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204
A, meeting of the Board of Governors of the Federal Reserve
878tem with the Federal Advisory Council was held in Washington on
Tuesday, February 14, 1939, at 10:30 a.m.
PRESENT:
Mr. Eccles, Chairman
Mr. Ransom, "Vice Chairman
Szynczak
Mr. McKee
Mr. Davis
Mr. 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
ead, Chief of the Division of Bank
Mr.
Operations
Mr. Goldenweiser, Director of the Division
of Research and Statistics
Mr. Parry, Chief of the Division of Security
Loans
Mr. Dreibelbis, Assistant General Counsel
Mr. Leonard, Assistant Chief of the Division
of Examinations
Messrs. Thames M. Steele, Leon Fraser, Howard A.
Loeb, T. T. Davis, Robert M. Hanes, Edward Ball,
Edward E. Brown, Walter W. Smith, John Evans,
R. E. Harding and Paul S. Dick, Members of the
Federal Advisory Council representing the
First, Second, Third, Fourth, Fifth, Sixth,
Seventh, Eighth, Tenth, Eleventh and Twelfth
Federal Reserve Districts
Mr. Henry S. Kingman, President, Farmers& Mechanics
Savings Bank, Minneapolis, Minnesota, representing the Ninth Federal Reserve District
Mr. Walter Lichtenstein, Secretary of the Federal
Advisory Council
2(.3
2/14/39
-2At the request of President Smith, Mr. Lichtenstein read the
f°11cming recommendations adopted by the Federal Advisory Council at
its
separate meeting which convened on February 12, 1939, and con-
cillded just before this meeting.
The reading of each recommendation
Was
followed by a discussion:
"TOPIC No. 1. Services to Member Banks.
"RECOMMENDATION: The Federal Advisory Council has
given careful consideration to the letter of the Secretary of the Board of Governors of the Federal Reserve
System, dated January 3, 1939, dealing with the question
Of 'Bow Can the Federal Reserve System Increase the Value
or Scope of its Services to Member Banks in Practicable
or Desirable Ways'. The Council is ready to express opinions on the questions raised in Mr. Morrill's letter,
though in some instances the topic has been covered by
the Council's Recommendation of November 29, 1938 and by
earlier recommendations.
"Following the order of Mr. Morrill's letter, the
Council makes the following observations on the queries,
a$ presented:
1. Collection System.
"(a) All checks payable in United States should
be collectible at par through Federal Reserve System.
"Answer: The Federal Advisory Council believes that
411 checks should be collected at par. The Federal Reserve System, therefore, should continue its efforts to
bring this about and the Council believes the cooperation
Of the Federal Deposit Insurance Corporation is essential
to accomplish the purpose desired.
"(b) Handle and collect non-par items, charging
41Y exchange deductions to sending banks.
"Answer: No.
"(c) Permit members to make exchange charges on
cash
items as long as nonmembers do so.
"Answer: No.
"(d) Abolish par clearance.
"Answer: No.
"(e) Furnish complete transit service similar to
that
offered by correspondents.
2a/1/39
-3-
"r: The Council answers yes in so far as par
itens are concerned and no in respect to non-per items.
Member banks should be allowed to deposit with the respective Federal Reserve banks or branches all par checks with
merely an adding machine tape showing the amount and total
cf such checks, provided the Federal Reserve bank of the
district is satisfied the sending bank maintains an adequate record of such items.
"(f) Speed up check collection service.
"Answer: In accordance with its Recommendation of
November 29, 1938, the Council answers yes.
"(g) Collection of non-cash items should be left to
Member banks.
"Answer: Yes.
"2. Examinations.
"(a) All examining authorities should be consolidated.
"(b) All examinations should be made by Federal Reserve banks only.
"Answer: The Council replies in the negative to (a)
and
it requests the Board of Governors to continue
it present efforts to bring about greater uniformity in
the examination procedure and in the form of the required
reports.
"(c) Centralization of authority in It.ashington weakens
8Ystem.
