Ic'ecial comment.
. "It appears that the bank possesses certain powers
whlch are not being exercised and which are not neces11Y required in the conduct of a banking business,
,
11c4 as the Power to act as surety in certain circum—
ances. Attention is invited to the fact that if the
°,..nk desires to exercise any powers not actually exer—
!
leed at the time of admission to membership, it will
necessary under condition of membership numbered 1
o obtain the
permission of the Board of Governors be1c3re exercising them. In this connection, the Board
.1(1)Tierstands that there has been no change in the scope
d the corporate powers exercised by the bank since the
'tete of its anplication for membership."




1.89
-4Approved unanimously, together with
a letter to Mr. Williams, President of
the Federal Reserve Bank of Philadelphia,
reading as follows:
"The Board of Governors of the Federal Reserve Syst,
tem approves
the application of the 'New Cumberland Bank
New Cumberland, Pennsylvania, for membership in the Federal Reserve System, subject to the conditions prescribed
In the enclosed letter which you are requested to forward
to the Board of Directors of the institution. Two copies
of such letter are also enclosed, one of which is for
YmIr files and the other of which you are requested to
forward to the Secretary of Banking for the Commonwealth
of Pennsylvania, for his information.
m
"A letter to Harrisburg Trust Company, Harrisburg,
'
ennsylvania, relating to its status as a holding company
affiliate upon the admission of New Cumberland Bank, New
?umberland, Pennsylvania, to membership is enclosed and
1-8 to be transmitted to the trust company. Two copies of
letter are also enclosed, one of which is for your
. 11es and the other is for transmittal to New Cumberland

Unanimous approval was also given
to the following letter to the Harrisburg
Trust Company, Harrisburg, Pennsylvania:
"This refers to your letter of October 18, 1943,
relative to the status of the Harrisburg Trust Company,

Harrisburg, Pennsylvania, as a holding company affiliate
!Pon the admission of the New Cumberland Bank, New Cumber?nd, Pennsylvania, to membership in the Federal Reserve
°Ystem.
"The Board understands that your bank owns over 50
.
1.
3,r cent of the outstanding shares of preferred and common
°I'ook of the New Cumberland Bank and, accordingly, it appears that
upon the latter's admission to membership, your
mank will become a holding company affiliate within the
aning of the following provisions of section 2(c) of
"e Banking Act of 1933:
'The term "holding company affiliate"
shall include any corporation, business trust,
association, or other similar organization--

j




190
2/10/44
-5"(1) Which owns or controls, directly
or indirectly, * * a majority of the shares
of capital stock of a member bank * * *.'
"However, the Board also understands that your bank
was organized and is operated for the purpose of engaging
in the general banking and trust business, and although
it owns approximately 18 per cent of the oustanding stock
of the Farmers Trust Company, Carlisle, Pennsylvania, and
aPproximately 9 per cent of the outstanding stock of the
Steelton Bank & Trust Company, Steelton, Pennsylvania, as
well as insignificant amounts of stock of three other banks,
it does not
manage or control any of such banks and is not
operated for the purpose of managing or controlling banks.
"In view of these facts, the Board has determined that
the Harrisburg Trust Company is not engaged, directly or
indirectly, as a business in holding the stock of, or managing or
controlling, banks, banking associations, savings
.:44ks,
,'.
or trust companies within the meaning of the follow-14g provisions of section 2(c) of the Banking Act of 1933:
'Notwithstanding the foregoing, the term
"holding company affiliate" shall not include
(except for the purposes of section 23A of the
Federal Reserve Act, as amended) * * * any organization which is determined by the Board of
Governors of the Federal Reserve System not to
be engaged, directly or indirectly, as a business in holding the stock of, or managing or
controlling, banks, banking associations, savings banks, or trust companies.'
True "As a result of such determination, the Harrisburg
t Company will not be a holding company affiliate for
e'Y Purposes other than those of section 23A of the Federal
Reserve Act.
However, the Board reserves the right to make
e .urther determination
at any time on the basis of the then
,!_tlsting facts and, if there should be such a change in the
,
e
-Lots
as to indicate that your bank might be deemed to be
t2gaged, directly or indirectly, as a business in holding
.
1 stock of, or
managing or controlling, banks, banking
e'rociations,
savings banks, or trust companies, this matshould again be submitted to the Board."

