Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, February 28, 1939, Volume 26, Part 1

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277

A meeting of the Board of Governors of the Federal Reserve
878teel Was held in Washington on Tuesday, February 28, 1939, at 2:30
P. Ai,
PRESENT:

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

Eccles, Chairman
Ransom, Vice Chairman
Szymczak
McKee
Davis
Draper

Mr. Morrill, Secretary
Mr. Bethea, Assistant Secretary
Mr. Carpenter, Assistant Secretary
Mr. Clayton, Assi stant 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. Parry, Chief of the Division of Security
Loans
Mr. Wingfield, Assistant General Counsel
Mr. Piser, Senior Economist in the Division
of Research and Statistics
Mr. Edmiston, Senior Economist in the
Division of Research and Statistics
MI'. McKee stated that Messrs. Wiggins, Chairman of the Legislative
C4 Littee
I and Needhara, Counsel, for the American Bankers Association,
ettll
eti °Il him this afternoon and left a draft of a proposed amendment to
4eti
:
4 11 22(g) of the Federal Reserve Act relating to loans to executive
01,
"8 Of member bajiks on which they would like to have any comments
t4Elt t
41,44 he
of Governors might desire to make. The draft of amend1448 reed
and, discussed briefly.
It was understood that after Mr. Wyatt
had had an opportunity to study the proposed




278
2/28/3
9

-2amendment he would confer with Mr. McKee
concerning it and that Mr. McKee would submit a recommendation to the Board as to the
action to be taken. In this connection it
was suggested that the Board might take the
Position that it would not oppose an amendment
which would retain the desirable features of
the present law and incorporate therein a
Change to permit a further extension, under
such existing limitations as may be thought
to be desirable, of loans to executive officers which were made prior to June 16,
1933.
Mr. McKee also reported the substance of his conversation with

the
l'ePresentatives
of the American Bankers Association with respect
tO

.

"elr consideration of an amendment to Section 8 of the Clayton Act
relating
to interlocking bank directorates.
Mr. Ransom stated that in accordance with the action taken at

the lueeting of the Board yesterday he had talked with the Comptroller
ot the

CUrrency
over the telephone with respect to the report to be

44e by

the Board on the trust indenture bill, (S-477), and that the

°c4Itr°11er of the Currency had stated that it would meet his wishes
it h

e could have a copy of the report after it was submitted. Kr.
11E14
()1 l'eDorted also that a conference was held by members of the
toEIrd
alld its staff in the Board's offices this morning with CommisCher and Mr. Burke of the legal division of the Securities
Etlaci x
141,eci e4nge Commission, that a revision of the draft of report, prebeelq

bY Mr. Wyatt following the meeting of the Board yesterday, was
cillring the conference, and that the draft, together with the




2/W39

-3,

Pr°cedure contemplated under the
trust indenture bill was the subject
or disallssion.

Mr. Ransom and Mx. Morrill outlined the principal points

covered by the
discussion at the conference including the question
whether the
draft of report was applicable not only to the bill which
accompanied the request for a report but also to the confidential
camIllittee print
No. 2 which had been received by counsel. It was agreed,
Mr. Ran6ola
_
said, that Commissioner Eicher would confer with the other
llaciznbers
Of the
Securities and Exchange Commission this afternoon and
Et(1.71Se Mr.

Morrill not later than 3:30 p.m. of any comments that the

C°1°nIalssion might have to make with respect to the draft of report.
D4ring the discussion which followed Mr. Morrill was called
th A
''meetinm7

and upon his return stated that he had just talked

°Irer the
1111.88i0

th

telephone with Mr.
Burke of the Securities and Exchange Comwh
0 stated that he had prepared a memorandum commenting upon

cillft of report prepared by the Board, copies of which were being
4
'rlt
te Board
by messenger, that the memorandum would be presented
to
th C0
mra1 ssion at a meeting which was about to convene and that Mr.
advise Mr. Morrill of the disposition made of the matter
th
e

or re

There ensued a discussion of the question Whether the draft

1(31't should be
changed to relate to the confidential committee
1)11/1t
'" 2 of the bill and Mr. Wyatt repeated a statonent which he
h
at the
conference this morning with the representatives of




tCla

2/28/39

-4-

the securities and Exchange Commission that the substance of the draft
14118 IIPPliCable

to the confidential print as well as to the bill which

Ilec°111Panied the request of the Senate Committee on Banking and CurereY
for a report. Mr. McKee suggested that, since the request for
rePC)rt was received before the confidential print was prepared, the
4
.
l'ellt3rt should relate to the copy of the bill which accompanied the

regliest of
the Committee.
During the discussion Mr. Morrill received four copies of the
raeraor.QkLidum prepared by Mr. Burke relating to the draft of report and
the m
.4.emorandum was read.
There was further discussion of the report in the light of

kr. lq.
'
like's memorandum and of the question whether the report should
- to the

confidential committee print No. 2.

Mr. Goldenweiser suggested that the Board might make a brief
41)011

to the effect that the bill would be a deterrent to new capital

1 gatae
8

tolreizta.

4nd action on the bill should be deferred until the recovery

"lit had progressed farther.

8ttetor
etirrela
to,

The suggestion was also made that Chairman Eccles talk to
Wagner, Chairman of the Senate Committee on Banking and

on the telephone and ascertain whether he desired the Board

"on the confidential reprint rather than the bill which
Eteeonip
'to,

hied the
request for a report, and this suggestion was agreed




0,E3

2/28/39

-5Consideration was then given to the problems presented in

ec)ralection with a determination by the Treasury of the securities
to be offered by it in exchange as of March 15, 1939, for Treasury
/1"es maturing
on June 15, 1939, and statements were made by Mr.
clitil eton with respect to the possible cash position and cash require1318---8 of the
Treasury until the end of the next fiscal year and by
14r1

er relating to possible issues that might be offered by the

Treaaary.