037117
"Answer: The Council presumes that the question refers to the centralization of examination authority in
14ashington. The Council does not believe that such centrpo
---ization, as heretofore conducted by the Comptroller's
"'Tice in respect to national banks, weakens the System.
As to State member banks the Council recommends that as
Mich discretion and authority be given the examining dePertments of the twelve regional banks as is given by the
,2
(
.:mPtroller's office to its chief district examiners.
°- Reserve Requirements.
"(e) Cash in vaults should be counted in reserves.
"Answer: The Council believes that this should not
be
--allowed in the case of banks located in communities
where there is a Federal Reserve bank or branch. In the
8e of banks located in communities where there is no
4:ederel Reserve bank or branch, some limited percentage
c't the required reserves should be allowed to be held
in cash.
"(b) Unifolin raises in requirements hurt country
banks.
"
Cr:
No; not more than other banks.
2/14/39
-4"(c) Nonmembers have advantage over members.
"Answer: Yes and no, depending upon the reserve requirements of the State in which the bank is located, but
advantages accruing to member banks, especially in times
Of distress, more than outweigh the slight disadvantages
to which member banks, under certain circumstances, may
be subjected.
"(d) Low rate of interest should be allowed on reserve deposits.
"Answer: No.
"4. Ea221 Requirements,
"(a) publication expensive.
"Answer: Not unduly expensive.
"(b) Lack of uniformity.
, "Answer: The Council continues to urge uniformity
arm is glad to note that substantial progress has been
made.
"(c) Number of reports required increasing.
"Answer: The steady increase in the number of statistical and special reports called for is placing an onerous
burden upon the banks. The Council recommends that the
Beard of Governors review the existing categories of reports to it and other governmental agencies to ascertain
whether some may be eliminated, and suggests that no further reports be requested without careful consideration
er the question whether the resulting information will be
er enough practical value to justify the work and expense
involved. To the extent that reports are considered necesearY, they should not be required at more frequent inter"as than is indispensable.
"3. Miscellaneous.
bo/(Vds.Extend wire transfer system to include Government
"Answer: No.
'(a) Draft rules and regulations in layman's language
and •
ln short paragraphs.
"Answer: This matter is fully covered in the Recom'1endation of the Council of November 29, 1938.
"(c) Furnish a manual, properly indexed, of all acts,
l
i
es and regulations of E
- ederal Reserve Board, Comptroller's
) Federal Deposit Insurance Corporation, and all
0th'
agencies dealing with bank management.
"Answer: Yes, but obviously this requires the co()Aeration
of other agencies.
2/14/39
"(d) Create in the Federal Reserve Banks an advisory
investment service for member banks.
"Answer: No.
"(e) A study of trust department earnings would be
of great value and would point out to many banks sizeable
10sses that are occurring in certain branches of that business. Such study might also be extended to commercial
departments.
"Answer: The Council believes a compilation of the
earnings and costs of trust departments made up from the
reports of national bank examiners and those of the examof the Federal Reserve banks would be desirable at
this time. Such a compilation of the earnings and costs
Of commercial departments is already available and is
considered adequate.
"(f) Since large amounts of Government bonds are
held by banks, the Federal Reserve System should provide
a satisfactory market both as to amounts and prices, therebY rendering a service to member banks and the Government.
"Answer: No, but this answer does not relate to
austomary operations of the open market committee.
"(g) Committee of operating officers of member banks
should be formed in each district to act as a working
committee for the Federal Advisory Council, this committee
!° bring to the attention of the Council from time to
'line suggestions for the improvement of the operations
of the System.
"Answer: No, but members of the Federal Advisory
Council will continue, as in the past, to obtain the
°Pinions of the member banks of their respective districts.
"Selected Comments
'Under this heading there are included a number of
to13-,os
concerning which the Council has either expressed
an opinion above or on some previous occasion. Such a
question is that referring to the collection of all checks
lEplt Par; another that of devising a method whereby member
anks in future should not be made to suffer by being
lepomPelled to pay exchange on items drawn on nonmember
tanks; again another is whether all member banks should
e given permission to make exchange charges on checks
(31" Federal Deposit Insurance Corporation should require
n°101111amber banks to clear checks at par.
