The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
96 A meeting of the Board of Governors of the Federal Reserve SYstem was held in Washington on Thursday, January 22, 1942, at 2:40 P•ra. PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Mr. Mr. Mr. Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairman Wyatt, General Counsel Dreibelbis, Assistant General Counsel 1,ingfield, Assistant General Counsel Reference was made to the draft of program for the Chairmen's Conference on January 26, 1942, which had been prepared following consilition with Messrs. Rumi, McCabe, and Neely, and no changes were sIsted, )4r. Morrill inquired what arrangements the Board desired to with respect to a luncheon and a dinner for the Chairmen while they a re in Washinc:ton for the Conference. It was voted unanimously (1) to authorize the Secretary's Office to arrange for a dinner at the Mayflower Hotel or the Metropolitan Club for the evening of January 26, with the understanding that the cost of the dinner would be paid by the Board, (2) to arrange a separate luncheon for the Chairmen in one of the Board's dining rooms on January 26, and (3) to request Mr. Szymczak to invite Mr. Alvin Hansen to attend the dinner and make a talk following the dinner. Reference was then made to the Presidents' Conference which .1111 be h -eld in V;ashington on February 2 and 3, 1942, and to the report 1/22/42 -2- f the special committee on self-insurance which was on the agenda t°r co nsideration by the Presidents at that time. It was agreed unanimously that during the afternoon session of the Chairmen's Conference Chairman Eccles would inform the Chairmen regarding the self-insurance matter and the reasons why prompt action With respect thereto is desirable. At this point, Mr. Parry, Chief of the Division of Security Loans, joined the meeting. There was presented the following letter, dated January 19, 1942 'from. Mr. Brown, President of the Federal Advisory Council: "I received today your letter of January 17, in answer to my letter of December 17, regarding the proPosed amendment to section 7(d) of the Securities Exchange 'tot Of 1934. While I and other members of the Council s'w the memoranchun sent us on November 15, containing then analysis made in the Board's legal division of the nouse committee print which contains the statement cominting on 7(d). 'The Board proposes that it be given Wider discretion and that its rules be permitted to ap-LY to unregistered and non-equity securities as well,' did not realize, and I am quite confident, from their Ae citters, that none of the other members of the Federal lrisr,Y Council understood, its full import. Speaking for myself, I am not convinced by your letter that it is desirable to give the Board authority to nolZI!e its regulations concerning extension of credit by .,her than brokers and dealers applicable to unregistered "Well as registered securities. ell "I desire, and believe the other members of the Counand will desire to discuss this matter amongst themselves 15. with the Board. Our next meeting starts on February i„ MY latest information is that hearings are due to i;Zrt on the proposals to amend the Securities Exchange 1934 tomorrow, January 20, and that Section 7(d) t. vart of the second matter on the agenda. It is pracleall- . J Impossible to arrange a meeting and discussion T 7 98 1/22/42 -3- "between the Council and the Board prior to the time at which the committee plans to take testimony. "I do not know what the Board's plan is in presentAt its testimony on this section, but I would like to ask that when it is presented the Board state that the Federal Advisory Council would like to study the testi! 1 1°nY presented in regard to this section and to discuss it livith the Board, and to reserve to the Council the right to file a memorandum before the committee dealing with this section. I would appreciate if you would let me know as promptly as possible that this is agreeable to the Board. , "In order to keep the members of the Council advised 01 developments, insomuch as they have received a copy of your letter to me, at my request, I am sending a copy of this letter, to each of them." the It was stated that on January 20 Mr. Parry testified before 11°118e Committee on Interstate and Foreign Commerce with respect to the Proposed amendment to section 7(d) of the Securities Exchange Act, and that inasmuch as Mr. Brown's letter was not received until esterclaY, January 21, it would not be possible to comply with the l'e(Illest contained in his letter since it was not anticipated that there \7°111(.1 be any further appearance of a representative of the Board before the C°mmittee in connection with the amendment. Following a discussion of the action that might be taken in these circumstances, it was agreed unanimously, upon motion by Mr. Szymczak, that (1) a draft of letter Should be prepared to Congressman Lea, Chairman of the House Committee, advising of Mr. Brown's request and stating that the next meeting of the Council would be held in Washington on February 15-17, 1942, following which the Council might wish to file a statement of its