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115 A meeting of the Federal Reserve Board was held in the Office of the Federal Reserve Board on Monday, February 4, 1929, at 11:10 a. m. PRESENT: Governor Young Mr. Platt Mr. Hamlin Mr. Miller Mr. James Mr. Cunningnam Mr. Noell, Assistant Secretary Mr. McClelland, Assistant Secretary The minutes of tne meeting oi the Federal Reserve Board held on Peh -ruar:i 2nd were read and approved. Telegram dated January 30th from tne Chairman of tae Federal Reserve 13enk of Boston, and letter dated January 31st from the Secretary of the Ilederal Reserve Bank of New York, advising tnat taeir boards of directors nisetings on tne dates stated, made no changes in the banks' existing lisdules of rates of discount and purchase. Noted. Letter dated January 29th, from the Assistant Federal Reserve Agent at New York, advising of the conviction of William F. Sutter, formerly Chief Teller of the St. George, Staten Island, branch of the Corn Exchange Bank °I'llew York, for defrauding the bank of $28,000 by forging the names of five tlePositors; tne Assistant Federal Reserve Agent stating that no report of elsilanation of the Corn Excnange Bank has been received since the time the arrest was made in November 1928, and the Federal Reserve Bank has no official illfOruanti ---,on with regard to the cnarges, in view of wnicn fact, inquiry is 4144 as to waetner the case snauld be reported to tne United States District Attorney. . p After discussion, it was voted to suggest to the Assistant Federal Reserve Agent that tne matter be reported to the proper autnorities in the usual manner. 2/4/29 Letter dated January 28th from the President of tne Rnode Island R ospital Trust Company, Providence, Rhode Island, replying to the Boardl,s letter of January 24th, with respect to the new branch being maintained in Wcionsocket on the site formerly occupied by the National Globe Bank and 4eoh5nics Savings Bank, which were taken over; the letter stating that plans 44 under way for a new building on tne site of their existing branch in W"nsocket, and tnat when building is definitely begun, the old branch will be moved to tne site of tne former National Globe and Mechanics Savings Bank, 4maining there until the new building is finisned, when the entire business *ill be moved into the new building. In his letter, the President of the stated that there is no desire to have two branches in Woonsocket, that the arrangement, at present, is entirely temporary, and that the permit Ileotired from the State Banking Commissioner is a temporary one, based upon the program outlined above. After discussion, it was voted to advise the Rhode Island Hospital Trust Company that the Board has no authority to approve its present arrangement at Woonsocket, but in view of the statements made in the above letter and the reported attitude of the State Banking Department, the Board is not disposed to take any legal steps and will let the matter rest for a reasonable time. Report of Committee on Examinations on an application of the Fayette 441c and Trust Company, Connersville, Indiana, for the surrender of 82 4eres of stock in the Federal Reserve Bank of Chicago, in connection with 4 reduction in the capital of the bank from $400,000 to $250,000; the Board's CoMtaittee recommending approval of the application. Approved. 2/4/29 -3- Memorandum from Counsel dated January 29th, on letter dated jarivary 23rd from the Assistant Federal Reserve Agent at Minneapolis, inquiring waetner it will be necessary to secure an application for the Board,s approval of a proposal of tie Ihlen State Bank, Ihlen, Minnesota, t° move to Jasper, Minnesota, a town about five miles south of Ihlen; ecIlaael stating tnat the member bank is subject to the general condition Of membership, and submitting draft of a. letter to the Federal Reserve iteent at Minneapolis requesting information cs to whether tae proposed a of location will involve or result in a change in the general cll character of tae bank's assets or a broadening in its functions, such as will tend to affect materially the standard required of it at the time of ita admission to membersnip in the System. After discussion, it was voted to advise the Federal Reserve Agent at Minneapolis that if the banking authorities of the State of Minnesota approve the proposed change of location of the member bank, the Board will interpose no objection thereto. Memorandum from Counsel dated January 29th, advising that in acc ordance with the action of the Board, at its meeting on January 28th, he c ommunicated with Hon. Newton D. Baker regarding steps which should be taken 1, -Y the Board before finally acting upon the organization papers of .te , International American Banking Corporation, proposed to be organized 1111cler Section 25 (a) of the Federal Reserve Act; Counsel stating that it *ill be impossible for Mr. Baker to consult with the Board until after his l'attxx, - from a trip to Hawaii about March 7th, and that Mr. Baker suggested, ther eic're, that if possible, the matter be held in abeyance until his return. 001144 ael stated tnat Mr. Baker further suggested tnat, if the organizers of the I 1_8 2/4/29 -4- 'r°13015e01 corporation demand that tae Board take some action on their application, tney be advised tnat tie wnole question of the Board's power in the Premises is involved in a mandamus proceeding now pending in the courts, and that tne Board believes it to be to the pest interests of all parties concerned not to take any action on the application until tne extent of the 1°ard l e powers has been determined in the case now pending. Upon motion, it was voted to hold the above matter in abeyance in accordance with Mr. Baker's suggestion. Memoranda dated January 29th, from Counsel, submitting copies of introduced by Senator Glass - (1) To amend Section 19 of the Federal Reserve Act so as to cnange from 3% to 5%, the amount of reserve to be r114111tained against time deposits, and (2) To provide for an additional (lividend for member bnnks of not to exceed 2go of the paid in capital stock of the. rederal Reserve Bank to be paid out of earnings for any year