"In respect to five other matters raised, the Council
replies as follows:
Orlp
2/14/39
-6-
"1. Discontinue solicitations of membership of countrY banks with deposits under a reasonably snail limit,
saY $1,000,000, through offering free of charge routine
banking services now rendered by present members of the
Federal Reserve System, such as free safekeeping of securities, free shipment of outgoing and incoming currency.
"Answer: No.
"2. Federal Reserve banks should be given all possible authority in their relations with their local members
with the idea of conserving time and also because of a
more intimate knowledge of local conditions prevailing.
"Answer: Yes.
"3. Coordinate issuance of regulations for member
banks and for nonmember banks to avoid conflict as, for
example, interest regulations.
"Answer: Wherever possible there should be coordination especially with the Federal Deposit Insurance Corporation.
"4. Membership in Federal Reserve System is purely
an expense as there are no benefits offered by Federal
that are not also available at correspondent banks.
ts
t7 r:The Council does not agree with the above
state:
"5. System should be developed and conducted in such
manner as to bring all banks into membership and then confine members to acceptance of deposits from sources other
than banks.
"Answer: Banks should be encouraged to became members of the
System, but the Council is unanimously opposed
to the elimination of inter-bank deposits."
Mr. Smith stated that the answers set forth in the above recomIleildation represented the unanimous agreement of the members of the
e°14lcil who were present at the separate meeting.
°I.
At the suggestion
Governor Davis, it was agreed that, inasmuch as a discussion of
thls re
commendation would require considerable time, the other recamkendations of the Council should be considered first and that, if
ilecessarY, the meeting should be continued this afternoon for a
210
2/14/39
discussion of the answers of the Council as set forth above.
"TOPIC No. 2. Easy Money Policy.
"RECMIENDATION: The Federal Advisory Council, considering that many of the fundamental effects of the continuing cheap money policy have not been fully appreciated,
recommends that the Board of Governors of the Federal Reserve System conduct a study of the long-range consequences
of the continuing policy of cheap money upon the accumulation and investment of the savings of the people, and upon
the financial structure of the country, with especial reference to its effects upon the maintenance of a sound banking system."
Chainman Eccles stated that the recommendation would be consider
ed by the Board.
"TOPIC No. 3. Interlocking Directorates.
"RECOMMENDATION: Section 8 of the Clayton Anti-Trust
Act) es amended by Section 329 of the Banking Act of 1935,
Permits a director, officer or employee of a member bank
Of the
Federal Reserve System, or a branch thereof, who
Was lawfully serving as a private banker or as a director,
0fficer, or employee of any other bank, banking association,
savings bank, or trust company, or any branch thereof,
on August 23, 1935, to continue such service to February
1, 1939.
"The Board of Governors of the Federal Reserve System
by
regulation has permitted such service as director, ofox' employee of a member bank and in not more than
ne
1939other
banking institution, to continue to August 1,
"The service of the directors, officers and employees
70 are now serving under the authority of the aforesaid
taw and regulations is in many cases extremely valuable
the banking institutions of which they are such directo
011a, officers, or employees, and the discontinuance of
such service would not result in a commensurate benefit
to the
public.
"Therefore, the Federal Advisory Council believes that
!nY director, officer or employee of any member bank of
-°1a Federal Reserve System or any branch thereof, who is
1/(317 lawfully serving at the same time as a private banker,
211
2/14/39
-8-
"or as a director, officer, or employee of any other bank,
banking association, savings bank, or trust company or any
branch thereof should be permitted to continue such service so long as the stockholders of any such banking institution shall desire to retain such persons in such capacities,
anct so long as such persons shall accept the election or
appointment to such positions. This, of course, means that
no permits for new interlocking directorates will be issued."
