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602
A meeting of the Federal Reserve Board was held in Washington
.Jebruary 23, 1934, at 11:30 a. m.
laiESENT:
Mr.
Mr.
LI%
Mr.
Black, Governor
Hamlin
:iller
Thaws
Szymczak
Morrill, Secretary
Carpenter, Assistant Secretary
Bethea, Assistant Secretary
Martin, Assistant to the Governor
Wyatt, General Counsel
Paulger, Chief of the Division
of iocaninations
Mr. smead, Chief of the Division
of Bank Operations
Mr. Goldenweiser, Director of the Division
of Research and Statistics
—r.
Mr.
Mr.
Mr.
Mr.
Mr.
The minutes of the meetings of the Federal Reserve Board held on
—4 0 and 13, 1934, were approved
The minutes of the meetincs of the Executive Camnittee of the
hde
Ilea Reserve Board held on February 10 and 14, 1934, were approved
4441 the
actions recorded therein were ratified unanimously.
The Board then considered and acted upon the followin
matters:
Telegram to Mr. McClure, Chairman of the Federal Reserve Bank
oricalisas City, replying to a telegram dated February 23, 1934, from
41*McAdams, Secretary of the Federal Reserve Bank of Kansas City,
ttt
that the board of directors of the bank, at its meeting todev,
l'oted to
establish a rate of 4;') per annum on advances to individuals,
1/EtZtxie.sh,Ps
or corporations secured by direct obligations of the United
1
t4te3 ulider section 13 of the Federal Reserve Act, as amended, effective
°11 the ri_ st
11
business day following that on which approved by the Federal
441311% Board.
The renly stated that the Board approved for the Federal
2/23/34
-2-
Ile8arve auik of Kansas City -Ghe rate of 21.-
fixed by the directors, ef-
rective February 24, 1934.
Approved.
In connection with the above there was presented a second tele€1''arrldated February 23, 1934, from Kr. McAdams, Secretary of the Federal
48ellbe Bank of Kansas City, advising Ghat, at the meeting of the board
°r directors today, no change was made in the bank's existing schedule
(3rrate2 of discount and purchase other than the establishment of the
rate
referred to above.
ai-Liout objection, noted with approval.
Letter dated February 21, 1934, from
the
Sproul, Secretary of
Federal :eserve Bank of Kew York, and telegrnm dated February 23,
'from :r. Young, Secretary of the Federal Reserve Bank of Chicago,
193'1
both advising that, at meetings of the boards of directors on the dates
no changes were made in the banks' existing schedules of rates of
cli3count and purchase.
Without objection, noted with approval.
Lemorandum dated February 19, 1934, from Kr. Paulger, Chief of
the D.
Mr. ,Tulius
lvis l on of ilIxaminations, recommending the appointment of
t.
examiner,
111°1iner and his designation as an assistant Federal reserve
with
the date
38
'3-al"' at the rate of :3,600 per annum, efi'ective as of
4 W hich he enters upon the performance of his duties.
Richner was appointed an examiner for
all purposes of the Federal Reserve Act, as
amended, and of all other acts of Congress pertaining to examinations made by, for, or under
the direction of the Federal Reserve Board, and
Was designated an assistant Federal reserve
604
2/23/34
-3examiner, with salary at the rate of . 3,600
per annum; all effective as of the date upon
which he enters upon the performance of his
duties.
Letter dated February 21, 1934, from Mr. Austin, Chairman of the
4Ural Reserve Bank of Philadelphia, advising of the acceptance by the
1)°4-11 of directors of the bank, at its meeting on February 7, of the
"
l' lignation of Mr. John C. Cosgrove as a Class A director, and stating
tha
arrangements have been made for a special election of a Class A
4141actor for the unexpired portion of the term ending December 31, 1934,
toe
llooeed Er. Cosgrove.
Noted.
Telegram to Mr. McClure, Federal Reserve Agent at the Federal Re111'73 Bank of Kansas City, referring to a letter dated February 19, 1934,
- 'vir• McAdams, Assistant Federal Reserve Agent at the Federal Reserve
Ilatat
‘j4
Kansas City, and stating that the Board approves the use of the
telle14310Yees of the Denver branch named in the letter to assist in the
eZah,4
-411)ation of member banks.
Approved.
Telegram to Mr. Newton, Federal Reserve Agent at the Federal Reserve
&Ilk of San Francisco, replying to his letter of February 16, 1934,
lie requested an additional leave of absence of thirty days to
ble
"Ilz to fully recover his health.
The reply stated that the Board
fittero
tO April 1, the leave of absence previously granted to Mr. Newton.
Approved.
tokrd,
Telegram dated February 21, 1934, approved by four members of the
toI'll'. Williams, Federal Reserve Apent at the Federal Reserve Bank
61.)