Luring the discussion above referred to Chairman Eccles left

the nleeting and upon his return stated that he had talked with Senator
egney.
- over the telephone who had advised that he desired a report
the Board relating particularly to the confidential committee
1/11nt No
of the trust indenture bill and that it would be satis-

hot
J'Y to him if the report were submitted not later than Monday,
1939,
Mr. Wingfield was requested to prepare a revised draft of report for consideration by the Board.
°11°Nving the meeting it was learned that the memorandum ret

.1141

ved
re
"
. Mr- Burke during the meeting was cleared by the Securities
SSi011 before it reached the Board.

At thi5 point Messrs. Thurston, Wyatt, Coldenweiser, Parry,




2/28/39
IVibL-p•

-6Piser and Edmiston left the meeting and the action stated

lijitla respect to each of the matters hereinafter referred to was then
by the
Board:
The minutes of the meeting of the Board of Governors of the
/'ecier,2.0
Reserve System held on February 27, 1939, were approved unani1:1301181.
.y.

Memorandum dated February 23, 1939, from Mr. Morrill recam14e/115111g that, for the reason stated in the memorandum, Miss Mary
0444
'e Ihickline be appointed substitute nurse in charge of the first
Etid 1"3431al in the Board's building, with salary at the rate of 85.00
tclr eech calendar day worked, including Sundays and holidays falling
between days worked.
Approved unanimously.
Memorandum dated February 25, 1939, from Mr. knead, Chief of
the Di i80
of Bank Operations, submitting a letter dated February
17, 19
39) fram 111r. Day, President of the Federal Reserve Bank of San

?relict

eco, which requested approval by the Board of changes in the

De/.60
4481 classification plans of the San Francisco bank and its
Port1
414(1 and Seattle Branches to provide at the head office for the
e'reati
O- of the new positions of "Assistant Head of Depailwent" in
t4
°IletnA4
-'
4-Lan Department and "Supervisor of Accounts" in the Fiscal




2/28/39

_7-

vsk-cuillent, for discontinuance of the position of "Supervisor of New
ssues" in the Fiscal Department, and for changes in the distribution
orw°rk of two other positions; for the change in title or distribution
°' work of two positions at the Portland Branch; and at the Seattle
131111/ell for the creation of the new positions of "Head of Department",
"A"istant head of Department", "Collateral Custodian" and "Custodian
Clerk", in the Custodian Department; and for changes in the title or
distribution of work of five other positions at the branch.

The

illorandura stated that the proposed changes had been reviewed and
Z'ee

ended that they be approved.
Approved unanimously.
Letter to Mr. Hamilton, President of the Federal Reserve Bank
or iceti
City, reading as follows:

r

"This refers to your letter of February 9, 1.939,
eoque
Gtine
that the Board rule that Goodland State Bank,
si,”1-end, Kansas, is eligible for admission to membert'J- without an increase in its capital from $30,000
11.(
)
1. 15°,000, such an increase beinP, required if the popion of
Goodland exceeds 3,000.
"uPon
the basis of your opinion that the population
Of
„
ata-`'uuland does not now exceed 3,000, and the opinions
is information furnished in support thereof, the Board
be °f the opinion that the bark may be admitted to memIjor8hiP at this time without increasing its capital.
if the census to be taken this year pursuant to
ari)::e law should be completed before the bank is actually
1-1wItted to
membership, the population of Goodland as
1.4°
J111 in mach census would, of course, have to be taken
° consideration in acting upon the application."




Approved unanimously.

281

2/28/39

-CLetter to Mr. Hamilton, President of the Federal Reserve Bank
or Xansas '
City, reading as follows:
'This refers to your letter of February 6, l99,

with regard to the request of the Farmers State Bank of
iallace, Wallace, Nebraska, for permission to reduce its
capital debentures held by the Reconstruction Finance
C°1130ration in order that it may effect a saving on the
interest paid
on its capital debentures. It appears that
the amount
of the common capital stock of the Farmers
State Bank of Wallace, together with the amount of its
!aPitel debentures held by the Reconstruction Finance
u°rPoration, aggregates 25,000. Since this is the miniiallm amount of capital which the State Bank would be reto have in order to became a member of the System,
Your counsel
has advised you that you might not properly
giVrove the proposed reduction.
"The advice you have received from your counsel is
in
A accordance with the provisions of the Federal Reserve
'
c?'"
l
However, in at least one case in which comparable
4. reumstances were involved, the Board has taken the posi;
l
un that it would
not object to the proposed reduction,
°Ject to certain requirements which would assure that
the
c°mmon capital stock of the bank would be increased
an equivalent amount within a reasonable time. In
that
case, the Board required that, at the time of each
reduct
dli
of the bank's capital debentures out of earnings,
there
must be set aside in a reserve fund, for the sole
pli
of declaring stock dividends, en amount equivalent
to
muethe
ll a amount of the reduction; end such stock dividends
of ;,ba declared when the reserve fund equals 10 per cent
uue Emount of the bank's capital stock and debentures
to the reduction. The Board further stated that the
thol. ne aside of such reserves should, of course, be audi, "-lad by appropriate action of the bank's board of
'ecters.

--s-e-tcj

slit :If the Farmers State Bank of Wallace desires to
tai7At an aPplication for permission to reduce its capi. tebenture _ ,
it3 with the understanding that it will be
ellVect to
requirements similar to those described above,
the You 'would be willinp to recommend the reduction from
standPoint of the Bank's condition and adequacy of




285
2/2e/39
capital funds in relation to its deposits, it is sageested that you submit the request to the Board for consideration with your recommendation in the premises."




Approved unanimously.

Thereupon the meeting adjourned.