Mr. Smith stated that in submitting this recoumendation it was
the h°116 of the Council that the Board would agree to a solution of
this Problem which would permit the continuation of existing inter1"killg bank directorates, without authorizing the creation of new
relat
ionshiPs, as it was felt by the Council that the discontinuance
"existing relationships would work a distinct hardship on member
ballics without a corresponding benefit to the public. He stated that
It
the desired objective could be accomplished without legislation,
the council would prefer to have the problem handled in that way.
1J
P°4 inqUirY from Mr. Ransom as to whether the Council had discussed
the "isting discrimination against member banks resulting from the
el
"
-t°11 Act in its present form, Mr. Smith stated that the Council
11°t given consideration to that point.
Mr. Hanes said that the legislative committee of the American
B15-41c4
Association at the present time was drafting legislation which
would
remove the discrimination in the present law and permit the cont117111e11es of existing interlocking directorates but would prohibit new
lilt en
relationships involving insured banks. He inquired whether
212
2/14/39
-9--
the Board would oppose such a solution of the matter and Chairman
eelea stated that the Board would be glad to give the matter consideration.
"TOPIC No. 4. S. 477 (Corporate Trusteeships).
"RECOMMENDATION: The Federal Advisory Council dealres to call the attention of the Board of Governors of
the Federal Reserve System to Senate Bill 477 relating to
the regulation of trust indentures under which securities
are issued.
"The Council feels strongly that the Imposition of
some of the liabilities as provided in the bill would
create contingent liabilities for banks of deposit acceptcorporate trusteeships which might be dangerous to
themselves and the banking system as a whole. Broadly
sPeaking, no corporations other than banks of deposit
have either the financial responsibility or the experience
which qualify them to act as corporate trustees.
"Furthermore, the Council believes that the bill
vould materially increase the cost of, and make more difficult long term public financing, particularly to smaller
corporations, and would thus tend to hinder expansion of
Plants and businesses at a time when such expansion is
Particularly desirable in the interest of business recovery.
"The Council also believes that the restrictions
contained in the bill on the right of security holders
to waive
defaults, and the requirements that the trustee
at act in the event of default if it is to avoid hawould force into receiverships, or th'e bankruptcy
°?Ilrts, many businesses that otherwise might survive, par!
lcularly in times of depression, with resultant loss to
ulaeir creditors, including banks, and to their stockholders
and to
their employees and the communities in which they
are
located.
"The Council requests the Board to submit this exPraasion of its opinion to the Senate Committee on Banking
!
Ilr Currency with the request that it be put in the record
or the hearings before its Subcommittee considering the
bill.
T
"The Council understands that the record of the Sube°mmittee, in the absence of further hearings, will be
1*(11eed on February 16th, and therefore requests that it
Ye forwarded by that date."
213
2/14/39
-10Mr. Ransom reviewed the consideration which had been given to
the trust indenture bill for over two years by members of the Board and
Its staff, stating that they had been in consultation with representatives of the Securities and Exchange Commission and banking groups
illtsrested in the legislation.
He stated that the Board had made sub-
"
Ltisl contributions towards improving the bill on its technical side
Isel"ing to the provisions governing fiduciaries under corporate trust
hilcientures. BB added that the bnnkers had seemed to feel from the bethat the proposed legislation was unnecessary, although admitt14
the desirability of improving the discharge of the responsibilities
"%lined under these indentures, that the feeling seemed to be growing
tilt the
legislation was not advisable at this time, and that a number
or,
People had stated that they thought it might have a deflationary
ttsot on the capital market.
In answer to a question, he said that
the bankers who had been watching the bill seemed to feel that it was
deillbtful if it would became law, and suggested that the Council consider
the
cillestion whether, if the above recommendation was transmitted by
tile
Board to the Banking and Currency Committee of the Senate, it would
ease or reduce the possibilities of the passage of the legislation.
ttansam inquired whether the Council had given consideration to
clieellesing the bill with the Securities and Exchange'Commission and
kr. t
'
ram replied that members of the Federal Advisory Council had disilssed it with representatives of the Securities and Exchange Cammiss10
,
4 and that the members of Council appeared to be in fundamental
214
2/14/39
-11-
disagreement with the Commission regarding it.