21Woll
c/r Cleveland, referring to the application of "The Atwater 3avings Bank
C01117Pany”, Atwater, Ohio, for permission to withdraw tnmediately from
inenthership in the 2ederal ,,eserve ,3ystam, and stating that the Board
yes the usual reouirement of six months' notice of intention to withclrft and that, accordingly, upon sorrender of the federal reserve bank
tc)elt issued to the Atwater davincls Bank Company, the federal Reserve
Of
Cleveland is authorized to cancel such stock and mke a refund
thereon.
Approved.
Letter to Lr. Hoxbon, Federal .:eserveent at the federal BeBank of Richmond, reading as follows:
"Condition nuailoered twenty-one, prescribed by the Board in connection with the application for membership of the Union Trust Com1)811Y of :_aryland, Baltimore, ::,aryland, provides that:
'3uch bank, in all of its published statements of
condition, shall show separately its extensions of
credit to, and investment in, its subsidiary, The
Royal Realty Corporation, as an investment in, and
an extension of credit to, an affiliated company
holding other real estate.'
"The Board's attention has been called to a condensed statement
Of condition of the Union Trust Company of Maryland as of December
'JO, 1933, published in The Sun, Baltimore (morning edition) of
.anuarY 1, 1934, wherein the bank's extensions of credit to, and
investment in, its subsidiary, The Royal Realty Corporation, were
Ot shown separately as such as reouired by condition numbered twentyflee I:either
were such advances to and investment in the subsidiary
9wn separately as such in the condensed statement of the bank's conItion appearing in The Sun of December 18, 1933, a reprint of which
,
1°13 inclosed with Er. Fry's letter of December 19, 1933.
1r:dine it has been noted that the statement of condition of the
on Trust Company of i_aryland as of December 30, 1033, published
The Sun, Baltimore (morning edition) on January 11, 1934, showed
IL'I,..?,bank's investment in, and advances to, its subsidiary, The Royal
:LtY
be
!
t
Corporation, separately as such as required by condition numacl'ed twenty-one, the condition prescribed that such investment and
tionnees be shown separately as such in all published statements and
°111:7 in the call reports published in accordance with statutory
"Jtirements. To permit the bank to do otherwise would be inconsistent
7p
606
2/23/34
-5-
"and would largely defeat the purposes of the condition.
"You are requested, therefore, to advise the Union Trust CamPany of Maryland that condition numbered twenty-one applies without
exception to all published statements of condition, whether such
statements are published for advertising purposes or in connection
With legal requirements of call reports."
Approved.
Telegram dated February 21, 1934, approved by three members of
the
Board, to
tatac
r. ialsh, Federal Reserve Agent at the Federal Reserve
of Dallas, reading as follows:
"Refer your telegram February 19, 1934, re application Security
State Bank, Pearsall, Texas. Board grants extension of time to
February 28, 1934, within which the bank may accomplish its admission to membership. Request for modification of conditions numbered
19 and 20 also referred to in your telegram will be considered when
the revised contract between the two banks has been received."
Approved.
Letter to the "First National Bank of New Rochelle", New Rochelle,
New
Y°rk, reading as follows:
"The Federal eserve Board approves your application for permis.
8ion to act, when not in contravention of State or local law, as
trustee, executor, administrator, registrar of stocks and bonds,
guardian of estates, assignee, receiver, committee of estates of
lUnatics, or in any other fiduciary capacity in which State banks,
trust companies or other corporations which come into competition
with national banks are permitted to act under the laws of the State
to the
now York, the exercise of all such rights to be subject
the
of
s
regulation
P,rovisions of the Federal Reserve Act and the
lederal Reserve Board.
"This letter will be your authority to exercise fiduciary
Powers as set forth above. A formal certificate covering such
aUthorization will be forwarded to you in due course.
"The Board feels that if you are tendered any of the trusts now
helrl by the National uity Bank of New Rochelle you should carefully
orutinize their condition and should not accept any of such trusts
:
your institu‘lich, through their assumption, may be detrimental to
to the tsermade
-°11. Ln this connection particular reference is
!
7
ion
participat
cleillg' of guaranteed mortgages or mortgages securing
of
Company
Title
tificates of the First Mortgage Guaranty and
IeW Rochelle, and to trusts the funds of which have been invested in
'
aranteed mortgages sold by that company." .
Approved.
607
VW34
-6Letter to "The First National Bank in L:ascoutah", flascoutah,
Illinois, reading as follows:
"Reference is made to the application filed by your bank for
Permission to exercise fiduciary powers under the provisions of
section 11(k) of the Federal Reserve Act.