7

Letter to the board of directors of the "Ypsilanti Savings Bank",
111811
"
-til Michigan, stating that, subject to conditions of membership




191
2/10/44
-6-

rallubered 1 to 3 contained in the Board's Regulation H, the Board approves the
bank's application for membership in the Federal Reserve
SYstem and
for the appropriate amount of stock in the Federal Reserve
Bank of
Chicago.
Approved unanimously, for transmission through the Federal Reserve Bank of
Chicago.
Letter to the "Farmers State Bank of Aiddleville, Michigan",
Michigan, reading as follows:
"The Board is glad to learn that you have completed
a11 arrangements for the admission of your bank to the
.
Federal Reserve System and takes pleasure in transmitting
herewith a formal certificate of your membership.
"It will be appreciated if you will acknowledge receipt of this certificate."
Approved unanimously.
Letter to Mr. Young, President of the Federal Reserve Bank of
Chi
cago, reading
as follows:
"This refers to Mr. Hopkins' letter of February 5,
1944, relating to deficie
ncies in reserves of The First
ilational Bank, New Castle, Indiana, caused by a misinter?!'etation of instructions concerning the amendment to
the Federal
Reserve Act relative to War Loan Deposits.
"In view of the circumstances set forth, the Board
-11 Interpo
se no objection to your waiving the penalties
incurred by
the subject member bank."
Approved unanimously.
Letter prepared for the signature of Chairman Eccles to Mr.
Glibe
'
l t) President of the Federal Reserve Bank of Dallas, reading as
tc3114)17:




1_92
2/10/44

-7-

"This will acknowledge receipt of your letter of
January 26 in which you comment on certain undesirable
trends in the policies and procedures of the Services in
the handling of Regulation V loans. You suggest that a
conference of Federal Reserve Bank officers in charge of
V loans be held in Washington in the near future for the
Purpose of discussing with the Board and with the Services
questions that have arisen in connection with present and
future policies. Prior to the receipt of your letter,
Mr. Vest discussed this situation with Mr. Stroud over the
long distance telephone and pursuant to this discussion
Mr. Stroud wrote Mr. Vest at length on January 25 using
Specific cases as examples of the types of questions which
have arisen. I assume that you had discussed this general
situation in detail with Mr. Stroud. Mr. Smead also received a letter on this subject from Mr. Hale, Chairman
of the
Presidents' Conference Committee on Reconversion,
whlch was written after Mr. Hale had received a letter
from Mr.
Stroud.
"We understand from Major Day, who has recently re,
flrned from Dallas, that he had a long discussion of Regulation V financing with Mr. Stroud and that Mr. Stroud
read to Major Day his letter to Mr. Vest. Major Day is
eoing tø discuss the various matters brought out in Mr.
letter with Colonel Cleveland, and from what
.jor Day tells us we believe he has a sympathetic appreclalon of the difficulties the Banks are having in admi
nistering the Regulation V program.
L
,
"I recognize the desirability of sitting down with
re Services to discuss some of the problems indicated
itn your letter. As you know, several subcommittees under
Tr. Baruch are working on various phases of termination
and
reconversion problems, including interim financing,
and it may be
that it would be better to hold a conferi,
encein March or early April after plans relating to fincing have been further developed. However, I think
01.,at a decision with respect to the advisability or timing
a conference might well await the results of Mr. Hale's
-Letters
on this subject to the members of his committee.
th "As you know, it has been my personal position from
tl e beginning that the Federal Reserve Banks should be ac'
ve agents under Regulation V selected because of their
Special qualifications for handling the credit aspects of

j




193
2/10/44
"the work. If they are to become rubber stamps, with the
Financial Sections of the Services supplying the credit
and banking guidance, I would prefer relieving the Federal
Reserve Banks of their functions entirely and asking the
Services to set up their own field organization. I agree
With you that a continuation of the trends as set forth in
Your letter would result in a duplication of effort and a
waste of manpower."
Approved unanimously.
Letter to the Comptroller of the Currency, reading as follows:
"It is respectfully requested that you place an orc.ler with the
Bureau of Engravinp and Printing, supplementing the order of June 15, 1943, for printing of Federal
1
,eserve notes of the 1934 series of the Federal Reserve
B
of San Francisco in the following denomination and
amount:
DenomiNumber of
nation
sheets
Amount
$20
166,000
$39,840,000
"The above request is to cover Federal Reserve notes
of the
Federal Reserve Bank of San Francisco with the
nawaiian overprinting, in accordance with request received
from the Treasury
Department dated February 7, 1944."

1

Approved unanimously, together with
the following letter to Honorable D. W.
Bell, Under Secretary of the Treasury, and
a letter to Mr. Clerk, First Vice President
of the Federal Reserve Bank of San Francisco,
transmitting copies of Mr. Bell's letter
of February 7, 1944, and the above letter
to the Comptroller of the Currency:
"This will acknowledge receipt of your letter of Feb!,,
11,arY 7, 1944, with respect
to the nrinting of $39,840,000
'*1- Federal Reserve
notes of the Federal Reserve Bank of
an Francisco with the Hawaiian overprinting.
"It is
noted from your letter that these notes are
-47E,1_T,ended to be used to establish a reserve in custody with
'
rllr±e Federal
Reserve Bank of San Francisco, and that shiptre therefrom will be made on telegraphic advice to
anr4atela
;;Nired to meet currency needs in Hawaii







Thereupon the meeting adjourned.