During the discussion, the question was raised whether some
changes should be made in the language of this recommendation before
trellanission by the Board to the subcommittee of the Senate Committee on
33anking and Currency and it was understood that the Council at a separate
fleeting today, would give further consideration to the questions raised
alld advise the Board of any revisions in the recommendation.
Chairman Eccles inquired whether any of the members of the
13"11 of Governors had any objection to complying with the request of
the CoUncil that the recommendation be transmitted to the subcommittee
Of
the Senate Committee on Banking and Currency and on being advised
that there was no objection stated that it would be transmitted by the
13°"d in the form agreed upon by the Council.
"TOPIC No. 5. In Re: Chandler Act.
"RECOMMENDATION: The Federal Advisory Council suggests that the Federal Reserve Board give consideration
to amendments to the Federal Bankruptcy Act as amended
bY the Chandler Act, approved Tune 22, 1938, and partic11141
'
1Y to Section 60 (a) - (b), to alter the provisions
or that Section.
'To an increasing extent member banks of the Federal
Reserve System are making loans secured by assignments of
receivables and other types of collateral. For the most
Part, sach lonns are made to relatively small and inade%lately capitalized enterprises and without notification
to borrowers' debtors, in a spirit of cooperation with
the borrowers to preserve their credit standing.
"The Federal Advisory Council is of the opinion that
1.4 11der the provisions of Section 60 (a) - (b) the reliance
.uthat banks place upon such collateral, unless title therePerfected to comply with the requirements of this
2/14/39
-12-
"Section, is illusory and may result in heavy losses. Attention is also called to the timing of perfection of title
With relation to the date of the loan, leading to a possible classification of the loan as an antecedent debt.
"In addition to loans secured by accounts receivable,
Other types of collateral loans may be affected, among
which are:
A - Loans secured by assignment of money payable under a contract or rents under a
lease.
B - Loans secured by assignments of life insurance policies.
C
Loans secured by assignments of rights and
interests in estates and trusts.
D - Loans on the security of instruments which
appear to be but are not in fact negotiable
instruments.
E - Loans upon borrower's promise to deliver
collateral, whether or not the collateral
is segregated or escrowed.
F
Loans secured in whole or in part by
equities of the borrower in collateral
owned by the borrower but pledged to secure other indebtedness.
(b) is presumably
"The language of Section 60 (a)
provisions beer
its
intended to prevent secret liens, but
ao heavily upon business and banking practice that restrictions in making loans will ensue, thus adversely affecting
general business, or if such loans are made without camPlete compliance with the requirements of this Section,
heavy losses may be encountered by banks."
Mr. Smith stated that the above recommendation was being sub141tted for study by the Board and for such action as it desired to
take
-Ln the light of the circumstances referred to in the recammendati34.
It was stated that counsel for the Federal reserve banks were
't,11(11,4
*74-11S the effect of the amendments to the bankruptcy statutes as
ke,de
by the
Chandler Act upon the industrial loan activities of the
der-,
g-L reserve banks and that following completion of this study the
'4 Would
give consideration to the matter in the light of the recom-
t
2/14/39
endation of
the Council.
During the discussion of the above recommendation Mr. Mmgfield,
Assi
stant General Counsel of the Board of Governors, joined the meeting.
There ensued a further discussion of the recommendation made by
tIle Council on topic number 2 as set forth above and Chairman Eccles
stated that the Board was continuously engaged in studies of the effects
Qt ohanges in the volume and cost of money on the country's economic
11 i
-' and that these studies dealt both with short-term and long-term
l'eltionships.
was
In view of this fact he felt that the recommendation
"ieaningless and also that it was too genern1 in its terms to con-
StitlIte a real recommendation.
In other words, easy money conditions
48,7e been
brought about by certain specific policies and developments.
's °Pinion, the only way a recommendation of this character could
ha7.
'
a concrete meaning would be by referring specifically to some
MieY or policies of the Government or the Federal Reserve System,
sl1Qth as) for example, the gold policy, the silver policy, and the
policies of the Government itself, or the policy of the Federal
in regard to reserve requirements or open market operations.