"The Federal Reserve Board has considered the application and
authorizes your bank to act, when not in contravention of State or
local law, as trustee, executor, administrator, registrar of stocks
and bonds, guardian of estates, assignee, receiver, committee of
estates of lunatics, or in any other fiduciary canacity in which
State banks, trust companies or other corporations which come into
competition with national banks are permitted to act under the laws
of the State of Illinois, only in the specific trusts in which the
First National Bank of Ynscoutah, Lascoutah, Illinois, had been apPointed and was actinc, on the date The First National Bank in Maewas authorized by the Comptroller of the Currency to commence
business, the exercise of all such rights to be subject to the proof the Federal Reserve Act and the regulations of the Federal
Reserve Board. Action upon your application for full fiduciary
Powers has been deferred until your institution has been examined
by a national bank examiner and a report thereof is available."
Approved, together with a letter
to Mr. Wood, Federal Reserve Agent at
the Federal Reserve Bank of St. Louis,
reading as follows:
"There is inclosed a copy of a letter to The First National
12:611at in lascoutah, I,:ascoutah, Illinois, advising of the action of
the Federal Reserve Board on its application for permission to exer`Ise full fiducia
fiduciary powers from which you will note that only limited
authority has been granted and that action on the application for
tuli fiduciary powers has been deferred until an examination of the
'
-nstitution has been made and a report thereof is available.
"Subsequent to such examination, you are requested to transmit
to the
Board an analysis of the report thereof, together with the
of your executive committee as to what action, if any,
Su
1,?()111d be taken at that time upon the bank's application for full
lduciarY powers.
ti
"While the applicant bank appears to be in satisfactory condith°n, and the trust department of the old bank is free from criticism,
hne,,Board feels, in view of the unsatisfactory record of the old bank,
as regards its securities investments, for which its
cashier (now
president of the applicant bank) was apparently responaPer
te to a large extent, that full trust rowers should be withheld
i;411 sufficient time has elapsed to observe the policies to be folby the management in its operation of this new institution.
m,Wed
.Ltle
nearness of Liascoutah to 6-b. Louis, and the small amount of trust
608
2/23/34
-7-
"business acouired by the old bank over a period of years also occasions a question as to whether the applicant bank has any real
need for a trust department."
Letter to MT. O'Connor, Comptroller of the Currency, reading as
Tqlows:
"In accordance with your recommendation, the Federal Reserve
Board approves a reduction in the common capital stock of the 'First
National Bank and Trust Company of Racine', Racine, aisconsin, from
a,000,000 to :500,000, pursuant to a plan which provides that the
bank's capital shall be increased by the sale at par of c)500,000
Par value preferred stock to the Reconstruction Finance Corporation,
and that the funds released by the reduction in common capital stock
shall be used to eliminate unsatisfactory assets, all as set forth
in your memorandum of February 6, 1934."
Approved.
of\
Letter to I.r. O'Connor, Comptroller of the Currency, reading as
follows:
"In accordance with your recommendation, the Federal Reserve
Board approves a reduction in the common capital stock of 'The
irst National Bank of Durango', Durango, Colorado, if and when its
consolidation with the Burns National Bank of Durango is effected,
from ;;100,000 to 50,000, pursuant to a plan which provides that the
bank's capital shall be increased by the sale at par of :400,000 par
value preferred stock to the Reconstruction Finance Corporation, and
Ili°vidss also for the use of the capital structure of both banks,
°liar and above the amount contributed to the common capital, surplus,
Profits and reserves of the consolidated institution, in eliminating
substandard
assets and securities depreciation in the amount of apI'oximately 460,300, all as set forth in your memorandum of February
Q)
R
Approved.
Letters dated February 21, 1934, approved by four members of the
toEtrci
'to Mr. Duncan U. Fletcher, Chairman of the Committee on Banking
encY
of the United States Senate, and to Mr. Henry B. Steagall,
114144 of the Committee on Banking and Currency of the House of Repre'es, reading as follows:
609
2/23/34
-8-
"The Federal Reserve Board wishes to bring to the attention of
Your Cautaittee the need for an amendment to the statute to require
the publication of reports of condition made by State member banks
Of the Federal Reserve System pursuant to the provisions of the
Federal Reserve Act. The existing law contains no such requirement.
"Reports of condition of national banks made to the Comptroller
Of the Currency ate required by the law to be published and the
Federal Reserve Board feels that State member banks of the Federal
Reserve System should be made subject to a like requirement with
respect to reports rendered on dates fixed by the Federal Reserve
Board. Moreover, the Federal Reserve Act, as amended by the Banking
Act of 1933, requires reports of affiliates of a State member bank
to be published by the bank 'under the same conditions as govern its
°wn condition reports.' This provision appears to have been based
Upon the assumption that there was a requirement in the Federal
statute for the publication of condition reports of State member
banks but, as stated, there is no such requirement.
