Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, February 15, 1937, Volume 24, Part 1

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291
A meeting of the Board of Governors of the Federal
Reserve Syswas held
in Washington on Monday, February 15, 1937, at 3:00 p. m.

PRESENT:

Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

Eccles, Chairman
Ransom, Vice Chairman
Broderick
Szymczak
McKee
Davis

Mr. Morrill, Secretary
Mr. Bethea, Assistant Secretary
Mr. Clayton, Assistant to the Chairman
Mr. Thurston, Special Assistant to the
Chairman
Mr. Parry, Chief of the Division of
Security Loans
Mr. Dreibelbis, Assistant General Counsel
Mr. Davis recommended that Mr. Donald Comer, Avondale Mills,
Birmi
lIgham, Alabama, be appointed a director of the Birmingham Branch
Of the Federal
Reserve Bank of Atlanta for the unexpired oortion of the
ter%
ending December 31, 1938.
Mr. Davis' recommendation was approved
unanimously.
been

Further consideration was then given to the amendment which had

Proposed to Regulation T, Extension and Maintenance of Credit by
401,
.,ers,
Dealers and Members of National Securities Exchanges, for the
Purpoae
of
r eliminating the practice known as "three-day riding" on the
ecurities
exchanges, and to the letter of January 'a, 1937, from Mr.
Gay, President of the New York Stock Exchange in regard to

this practice.




The previous discussions of this subject were revie-ed.
Mr. Broderick moved that the following resolution be adopted:

292
2/15/37
-2-"Resolved, in view of assurances received from representatives of the New York Stock Exchange and others, that
the practice commonly
known as 'three day riding' can be
eliminated by action of the New York Stock Exchange and other
national securities exchanges and in order to provide an opportunity to observe the effectiveness of the proposed action
to be taken, that
the Board lay on the table the amendment to
Regulation T, which was proposed for the purpose of eliminating this practice, without prejudice to the Board's complete
freedom to promulgate such or any amendment at any time when
IA seems
advisable to do so either for the purpose of eradicat.11C the practice referred to or for any other reason which,
in the Board's judgment, justifies such
action."
Carried unanimously.
Mr. Broderick moved that, in response
to Mr. Gay's letter of January 27, 1937, a
reply in the following form be transmitted
today:
"This is in answer to your letter of January 27 summarizing the views expressed and the proposal made to the Board of
'Jovernors of the Federal Reserve System by representatives
of the Exchange on January 18, 1937, with reference to the
Practice commonly known as 'three-day riding and the amendrent of Regulation T as tentatively proposed by the Board
rider date of November 20, 1936 for the purpose of eliminating
this
practice.
"The contents of this letter and the statements made by
u and your associates have been carefully considered by the
13°I'd of Governors, together with material from other sources
the same subject matter, from which it appears
;rtirtilec/T is general agreement that the practice in question
3aould be
eliminated. It has been represented to the Board
Governors, on behalf of the national securities exchanges,
uflat the
occasion for amending the regulation for the specific
a
,
,
rpose of preventing 'three-day riding' would disappear if
cr°Priate action should be taken by the New York Stock Exchange
and other national securities exchanges.
'The Board notes from your letter that the New York Stock
P)cchancanr, —b e is prepared to take such action promptly by adopting
e nforcing rules and regulations which, in the opinion of
the
Exchange, would effectively eliminate the practice within
he field
o
of jurisdiction of the New York Stock Exchange. The
ard notes also that the Exchange would require that members

r




293
2/15/37
-3"keep certain records and make certain reports to the Exchange,
which would result in the accumulation of a substantial quantity
of information in regard to the manner in which margin requirements are met, and that the Exchange would cooperate with
the Board in making available to it, in convenient form, the
Information thus accumulated.
"Having given further consideration to the problem, and
taken account of the representations made in behalf of the
New York Stock Exchange and other national securities exchanges,
the Board of Governors has deferred adoption of the proposed
amendment of Regulation T in order to afford to the New York
Stock Exchange and other national securities exchanges an opportunity to eliminate the practice. The Board's action is
Without prejudice to its complete freedom to promulgate such
an amendment or any other amendment at any time when it seems
advisable to
do so either for the purpose of eradicating the
Practice referred to or for any other reason which, in the
sole judgment of the Board, justifies such action.
"There is enclosed a copy of a statement which the Board
Will give to the press for release in afternoon papers of
Tuesday, February 16, and the Board is transmitting to each
Federal Reserve bank a copy of this letter, together with a
coPy of the press statement."
Carried unanimously.
Thereupon Mr. Broderick moved that
the press statement referred to in the
letter to Mr. Gay be approved and released for publication in the afternoon
papers of Tuesday, February 16, 1957.
Carried unanimously.
After referring to the action taken at the meeting of the Board
reb
'
lIlarY 41 1957, with respect to questions for submission to the
Peder
al Advisory Council at its meeting on February 16, Mr. Ransom stated
that b
'
4e felt the questions with respect to the practices of commercial
batiks
of maintaining deposit balances with banking institutions other
that Federal
reserve banks, which had been under consideration for sub111481
"to the Council should be studied further, and, therefore, stated,
thEit in the
absence of objection, he would defer the matter pending




294
2/1V37
—4—

further

study.