Mr. Steele stated that the recommendation was made in the
Of earlier recommendations of the Council to, and discussions
with,
vile Board of Governors on related matters over a period of apiniatelY eight years.
Mr. Loeb stated that the question in the Council's mind, was
t'
4e easy money policy was a conscious one or merely the result
2/14/39
-14-
What has occurred during the period of depression.
Mr. Fraser stated that he had suggested the resolution, that
the question presented by the resolution was what the long range effects of the cheap money situation were going to be, and that the suggestion was made with the thought that the Board would undertake a
etlIclY to determine whether the long-term results of the policy would
be b
eneficial, and, if not, what steps could be taken to meet the
Chairman Eccles referred to some of the problems inherent in
the existing situation such as gold imports and the Government silver
14'c:sere/a and suggested that the Council might consider making specific
lisconimendations on these important issues.
Mr. Loeb stated that the Council had always looked to the
11°"ci for suggestions as to topics on which the Board desired the
e'ciell's views and that the Council was not in as advantageous position as the Board of Governors to assess the importance of these
71111°118 Problems.
During this discussion Mr. Hanes left the meeting.
The meeting recessed at 1:00 p.m. and reconvened at 2:00 p.m,
Inth the
same attendance as at the opening of the morning session
eleePt that
Messrs. Hanes, Ball, Kingman, Thurston and Paulger were
llot present.
Mr. Smith stated that in a separate meeting during the lunch
13e11
"the Federal Advisory Council had given further consideration
to
the r
ecannendation relating to the trust indenture bill and had
218
2/14/39
-15-
aecided to request the Board to transmit it to the subcanmittee of
the Senate Committee on Banking and Currency without change.
There followed a discussion of the answers submitted by the
C°11ncil at its meeting with the Board this morning under topic number 1.
Mr. Ransom pointed out that the list of topics enclosed with
/11'• Morrill's letter of January 3, 1939, referred to above, consisted
siLITIPlY of an abstract from the suggestions offered by member banks as
e("led in the report submitted by the Council to the Board of Gover11°re at the
meeting on May 17, 1938, and that, therefore, the list of
t°Pics had not originated with the Board. He suggested that the comrnent
of the Council on some of the topics were so brief that its position
illight easily be misunderstood unless the comments were expanded to
11/1"ent more clearly the reasons underlying the position taken, and that
the e
'
luncil might wish to give further consideration to the matter at a
later
Meeting and determine whether it would be desirable to expand the
/lers to same of the topics for the purpose of stating the reasons in
case for the answer given.
Mr. Smith said that the brevity of the
e°11Zente Was
influenced by the desire of the Council to make its report
17101't enough
so that it would not become unduly burdensome.
In connection with the answers on the Federal reserve check
°ollectiOn system, Mr. Ransom referred to the obstacle to increasing
r4enabershiP in the Federal Reserve System which is presented by the
2/14/39
-16-
131°131en of par clearance.
He referred also to the problems before the
in connection with the prohibition against the payment of interest on demand deposits and expressed the opinion that in the event
he matter again comes before Congress there would be tremendous presatilse tor a repeal of this prohibition.
During the discussion
Lichtenstein read an excerpt from a letter received from Mr. L. B.
11.1118111e, who was a member of the Federal Advisory Council representthe Fourth Federal Reserve District last year, on the subject of
"
13
clearance.
A copy of this excerpt has been placed in the Board's
files.
Mr. Loeb raised the question whether in view of the great
e'lli°11
"of work done in the early years of the Federal Reserve System
to establish the
system of par clearance it would be wise to reopen
tile matter
at the present time.
In connection with the answers on reserve requirements there
4 discussion of whether vault cash should be counted as any part
Of the
legal reserve of a member bank and whether the same reserve re-
cllUrernellt should be established for all banks outside of New York as
the
LLLtiltate central reserve city. It was agreed by the members of
the
e°11ncil during the discussion that the answer to 3(a) should be
c11411 ed to provide that cash in vault should not be counted
as
re-
41''7es in the case of banks located in communities where there is a
l'cler44,1 reserve bank, branch, or agency.