"In the circumstances, the Federal Reserve Board feels that it
12 important that the law be amended so as to require the publication
Of reports of condition of State member banks which are made to the
Federal reserve banks on dates fixed by the Federal Reserve Board
and there is inclosed herewith
draft of a bill which would accomPllsh this Purpose. The Federal Reserve Board hopes that your ComMittee may take favorable action with respect to this proposed amendInent at an early date."
Approved.
Letter dated February 21, 1934, approved by five members of the
) to Honorable
Duncan U. Fletcher, Chairman of the Committee on
11R and Currency of the United States Senate, readint7, as follows:
. "This refers to the letter dated February 2, 1934, from the
teting Clerk of your Committee, inclosing a copy of S. 2565, in;
1°duced by Senator Capper on January 23 (calendar day February 1),
1
4.''3 ) which would amend Section 3138 of the Revised Statutes so as
authorize the organization of national banks with a capital of
° lees than ,25,000 in any place the population of which does not
exceed
three thousand inhabitants, with the request that a report
thereon be made to your Committee.
co
"Prior to June 16, 1933, Section 5138 of the Revised Statutes
b "ained a provision authorizing the organization of national
tring associations with a capital of not less than ,;
T 25,000, with
a e sanction of the Secretary of the Treasury, in any place having
sc qulation of not more than three thousand inhabitants; but this
pretl°11 Was amended by the Banking Act of 1933 so as to omit the
(3v131on
containing this authority.
610
2/23/34
-9-
“It is the view of the Federal Reserve Board, in the light of
the experience of recent years with respect to banking institutions
Of small size, that the enactment of this bill would not prove beneficial. In this connection, it may be pointed out that of the national banks which suspended during the eleven year period of 19211931, 40.8 were banks with a capital stock of less than .50,000, and
67.1. of the national and State banks which suspended during this
period were banks having a ca0.tal stock of less than e250,000. More°ver, out of every one hundred active national banks on June 30, 1920,
having a capital of ,
. 25,000, 20.1 suspended during the period referred
to and out of every one hundred active national banks on June 30, 1920,
having a capital between .;,25,000 and 50,000, 25.4 suspended during
that period.
"As a general principle it is believed that a bank's capital
and surplus should not ordinarily be less than one-tenth of the average
amount of its aggregate deposit liabilities; and in many cases the dePosits of a bank with a capital of only „;25,000, unless it has a relatively large amount of surplus, are insufficient to insure for it an
adequate earning capacity. Such banks find it difficult to pay the
compensation necessary to obtain competent mana7ing officers and, due
'to the limited amount of funds available for investment, are frequentlY unable to secure a proper distribution of risks in investing such
funds. Where risks are not well distributed, losses are apt to be
high and to absorb too large a proportion of earnings. The pressure
for high earnings and low expenses often results in poor management
and in the assumption of excessive risks that lead to failure, with
resulting distress to the communities in which such banks are located.
"It is the view of the Federal Reserve Board, therefore, that
the
existing
provision of the law requiring a minimum capital of
n
wu,000 for the organization of a national bank in a place having a
12?Pulation of not exceeding six thousand inhabitants should not be
`'Ilenged and the Board, accordinrr.ly, does not favor the enactment of
the bill S. 2565.”
Approved.
Letter to Honorable Duncan U. Fletcher, Chairman of the Committee
attilk
ing and Currency of the United States Senate, reading as follows:
"This refers to the letters from the Acting Clerk of your com8
4,4.1ttee
dated January :51, February 15 and February 17, 1934, requesting
l'aPort to your committee on bills S.2520 introduced by Senator
111denberg
on January 23 (calendar day, January 30, 1934), S.2756
t
roduced by Senator Townsend on February 6 (calendar day, February
(r.1,1934), s.2767 introduced by Senator Vandenberg on February 6
:,'It-Lendar day, February 14, 1934) and S.2789 introduced by you on
xebriin
w„,7rY 6 (calendar day, February 15, 1934). Each of these bills
,f,7-LQL amend Section 12B of the Federal Reserve Act with regard to
""e insurance of bank deposits.
47
Gil
-10"Since all of the bills relate to the same subject matter, the
Board will not undertake in this letter to cement upon each of them;
but, as 8.2789 was introduced by you after the introduction of the
Other three, will express its views with reference only to that bill.
"The bill 8.2789 would extend the insurance of deposits under
the temporary Federal Deposit Insurance Fund until July 1, 1935, and
the permanent plan would not become effective until that date. The
bill also would authorize the issuance of obligations of the Federal
Deposit Insurance Corporation with the approval of the Secretary of
the Treasury guaranteed both as to interest and principal by the
United States, and such obligations so guaranteed would be eligible
for purchase by Federal reserve banks and as security for advances
made by such banks to their member banks under the provisions of
Section 13 of the Federal ileserve Act. The bill also contains an
mendment to Section 9 of the Federal Reserve Act under which the
terms 'capital' and 'capital stock' for the purposes of membership
Of a State bank in the Federal Reserve System would include the
amount of outstanding capital notes and debentures legally issued by
the bank and purchased by the Reconstruction Finance Corporation. A
draft of a proposed bill to accomplish these purposes was recently
the subject of correspondence between the Federal Deposit Insurance
Corporation and the Federal Reserve Board, and the Board stated in
that correspondence that it would favor the enactment of a proposed
bill which was in form substantially the same as that of 3.2789.
