Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, February 2, 1940, Volume 27, Part 1

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189

meetirg of the Board of Governors of the Federal Reserve System
WEis held

in Washington on Friday, February 2, 1940, at 11:00 a.m.
PRESTT:

Mr.
Mr.
Mr.
Mr.
Mr.

Eccles, Chairmen
Ransom, Vice Chairman
Szymczek
Davis
Draper

Mr. Morrill, Secretary
Mr. Bethea, Assistnnt Secretary
Mr. Carpenter, Assistant Secretary
Mr. Clayton, Assistant to the Chairman
Mr. Thurston, Special Assistant to the
Chairman
Mr. Wyatt, General Counsel
Mr. Goldenweiser, Director of the Division
of Research and Statistics
Mr. Gardner, Senior Economist in the Division
of Research and Statistics
There was presented a memorandum dated January 31, 1940, from
14* lIctli.F"'en, Assistant Chief of the Division of Bank Operations, in
ill'erel'ence was made to a letter dated Jnnurry 26 from First Vice
t:
cLarip of the Federal Reserve Bank of Atlanta, requestipw
b)r the
Board of changes in the personnel classification plan
theAtiPlIts bank to provide for the creation of the new positions

:

;1 141(31' 14'=u1k Representetive (Manager — Bank Relations Department)"
he hetid officwe

the 11

end

"Assistant Building Custodian and Mechanic" at

the "19-ell4s branch, and for en increase in the maximum salary for
:
11111 . itirm (3f "Guard" at the Savannah Agency from $12 to (f$1,380 Per
salez7 of the guard at the Savannah Agency had been paid
tI

111Y b v the Savannah clearing house banks and he had been carried
the
navroll for the purpose of elacinr, him under the bankers




190
2/2/40
-2b44ket bond.
McLarin's letter stated, that it now aineared deFirblet0

th

entire salary of the guard paid by the Reserve bank,

t4l'ebY e""tin P complete supervision of the Position by the officers
or
aeency and
clearing up a cuestion of the employee's status under
t4800inl

Security Act.

Reference wss made by some of the members of the Board to the
to the
justification for the retention of the Savannah Agency
th„e
1.

as
was
cost ofagreement with the sugg,estion that in any ev?nt an increase

(Theratinc7 the agency at this time was not justified and
th':A the proi)osed
increase in the maximum salary for the guard should not
t) EIIDAroved.

Mr. Szymczak moved that the Federal Reserve Bank of Atlanta be advised that the Board
alToroves changes in the personnel classification
Plan of the bank to provide for the creation of
the two new positions mentioned but disapnroves
the Dronosed change which would increase the
maximum salary for the guard at the Savannah
Agency,

tbO ?

Mr. Szymczak's motion was nut by the chair
Elid carried unanimously.
There
were then presented telegrams to Mr. Young, President of
Reserve

Bank of Boston, and to Messrs. Kimball, Post, Hays,

LeedY and Hale, Secretaries of the Federal Reserve Banks of
Philadelphia, Cleveland, Chicago, Kansas City end San Francisco,
tivelY) 'tntinp
thf,t the Board apnroves the establishment without
NR„
the Federal Reserve Bank of

Francisco on January 30, by the

eller.
"Banks of ivewY(yrk, Cleveland, Chicago, Kansas City and




191
V2/40

Co on
February 1, 1940, and by the Federal Reserve Banks of
84t°11 end Ph
iladelphia today, of the rates of discount and purchase in
the* elisting
schedules.
Approved unanimously.
M.r. Morrill
stated that Mr. Clerk, First Vice President of the
Neral.

Reserve Bank of San Francisco, who was still in Washington, had

IlledNIsed

over the telephone by Mr.
Day, President of the San Fran-

°113e(1 bank,
that

Cushinq, sneciEl counsel for the Bank of America

1\1"14341 Trust
&
savinr-s Association, would leave San Francisco today
t°1' 11"hine)t0n and
that arrangements had been macfe for him to confer with
the
ConiDtrolier of the Currency on
7, 1940.
February

CheitIllan Eccles stated that he had received an invitation this
111°11114e to
attend a meeting
Ner
afternoon in the office of Mr. Bell,
this
8eenetery of
the Treasury, with respect to the Bank of America
(141 Trust &
Savins Association.
It was understood that Messrs. Eccles
end Morrill would attend the conference.
Mr. n
kzerdner stated that in accordance with the understanding
"44 ath
Z7, tll
t-e meeting with representatives of the Treasury on January
N

ttit or et t0rth in the letter addressed to MT. Berle, Assistant Secre8teto
Under date of January 29, representatives of the Board
cs. 1AT"Pittt ,..,
TN,,
.
, rardner, and Solomon) met with representatives of the
q

the

r(Ir t
he purpose of considering changes in the draft of by-laws
14ter_fim
'LLerican Bank which would remove any implication that might