2/14/39
-17At this point Mr. T. J. Davis left the meeting.
In connection with the answers of the Council on the question
rePorts required of member banks, Mr. Ransom stated that the suggestion had been made that the Board obtain reports on the extent to
which banks are making longer term loans than has been customary in
the Past and he inquired whether the members of the Council saw any
°Ili"tion to the Board obtaining reports on loans and the recent exPellience of the banks with respect to demands for credit.
Messrs. Fraser, Evans and Dick withdrew from the meeting at
this point.
It appeared to be the consensus of the members of the Council
88ent that there would be no objection to the development of the
1-mation referred to in Mr. Ransom's inquiry, but the suggestion
ws
°ffered that it would be desirable if the study could be made by
Et
.L. nterested agency so that there would be less occasion for at'kliPts to discredit the report because of bias.
There ensued a discussion of the effects on the capital mar-
ket of the
provisions of the Securities Act of 1933 and the Securi-
ties
Exchange Act of 1934 and of the present difficulties in floating
issues of securities.
Consideration was also given to the
•ren,
,
otis 4
2or the existing low volume of corporate financing and the
OPixli
was expressed among members of the Council that the principal
'
l'essons therefor were the feeling that there is little opportunity for
2i>1
2/14/39
-18-
Pl'oritable investment at the present time and that there is a lack
Of co
nfidence in the future.
There was also a discussion of sugges-
ti°ne that had been made that a new agency be created to make industrial loans and what steps might be taken by existing agencies to
Meet that
need.
In connection with the answer to 5(a) Mr. Ransom stated that
te
zederal bank supervisory agencies had given some consideration to
the Matter of statistics relating to the operation of trust departof banks but had found that the practices at the banks were so
leoking in
uniformity that the information available was practically
Meaningless.
Mr. Ransom stated that the form of the answer to 5(f) might
1
1111P Y that the
Council considered one of the functions of the Federal
°PelliAarket Committee to be the Provision of a satisfactory market for
G°17arnment securities.
Mr. Smith stated that such was not the inten-
ti°4 Qf the Council to create such an impression and that the answer
be amended.
The members of the Council present agreed that
the a,
48Wer
should be amended by striking out everything after the
”nous
After a discussion of answer 3 under selected comments, it
wtle a
greed that the words "wherever possible" should be stricken out
ora
er to remove any possibility of misunderstanding of the sag-
222
2/14/39
-19In connection with the answer to the suggestion that the Sys-
tell should be conducted in such a manner as to bring all banks into
Illenbership and then confine members to the acceptance of deposits
fr°111 sources other than banks, Chairman Eccles stated that a suggestion which had
been made by him that insured banks be relieved of the
111s41"ance assessment on deposits carried by them with Federal reserve
was not made with the thought of eliminating entirely interbank
ba
hces but to discourage unsound pyramiding of reserves and to bring
about more stability in reserve deposits at Federal reserve banks and
ill the balances carried by banks with their correspondents.
Mr. Smith referred to the recommendation made by the Federal
Acills°rY Council at its last meeting with respect to the assignment
"el&ims against the United States and inquired what action had been
tke
„
" by the Board with respect thereto. The members of the Council
Were advised that the matter had been looked into by the Board's
coUnsel and
the Council's recommendation had been included in the
ik)azicp Annual
Report for the year 1938 which was submitted to the
Si°elker of the House of Representatives under date of January 27,
193g,
and that the Board felt that in the circumstances no further
acti°11 should be taken regarding the matter at this time.
Mr. Smith stated that, in order to avoid a conflict with other
'neeti
ilgs in May, the Council had decided tentatively to hold its next
,
Ineatin
g° on Tune 5-6, 1939, and would like to know whether this change
223
/14/39
-20-
/148 satisfactory to the Board of Governors. The members of the Board
stated that they saw no objection to the proposed change in dates.
Thereupon themeeting adjourned.
0410.1 (L__
Secretary.
@FedFRASER