"You are advised therefore that the Federal Reserve Board favors
the enactment of the bill S.2789."
Approved.
Letter to Mr. McClure, Federal Reserve Agent at the Federal Reserve
ktit
of
Kansas City, reading as follows:
"This refers to Mr. McAdams' letter of February 9 concerning the
application of the First National Bank of Holyoke, Colorado, for 15
additional shares of stock of the Federal Reserve Bank of Kansas City,
aPproved by the Board on February 3.
"It appears that this application was based on an increase of
,000 in the capital stock of the subject bank, incident to the
88.le of preferred stock to the Reconstruction Finance Corporation,
11 certificate of approval of which was issued on January 8, 1934,
eald that the Comptroller of the Currency on January 29, 1934, issued
4 certificate approving a reduction from c50,000 to :„,25,000 in the
eaalmon stock of the bank, thus offsetting the increase in capital
_c3ck due to the issue of preferred stock. It is assumed that the
10 additional shares of Federal Reserve bank stock, the application
rr which was approved by the Board on February 3, have not been
.tasued to the bank. In the circumstances, the Board revokes its
4PProval, graated on February 3, of the application of the First
612
2/23/3.1
-11-
"National Bank of Holyoke, Colorado, for 15 additional shares of
stock of the Federal Reserve Bank of Kansas City."
Approved.
Letter to Er. Walsh, Federal Reserve Agent at the Federal Re11/1117e Bank of Dallas, reading as follows:
"This refers to your letter of January 23, 1034, inclosing a
copy of a letter addressed to you under date of January 20, 1934,
by Ur. Elmer Stearns, Cashier of The First State Bank of Matador,
Texas, relating to a possible violation of the provisions of Section 22(g) of the Federal Reserve Act by Er. A. B. Echols, President of the bank. It has been noted that you have reported this
Matter to the United States Attorney at Port Worth, Texas, and,
in accordance with the Board's usual practice in such cases, two
copies of your letter and inclosure have today been forwarded to
the Attorney General of the United States for such action as he
considers advisable.
"It has been observed that 1/.. Stearns has stated that the
Matter of increasing Mr. Echols' indebtedness was discussed with
the directors of The First State Bank of Matador and with 'an official of the Federal Reserve Bank prior to the increase', to wham
the duties of the President and Vice President were explained, and
that advice was received that 'the interpretation of the law was
not clear but that from our explanation of the duties it did not
seem that they (President and Vice President) would be classed as
executive officers.'
"In this connection, your attention is directed to the Board's
letter of July 11, 1933, with inclosure (X-7493), wherein it was
Pointed out that, since Section 22(g) of the Federal Reserve Act
Provides a penalty of fine or imprisonment for violations, the
determination of the question whether persons should be prosecuted
for such violations is a matter entirely within the jurisdiction of
the Department of Justice, and that an expression of opinion by the
Board on the question who is to be considered an executive officer
17culd not afford protection from criminal prosecution if the Departtent of Justice upon consideration of the matter should take the
P°sition that a person was within the statute and should feel it
.1rcossary to prosecute for a violation thereof. It is suggested
hat, if you have not already done so, you bring the views of the
4)ard as expressed in its letter of July 11, 1933, to the attention
'
?r the officials and examiners of the Federal Reserve Bank of Dallas
which might be
In Order that they may avoid expressing any opinion
c°11strued as an interpretation of this section."
Approved.
21W34
-12Governor Black referred to his recent informal discussions with men-
Of the Board with regard to the suggestion that there be organized
Within the Federal Reserve System credit banks for industry, and stated
that
on February 20, the President, through the Secretary of the Treasury,
l'ecgested that a bill covering the proposal be drawn and submitted to him
tc* hia consideration, he having stated to Mr. Morgenthau at the time of
41king the request that he was in favor of the purchase by the Treasury
bePartment from the Federal reserve banks of the stock subscribed for by
the
banks in the Federal Deposit Insurance Corporation and of allowing the
l'eelerve banks to purchase the stock of the credit banks for industry with
the
Proceeds received from the stock of the Federal Deposit Insurance Cor-
DQzation. Governor Black also stated that on February 21 Mr. John T.
44t401 one of the directors of the Reconstruction Finance Corporation, had
etIlled on him, at the request of the President and after a conference with
the latter, and stated that he was in thorough agreement with the suggestI011 and that he did not feel that the Reconstruction Finance Corporation
W48 t4
a position to undertake the activity.