subsequent tO 1928. The Governor stated tnat he has discussed taese bills with the Board's Counsel and has requested him to prepare for submission to the Board, drafts of letters pointing out tne objections to tneir passage. Mr. Platt stated that he would prepare and submit to the Board drafts of letters recommending adoption of some legislation along the lines of tne bills above referred to. The Governor tnen submitted a letter dated February 2nd, from the Gove Inor of tne Federal Reserve Bank of Boston, setting fortn conditions 14 th -e First Federal Reserve District, in view of wnich he will recommend to mie board of directors at a special meeting this week tnat tne discount l'Ett e (31. the bank be increased to 6 per cent; tne substance of the situation beta that member banks in the First Federal Reserve District, while owing the 2/4/29 -5- Psderal Reserve Bank approximately $80,000,000, are simultaneously making speculative loans to their customers. A detailed discussion ensued, during waica it was the consensus of opinion taat no action should be taken toward an increase in tne discount rate of tne Boston Bank until the directors have considered and replied to the Board's letter of February 2nd with respect to the improper use of the credit facilities of tne Federal Reserve Banks by member banks. It was voted tnat draft of a letter to Governor Harding nlong the lines of the discussion be prepared and submitted to the Board at a meeting tais afternoon. At 1:10 D. m. the meeting recessed and reconvened at 2:50 D. the M., same members being present as attended tne morning session. The Governor reported a telepaone conversation with Governor Rarcling, during which he acknowledged receipt of his letter of February 243, and Governor Harding stated that his bank has received tne Board's letter Of the same date. He advised Governor Harding, he stated, that the Board would like to receive a reply to its letter before acting upon 8114 'PPoposed increase in rate and that Governor Harding nad stated tnat, it there was any question of a rate proposal being held in abeyance by the B'eza, he thougat it would be better not to call a special meeting of his "ors for the purpose of considering tne matter. Mr, Miller then submitted draft of a letter to Governor Harding, ill'ePared along tne lines of the discussion at tne morning session, which, 111)°11 motion, was approved as follows: toe. "Your letter of February 2nd has been received and was read to the DEtrrd t, this morning. Your description of banking conditions in New England, 4 the large volume of your loans and advances to member banks, at sea ok41 80n of the year when business is inactive and liquidation ordinarily Ok:8, and your further statement tnat your member banks' borrowings are 6i011ed by collateral loans made by them, were all listened to by the -1 ‘,1",t,r) 2/4/29 -6- oari with great interest and some concern. I want to thank you on behalf tile Board for your full and frank presentation of tae situation confront' flg You. Your letter crossed with one which the Board addressed to your bank Map 1, auruary 2nd, dealing with tne general subject of borrowings by member bAn6. occasioned by speculative security loans, and tne impropriety, as the aoard views it, of such use of the rediscount privilege. It is the hope and the belief of the Board that with tnis statement rolf the Board's attitude, you may find yourself in a better position in ;!Tling with member banks in your district who are making collateral loans _14h the support of Federal reserve credit. I may say to you that tnere are tlembers of the Board who feel strongly that a thorough-going attempt should Beo made to improve tne existing situation along the lines indicated in the eard l e letter. If, after these have been exhausted, it appears that furtner 8.11Pe are necessary to restrain the use of Federal reserve credit for ! 4 ° dilative security loans, the Board will be ready to take up their consideration In the meantime, it bespeaks your personal interest and cooperation onstrating the feasibility of effecting an improvement in a situation is concerning all of us, by means of pressure upon offending banks by at'jriA to taem, if necessary, the attitude of tne Board and the necessity of t„ Piping a practice which is disturbing, alike, to the credit situation and w the business interests of the country." In connection with the discussion at the meeting of the Board on Iltebrnm —17 2nd, with respect to the possible publication of the Board's letter to 4441 Federal reserve banks on tne subject of the improper use of Federal r e--rve credit facilities by member banks, Mr. Miller informally submitted tentative draft of a statement setting forth the Board's views, for use in Ca.se the Board should decide to issue such a statement. The matter was further discussed, and upon motion by Mr. James, it was voted to authorize the preparation of an article for the Federal Reserve Bulletin along the lines of the statement submitted by Mr. Miller, which, when approved by the Board, should be given immediate release as a press statement. 11ZPORTs ar STANDING COMI1TTEES: Nited, pebruary 4th, 144d, February 4th, Recommending changes in stock at Federal Reserve Banks, as set forth in the Auxiliary Minute Book of this date. Recommendations approved. Recommending action on an application for fiduciary powers as set forth in the Auxiliary Minute Book of this date. Recommendation approved. 04 2/4/29 -7COMMITTEES: (Continued) U Dated, February 2nd, riated, February 2nd, Recommending approval of tne application of Mr. Carl W. Fenninger, for permission to serve at the same time as director of the Madera National Bank, Madera, Pa., and as director of tne Commonwealth Title Insurance Company, Pniladelpnia, Pa. Approved. Recommending approval of tne application of Ir. Louis Haas, for permission to serve at tne same time as director and officer of tne Lefcourt-Normandie National Bank, New York, N. Y., and as director of the Chelsea Exchange Bank, New York, N. Y. Approved. The meeting adjourned at 4:10 p. m. G17/(ze As 4.1)131‘oved: • Secretary
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