1.92
2/2/40

-4bedrawn
'Were

therefrom that the central banks of the interested countries
er18 of their respective Governments and, therefore, could not

be the
elleies of Government with which the ownership end direction of
the 'liter
-American Bank could be Placed. Mr. Gardner said that the represelltEttilres
or the Board had objected particularly to the provisions
or the
proposed by-laws which would permit the Inter-American Bank to
deal in
drsfts, acceptances, end other short-term paper only with the
ellDrovel of
the
interested Government as to each transaction and only
Klan the
Per
guaranteed by the Government and that when it was
etlqested.that, in accordance with the agreement reached on January 27,
127
-laws be
emended to provide that the bank should be free to deal
ee
ttrel benk
indorsed Paper without Government approval or guarantee
the
raPrese
ntetives of the Treasury opposed the suga:estion as being conto
the a
greement reached on January 27, that the whole matter was
the l'ibieet
of

discussion at that end a subsecuent meeting, and that the

f31)Nett"ives of the Treasury were unwilling to surrender their position.
141'' 4"c111"
added that the representatives of the Board made it clear that,
111111 theY
would not bring up the points of difference between the repNolltattves of
the Treasury
141/bee ot
the
lt ha
InterAme
-ricen
to be
tic
understood that
When.
the
tiike comes for
14 the bY-1-fllys,
.4gt

and the Board at the meeting of the subcomP,conomic and Financial Advisory Committee,
the Board would be free to state its posithe presentation and discussion of changes

In connection with this latter Point Mr. Gar ner stated

d"ultlent in its
Present form is merely tenttive and, when nessed




193
2/2/40
-5by

the Into -American
Economic and Financial Advisory Committee,

"
be submitted to the
interested Governments for their sur-erestions
•

anOther onPortunity will be afforded this Government to make

ell"ees) althouct
it is the hope of the State Department that changes
be
held to a
minimum.
Mr. Gardner made a further statement that on the afternoon of
the•

°I1 which the
second meetine or the representetives of the Board

• he
Treasury v'es hold a meetinc, of tbe subcnmmittee of the Inter°1'tella -becIll'mje and Finenciel Advisory Committee was held at which the
!
'411"11
reDreeentetive suggested th - t it -Tould be better if, instead of
liegillrinc,
Government approval in each case of the accentence or a dethe

oDening of a corres ondent account, or en issue of debentures,

t11"41111: Were a uthorized to
engage in these activities provided the
elell.4Zatts do not
object, and thet this idea was adopted.
Goldenweiser stated that he had just talked over the tele13114 l'ith
Mr
telle

Berle and that during the convers-tion he advised Mr.

the status of the discussions with the Treasury representetives
;Itm l'"33ect to
the proposed bank and stated thet it we the Board's
4/N1,eterdi
that the draft of the by-laws would be submitted to the
1-el'eetQd
Gov
ernments pnd thpt the Board would have an opnortunity to
t4Neetione for further changes when the suggestions
submitted by
e°1111t1l05 ere
codsidered so that the Board was not precluded in
suggestions at an appropriate later time.
tt eliet8er

Mr.

added that Mr. Berle responded that that was his under-

t}t he would make
a stntement to that effect before the




194
2/2/40

-6leetille of the Inter
-American Economic end Financial Advisory Committe
41‘e teitliaatedi thnt this would give the Board an opnortunitv to wori*c on
the xatter while
it is beinr considered by other countries, hut that he
*iiiteci to get the
nei- bank in operation as soon as Possible and would
s
exicour_ e
change .
ellirm-en Eccles suggested that in r7,ivin further consideration
t
elthem9tter the
Hoard mirht wish to bring in Mr. Knoke, Vice President
°1't4pederal
e4I'lq

peserve Bank of New York, and possibly others from the

Reserve bank-s to
assist the Board in preparing the changes in

the 11Y-1€1vis
which it will sugpest.
WYEItt StetFA that it is
now pronosed to charter the hank
1111(1e/' the
laws of
the United States which will reduire the enactment of
leRieaatio

n

by

Con ,ress.

the
thtit
at

Mr. Goldenveiser added that if tht, is

':i11 then have an ouportunity to state its position and
v:i11
the

the

present t

e there anpeared to be no further action required

Board
connectic\n with the matter.
At

this

Point Messrs. Thurston, Wyatt, Goldenweiser and Gardner
t th e 1flFt
irrp and
the action stated with respect to each of the mat1. 1°1‘e1.117Jreferred to was then taken by the Board:
The
Minutes Of the meeting of the Board of Governors of the
1 R"ellre
87step. held on February 1, 1940, were anproved unanimously.
"the

%11

tri"andum dated
January 26, 19401 from Mr. GoldenTeiser, Director

or Peserch

and Statistics, recommendinr tht, for the
tet ed in
the la(rmorandum,
Fdward Boorstein be at pointed on




195
V2/40
telliP(Irary basis
for a perioe of one year as an economic assistant in
the
Division, with
salary at the rate of 2,000 per annum, effective

"o the

date upon which he enters unon the Performance of his duties.