The Governor added that a
waa being prepared in accordance with the President's request, and
that
the
iii order that the Federal reserve banks might be informed regarding
Illatter he
had talked with the governors of all Federal reserve banks
0ept.
Boston, and, in the absence of Governor Young, with Mr. Curtiss,
Chad.
1'444 of the Boston bank, and that all except n*. Curtiss and Governor
44-8 at Philadelphia, had expressed approval of the plan.
The matter was discussed briefly, and the Governor was
requested to proceed with the drafting of the bill, with the
Understanding that it will be submitted to the individual members
Of the Board for consideration when completed.
Sig
212Z/34
-13The Governer called attention to the fact that the provisions
of
4"ion 404 of the Emergency Banking Act of March 9, 1933, as amended,
4140 which Federal reserve banks may make direct loans to non-member
444 and trust companies, will expire on narch 9, 1934; that an extension
/) Congress of the effective period of the section had not been requested,
kid that
Mr. Oliver of the Treasury Department had called on him during the
1141c and had stated that the authority given to the Federal reserve banks
section is of importance to the mutual savings banks of New York
l'°1‘ the reason that they have established a mortgage company for the pur13(441 or borrowing from the Reconstruction Finance Corporation, and a non4111her trust company for the purpose of borrowing from the Federal Reserve
13.441, 0f
New York for the benefit of the mutual savings banks, and that if
Ille Provisions of Section 404 of the 10ergency Banking Act are not continued
14 e ,,
.kr
act the entire borrowing arrangement will be rendered ineffective.
'"cr Black called attention to the fact that under the provisions of
thep
ecleral Reserve Act, as amended by the Bankin Act of 1933, mutual
444111ga banks may become members of the Federal Reserve System, and that
tile
presented is whether Mr. Oliver should be advised that (1)
the Board would favor the extension of the effective period of Section 404
°t the baereency Banking Act, or (2) under the provisions of the Federal
441erve Act, as amended, mutual savings banks may became members of the
Neraa
Reserve System and as such avail themselves of the privilege of
b00
Wing from Federal reserve banks, and, therefore, the Board does not
ttel
that the provisions of Section 404 should be extended for a further
13i*i°d to meet
the situation referred to.
The Governor was requested to advise Lx. Oliver
that the Board had taken the latter position.
615
V23/34
-14Governor 31ack then referred to the informal .conference in his
°trice on February 16, 1934, between members of the Board and Messrs.
lewem D. Young and Clarence M. Woolley, directors of the Federal Reserve
of New York, during which the directors requested that the Board
rec*asider the action taken by it on January 22, in disapproving salaries
tc:11
'the Year 1934 recommended for
certain of the officers of the bank.
After discussion, action on the request was deferred
Pending the return to Washinton on March 7 of Mr. Tames, who
is Chairman of the Committee on Salaries and Expenditures.
Action was also deferred, pending Mr. Tames' return,
on a letter dated January 26, 1934, from Mr. Stevens, Chairman
Of the Federal Reserve Bank of Chicago, requesting reconsideration of the salaries for 1934 recommended by the directors
for Messrs. C. R. McKay, H. P. Preston, T. H. Dillard and
A. L. Olson; and on a letter dated February 7, 1934, signed
by the directors of the Federal Reserve Bank of St. Louis,
expressing the opinion that the adjusLment to the rate of
012,000 per annum in the salary of Hr. T. G. McConkey, Deputy
Governor and General Counsel, recommended by the directors,
should be made.
Hamlin presented the following letter dated February 21, 1934,
*("Lr. Austin, Chathnan of the Federal Reserve Bank of Philadelphia,
/411.011 was
read:
"Referring to the conversation I had with you today, I beg
leave to say that the committee, appointed to look carefully into
nd study the executive personnel of this bank, as suggested in
the .8oard's
letter of December 13th, addressed to Governor Norris
!ad referred to again in their letter of January 23rd, has made
noh an examination and study, and has made a report to this board,
nblmitting the information concerning the executive personnel which
IlaY were able to obtain from the bank's records and elsewhere, and
JcPressilig the opinion that -from the records it is evident that
these men had the necessary business experience and the proper backUpon which to build, in order to fit themselves for the posic)aa they occupy in this bank. Their records of performance thaw
thatthey have developed into efficient and reliable officials.
"The report was unanimously adopted, with an expression by the
A
boa
,
or its desire, through its coulmittee, to confer with the FedReserve Board at such a time as they may designate."
;;
j
616
2/23/34
-15Mr. Hamlin moved that Mr. Austin be requested to
forward to the Board, for the consideration of the
Committee on District No. 3, the committee report
referred to in the above letter, and that following
its receipt consideration be given to the matter of
a conference of the special committee with the Board's
Committee on District No. 3, or with the Board.