No objection was offered by any of the members of the

Board.
At this point TJessrs. Thurston, Parry and Dreibelbis left the
Ieet

-11g and co11Lii6eration nas then given to each of the matters herein-

after referred to and the
action stated with respect thereto was taken by
the Board.
The minutes of the meeting of the Board of Governors of the Federa' Re
Serve System held on February 12, 1937, were approved unanimously.
Telegram dated February 31, 1937, to Mr. Austin, Federal Regent at the Federal Reserve Bank of Philadelphia, reading as follows:

"Relet February 8. Board approves rider which modifies
executed on July 10, 1933, by J. Frank Rehfuss as Acting
Assistant Federal Reserve Agent at your bank so as to state
sition of Mr. Rehfuss to be Alternate Assistant Federal Reervs Agent effective January 1, 1937."

bone

r

Approved unanimously.
Letter to Mr. 3. J. Mooney, Chief TelegralOperator in the Board's
'
raPh Officei reading as
follows:
view of the rules of the retirement system and the
i'n-"eral policy with respect to employees eligible for retireGent
thereunder, the term of your employment by the Board of
d°
j
ernors will expire at the close of February 28, 1937, the
the t° which your period of service was lest extended, and
Botird has authorized the payment to the retirement system
Of an
in an amount equal to six months' salary for the purpose of
Singthe allowance to which you will be entitled under
the
1V-es of the retirement system.
re
.In taking this action the
members of the Board have
tIZITed me to express to you the deep appreciation which
ren-, -eel of the long and faithful service which you have
(tered not only to the Board
but to the Federal Reserve




295
2/15/37

-5-

"System as a whole. The members have been advised of the
Wholehearted devotion to duty which you have displayed at all
times in seeing that the functions of the leased wire system
were carried out smoothly and expeditiously
and they commend
You most highly for the results which you have obtained.
Your close and complete cooperat
ion with the members of the
staff and the telegraph offices at the Federal reserve banks
has done much
to increase the effectiveness of the leased wire
sYstem and we wish to take this opportunity to express our
aPpreciation of our pleasant associat
ion with you. You will
leave the service with the satisfaction of important duty
well done and
with the best wishes of all who have had the
Pleasure of working with you.
"Trusting that your friends in the organization will hear
from You
from time to time after your retirement in order that
we may keep in
touch with you,"
Approved unanimously.
Letter to Mr. Burke, ChairmLn of the Federal Reserve Bank of
Cleveland, reading
as follows:
"In accordance with the request contained in your telegram of February 5,
the Board approves the reappointment of
Messrs. F. A. Smythe,
D. R. Davies, F. C. Folsom, and D. C.
SIvander as members of the Industrial Advisory Committee for
the. Fourth Federal Reserve District to serve for terms of
'ne year each beginnin
g on March 1, 1937.
"The Board also approves the appointment of Mr. Herman
11* Neff as a member of the Industrial Advisory Committee
(3
tr Your district for 13 term of one year from March 1, 1937,
so_being understood that Mr. Neff is actively engaged in
Irme industrial
oursuit within the Fourth Federal Reserve
letrict.”

f

Approved unanimously.
Reserve

Letter to Mr. Worthington, First Vice President of the Federal
Bank of
Kansas City, reading as follows:

,
t
"Reference is made to the report of examination of the
71'euel County
State Bank', Chappell, Nebraska, as of January
""ereto7,
193
and your letter of January 28, 1937, in regard




296
2/15/37
-6"The unsound practices of the management, the dissension among the stockholders, and other matters as disclose
d
bY the report of examination are disturbing. It is noted
that the State Banking Department has taken a firm stand
in
requiring the correction of the criticized matters and the
installation of a competent executive officer acceptable to
the
Superintendent of Banks, and that the bank has reported
the correction of most of the criticized matters but has
advised that it is not yet prepared to select an executive
officer and wishes to defer such selection until the return
of Mr.
Carlson, a director and the principal stockholcer,
who is now in
California.
"In view of the action which has been taken, it is assumed that this matter will
be followed to a conclusion and
that a
satisfactory management will be installed. It would
aPPear, however, that the situation requires not only that a
competent management be installed, but that the directors
give closer attention to the affairs of the bank and be more
acttv e in the discharg
e of their responsibilities."
Approved unanimously.
Letter to Mr. Leo T. Crowley, Chairman of the Federal Deposit
Iriswp,„
-"nee Corporation, reading
as follows:
"The Board of Governors has been advised that the 'West/7°°d Trust Company', Westwood, New Jersey, has made applicai°n to the Federal Deposit Insuranc Corporation for a loan
e
111 order to
facilitate a merger with the Peoples Trust Com1.11Y of Bergen County, Hackensack, New Jersey. Mr. Gidney,
Vice
President of the Federal Reserve Bank of New York, has
reported that Mr. Penn, Supervising Examiner of the Federal
teP°sit Insurance Corporation, has stated that he would like
o
a. Participate
in an examination of the Westwood Trust CompLIY, in view of the possibility that your Corporation may
ve to absorb a loss either
in connection with a merger or
'
-lquidation
of the trust company.
of
"In view of the circumstances, the Board of Governors
si the Federal Reserve System, in accordance with the provi°113 of subsection (k)
s,
of Section 12B of the Federal Recrve Act, hereby grants()
written consent for the participation
examiners for the Federal Denosit Insun-nce Corporation
-1/the suggested joint examination of the Westwood Trust ComWestwood, New Jersey."

I




Approved unanimously.