The
MeZorandura stated that in view of the fact that Mr. Boorstein will
1)l'obably be
recoinmended
for a permanent appointment at the expiration
or his
temporary
appointment, it was requested that he now be permitted
t° become a
member of the Retirement System of the Federal Reserve Banks.
Approved unanimously.
Memorandum dated January 30, 1940, from Mr. Paulger, Chief of
tbebivision of

the

Examinati,ms, recommendin7 that, for the reason stated

beineltiorandurn,
erelited sick

HarveY

J. Wishnrt, Assistant Federal Reserve Examiner,

leave with pay (in addition to his accumulated sick leave
13:11c)4114.
1r1R to
18-& daYs and the 30 days advance sick leave allowable under

t413°E*4t 3 leave
regruletion, all of which expired on January 24, 1940),
Ifitt.liary 24,
to March 1, 1940, or until such earlier date as he may be

1)1e to
to,ein

resurnrz, hi.. duties and that all advance sick leave granted
Wishart be
not
eFainst ruture eccumuleted sick-. leave.
ch"rP7ed
Approved unanimously.

4,

tett
"to the board of directors of the "Bank of Kevtesville",
1(e"eir111F,
Viiseouri, statirw: that, subject to conditions of membershio
1111111heci 1 to
3
conteined In the Boara's Regrulation H and the followincr
e(3116 1ti onn,

the Board approves the bank's application for member-

the111111e Federel Reserve System and for the appropriate amount of stock
?
Moral
Reserve Bank of St. Louis:




196
2/2/40
-8"4. Such bank shall make adequate provision for
depreciation in its furniture and fixtures.
5
'Prior to edmission to membership the capital
of such bank shall have been increased to not
less than 425,000."
Apnroved unanimously for transmission
throurfh
the Federal Reserve Bank of St. Louis.
Letter to
th

rOliows:

Federal Deeosit Insurance Corporation, reading as

pede "Pursuant
to the provisions of section 12B of the
./1
the ,1.
Reserve Act, as amended, the Board of Governors of
laiwjederal Reserve System hereby certifies
that the Nyack
the;
Ind Trust Company, Nyack,
New York, became a member of
Qin le,deral
Reserve System on January 31, 1940 and is now
erea 1;er of the System. The Board of Governors of the FedIleeti:eserve SYstem further hereby certifies that, in conwith the admission of such bank to membership in the
Ivorir l Reserve System, consideration
was given to the folot 41
,
1g factors enumerated in
subsection (g) of section 12B
Federal
Reserve Act:
2. :De fihtmcial history and condition of the bank,
3.
adequncy of its capital structure,
4. ,;ts future earnings prosT)ects,
5, Til„le gener7,1 character of its mano7ement,
The
'A se
convenience end needs of the community to
be
6,
rved by the bank, and
,.7ether or not its corporate powers are consistent
h the purposes of section 12B of the
Federal
"serve Act."

ir

Approved unanimously.
tc)

Letter to
Mr. Yollnr7) President of the Federal TReserve Brrik of

4) liPnri 4

---4-11r-', a, follows:

N1x1"11 °rder that we may bring OUT records on gronTe
1
11)1Pre -ankinP un to date as of December 31,
Will
1939,
it
.11 1/1
11(?: -L'1 if you will kindly furnish us with statements

l

'The ,,
bet 4-14i'zle and principal office of each group
'
,44 0-ng system with one or more banks in your
`u-strict;




be

1_97
2/2/40
-9"2. The name and location of each bank which
on
December 31 , 1939 was a member of such grout);
3. Changes, if any, in grow) banking in your district during the calendar year 1939, showing
the name of the growp and of the banks involved
and the manner in which the bank became or ceased
to be a
member of the group; and
4. Statement showing data siThilar to items 1, 2, and
It i 3 covering
chain banking,.
it !
tl suFrftested that the statements be arranged so as to show,
bellit"e case of each group and chain, the trifles of national
to_8 first, followed by the names of State member banks and
..wlet:ber banks, respectively.
determining whether or not a given bank should be
48:
Ildeu as a group or chain bank you should, of course, use
i Tilde the instructions given to you in Mr. Smead's letter
bEthi,l/"LY 20, 1937 which requested a list of group and chain
--S as of
December 31, 1936."
Approved un,
.ninously, tog,ether with
similar letters to the Presidents of all
Other Federal Reserve banks.




Thereupon the meeting adjourned.

''h
er
retcry.
Se

Chairman.