Carried.
There was then presented the following memorandum dated February
13, lo„
--Q*, from Mr. Snead, Chief of the Division of Bank Operations, a copy
or
had been furnished to each member of the Board:
"Mr. Broughton of the Treasury Department was aded to consult
With Mr. Goldenweiser, rir. Harlan of the Treasury and myself with regard to changing the legends, etc., now appearing on Federal Reserve
totes, Federal Reserve bank notes and National bank notes, and to
sUhmit a recommendation on the subject. It is understood that such
recommendation as is made will be formally submitted by the Treasury
DePartment to the Federal Reserve Board for any changes it may wish
to suggest.
"In this connection you will recall that the legend on Federal
ileserve notes now reads: 'Redeemable in gold on demand at the United
tates Treasury, or in gold or lawful money at any Federal Reserve
nenk'. Inasmuch as no currency is now being redeemed in gold the
9.1.1esti0n arises as to whether the Federal Reserve banks should conltue to pay out Federal Reserve notes bearing this legend. It will
be
that while the legend obligates the Treasury to redeem such
notes in gold it obligates the Federal Reserve banks to redeem them
either in gold or in lawful money.
"At the present time (February 6, 1934) the unissued stock of
Peri eral
Reserve notes on hand at the Bureau of Engraving and Printing
ahlounts to „:3,747,540,000, and if this stock was to be scrapped and
new notes printed in replacement thereof such new notes would cost
,IpProximately .4,557,000. The Bureau also has a stock of approximate3:893,000 sheets of incomplete Federal Reserve notes on hand, the
lecee of which have been printed, and the cost of replacing such
,
neamplete currency would be about ,257,000. In addition, the Federal
italeserve agents on December 31 held c-,3,603,475,000 of Federal Reserve
(.tes, the Federal Reserve banks 270,262,000 more and there were
3,07g,543000 in circulation. Assuming that the notes held by the
pe`'eral Reserve agents are new notes and that the notes held by the
oederal Reserve banks and the notes in circulation are one-half worn
ant) it would cost the System approximately $1,966,000 to cancel and
,ntroY all Federal Reserve notes held by the Federal Reserve banks
Ele;ents and all Federal Reserve notes now in circulation as they
returned to the Federal Reserve banks. The total cost of scrapping
y
39
2/23/34
-16-
"the entire stock of Federal Reserve notes, including notes now in
circulation would, therefore, amount to approximately „i3,780,000.
"It is assumed that this matter will receive the prompt con.
sideration of the Treasury Department, particularly as the legend on
the notes requires the Treasury to redeem such notes in cold, but it
would seem that the question as to whether such notes should continue
to be paid out should also receive the consideration of the Federal
Reserve Board. If they are not to be paid out it would also seem that
the cost of replacing the notes should be borne by the Treasury Department out of the profit resulting from the reduction in the gold
content of the dollar, as it is Governmental policy rather than any
action on the part of the Federal Reserve banks which would necessitate the incurring of such expense.
"We have been advised informally by the Bureau of Engraving aid
Printing that the printing of Federal Reserve note faces has been
temporarily suspended."
During the ensuing discussion, LiT. Smead stated that the question
r °hanging the legends now appearing on Federal reserve notes and Federal
48erve bank notes had been discussed by him particularly with Er. Broughton,
Cc°111113-s3ioner of the Public Debt, and that Mr. Broughton had expressed the
(11)1410n that the banks should continue to pay out the notes which are now
d.
14N
Er. amead also stated that the Treasury Department proposes to
'Lew plates made for Federal reserve notes and Federal reserve bank
ilcitea which it is anticipated will be ready in approximately six weeks;
that
all future printings of Federal reserve notes and Federal reserve bank
11(43
a) which will be resumed as soon as the new plates are ready, will be
4'1°14 the new plates; and that it was his understanding from the Treasury
°141elals with wham he had discussed the matter that the changes in the
Dlat
ea Will be submitted to the Federal Reserve Board for consideration
betor
e rinally Tproved by the Secretary of the freasury.
All of the members of the Loard present expressed
banks
agreement with the suggestion that Federal reserve
aid
notes
reserve
Federal
the
out
should continue to pay
of
printings
that
hand,
on
now
notes
Federal reserve bank
618
2/23/34
-17notes in the present form be suspended for the time
being, and that consideration of the replacement of
the present notes with notes in the new form be deferred.
Consideration was given to the following letter dated Yebruary
15) 1934, from Mr. Harrison, Governor of the ieederal Reserve Bank of
New
York,
a copy of which had been furnished to each member of the Board:
'Tr. Gates W. McGarrah, one of the two American directors of
the Bank for International z)ettlements, has informally advised us
that various banks of issue are planning to send members of their
staffs to work for a short period with the economic studies section
Of the Bank for International Settlements. These men will continue
to be paid by their own institutions but will receive, in addition,
a daily indemnity from the Bank for International Settlements to
eover their subsistence while at Basle.
"The advantages of such visits are believed to be mutual.
The men who are temporarily located at the Bank for International
Settlements will be engaged in the study of problems of interest
both to their respective institutions and to the Bank for International Settlements. They presumably will be a source of ideas in
the general field of monetary economics, and of specific information concerning conditions in their home countries, for the permaLent staff of the Bank for International Settlements. In return,
they will become familiar with the operations of the Bank for International Settlements and will also have the advantage of daily contact with the visitors from other central banks engaged in work of
s character similar to their own. In brief, this will provide an
oPPortunity for members of the staffs of the different banks of
issue to concentrate most of the advantages of a visit to several
foreign central banks in one visit to Basle where, in addition, they
ean acquaint themselves with the personnel and practices of the Bank
for International Settlements.
"We are informed that the Bank of England, the Reichsbank,
and the Bank of France will detail junior members of their staffs
tor this work, and that the Bank of Italy and other banks probably
Will participate in the plan in some degree. We, ourselves, feel
that, ir formally invited, we should send one of the members of our
foreign information division to Basle for three months to try out
the arrangement. The members of our foreign information division
are currently engaged in studies of banking and economic conditions
abroad, have some familiarity with foreign languages and, it is
believed, could most advantageously take part in the program suggested by the Bank for International Settlements.
"We should be obliged if you would advise us v:hether the Board
sees anY objection to our sending one of the members of our foreign
information division to Basle for a three months period for the
Purpose mentioned."
619
2/23/34
-18The matter was discussed and the opinion expressed that it would
be unwise at the Present time for the Federal Reserve Bank of New York
to Send one of its employees to the Bank for International Settlements
the purpose referred to, and that, if anyone were sent, it should be
inelaber of the staff of the Board's Division of Research and Statistics.
At the conclusion of the discussion, Mr. Szymczak
moved that Mr. Harrison be advised that, in view of the
present financial and economic situation, the Board
does not consider it advisable at this time for the
Federal Reserve Bank of New York to send an employee
to Basle for the purpose stated.
Carried.
Reference was then made to the report submitted by Mr. John W.
t'
P014
3,
1
Special Adviser to the Federal Reserve Board, under date of February
1934, with regard to banking and other conditions in Puerto Rico,
IllIch had been read by all of the members of the Board.
After a brief discussion, the report was referred
to Mr. Paulger, Chief of the Division of Examinations,
with the request that he review the report and submit
to the Board his views thereon, particularly with regard to the condition of the banks in San Juan and
Ponce specifically referred to in the recommendation
contained in Mr. Pole's report.
It was also understood that, following the receipt of Mr. Paulger's report, consideration will be
given by the Board to whether similar investigations
should be made of banking and other conditions in other
territories and possessions of the United States.
There was then presented a memorandum from Mr. Smead, dated Feb' 1.1.akty 1
1934, which had been circulated among the members of the Board,
111410-4
"41g that now that the Board has given formal approval to the retireh
8Ystem of the Federal reserve banks which is to become effective on
1, 1934, it will be necessary for the Board, (1) to designate a
ketib
er of the board of trustees of the retirement system as provided in
620
2/23/34
the
-19-
rules and regulations of the system, and (2) to decide whether the
814Ployees of the Federal Reserve Board are to be covered by the Plan.
e°11sideration was also given to a memorandum dated February 16, 1934,
111111.1-r. Wyatt, General Counsel, concurring in the opinion that the Federal Reserve Board has authority to contribute to the pension fund and
Otherwise participate in the plan.
Mr. Szymczak moved that Mr. Tames be designated
by the Board as a member of the board of trustees of
the retirement system to serve until a successor is
appointed by the Board.
,f
Carried.
There followed a discussion as to whether the employees of the
4jo
Pederal Reserve Board should be covered by the plan, during which inquiry
made by Er. Miller concerning the benefits provided for Federal emM°Yees under the Civil Service Retirement Act.
At the conclusion of the discussion, Er. Smead
was reouested to prepare and submit to the Board a
statement containing a comparison of the benefits
provided by the retirement system of the Federal reserve banks and by the Civil Service Retirement Act.
There were then presented the following applications for original
4tc
'ek, or for the surrender of stock, of Federal reserve banks:
A 1,
Shares
A-Leations for ORIGINAL Stock:
--?re National Bank in Woburn,
110hurn, Massachusetts
1)
644111.112.,
en3 National Bank in Windber,
Wihdber, Pennsylvania
l
la ication for SURRIMER of Stock:
trict
-euritY National Bank,
Cheney, Washington
Approved.
72
72
Total
45
72
72
144
45
@FedFRASER