position in connection with the amendment, (2) that this draft 99 1/22/42 -4of letter should be handed to Mr. Purcell, a member of the Securities and Exchange Commission, who is in charge of the hearings before the Committee, for submission to Congressman Lea, and (3) that a copy of the letter be sent to Mr. Brown with the statement that he would be advised as soon as a reply was received from Congressman Lea. Following this action, Mr. Parry left the meeting and Mr. Gardner, Senior Economist in the Division of Research and Statistics, efte into the room. Consideration was given to a memorandum dated January 17, 1942, f rom Mr. Gardner, in which it was stated that hearings would be held in the near future before the Senate Banking and Currency Com "see on the Inter-American Bank; that the Board might be called upon to test, 11 at the hearings; and that aside from that phase of the matter the time at the disposal of the Board for choosing candidates for rilenlbership on the organization committee, for the board of directors q the Bank,and for the presidency of the Bank might be short, parqeillarlY if there is to be preliminary discussion of the candidates 'd.th other persons and agencies interested in the Bank. In the discussion which ensued, reference was made to the suggeetions offered by the Board's Personnel Committee and considered at themewng 1 of the Board on October 3, 1941, as to possible selections the A merican director of the Bank and to the informal consideration that had been Chairman and given subsequently to Mr. Grady, the new ?""al Reserve Agent at the Federal Reserve Bank of San Francisco, 1_00 1/22/42 for that position. While the discussion was in progress, Mr. Goldenweiser joined the 'fleeting In connection with a reference to the legislative situation, Viyatt stated that the convention creating the Bank had been signed by the United States but would have to be ratified by the Senate, that thereafter the necessary enabling legislation would have to be passed by congress, and that the hearings before the Senate Banking and Cur- rency Committee, which had been asked for an advisory opinion by the Sen4te P°reign Relations Committee, would be in connection with the ratification of the convention. that m At the conclusion of the discussion, Chairman Eccles suggested "ere. Wyatt, Goldenweiser, and Gardner be asked to prepare a draft of statement which the representative of the Board might make at the h earinge, and that a meeting of the Board be held on Wednesday, 28, 1n, 1944 at 10:30 a.m, to consider the statement. Chairman Eccles' suggestion was approved unanimously, following which Mr. Gardner left the meeting. There was then presented a letter dated January 13, 1942, from 111's Lichtenstein that the peb he be Secretary of the Federal Advisory Council, asking advised of the subjects that the Board would like to have discuss at its next meeting to be held in Washington on 111417 15-17, 1942. 101 1/22/42 -6The Secretary was requested to inform Mr. Lichtenstein that the Board had no tonics to suggest at this time but would be glad to consider with the Council any matters that it might wish to take up at the meeting. Messrs. Leonard and Cagle, Assistant Chiefs of the Division . lInations, were called into the meeting at this point. of Mr. McKee presented a draft of letter to Mr. R. P. A. Everard, Cashi_ 'r of the Bank of America National Trust and Savings Association, San Francisco, California, reading as follows: "This refers to your letter of January 15, 1942 F!lating to the filing of reports of affiliates of your ocLnk as of December 31, 1941. "A number of inaccuracies in your letter have been noted, including the statement that, in granting TransI rpoation permission to file a brief in support of . Its r request for reconsideration of the Board's ruling thatthat corporation was a holding company affiliate of r' 'the Board assured the Bank that during the time IIIT: terestio was under reconsideration, the parties nr e could disregard the ruling'. The Board did n°t give any such assurance to anyone. c "Idth respect to the question whether Transamerica b°rPoration now is a holding company affiliate of your sa a, / Your letter does not contain the information necesor'Y to determine whether Transamerica Corporation owns ce ,°ntrols, directly or indirectly, 'more than 50 per of the number of shares voted for the election of mIrectors' of the bank at the election on January 13, 1942. y ec)ver, there also is the question, not mentioned in t;'Ir letter, as to whether Transamerica Corporation 'conill any manner the election of a majority of the dith 6, ° ,rs' of your bank; in its rulings, to which you refer, 3i ;j°0ard expressly reserved this question for future conr 0n. In the circumstances, the Board cannot concur ) 11 Your conclusion that the holding company affiliate re. 1-18h-lp between Transamerica Corporation and your bank ueen terminated. Z 4 102 1/22/42 -7"With respect to your request that the Board waive the requirement that your bank obtain and file reports for Transamerica Corporation and other affiliates of your bank as of December 31, 1941, you are advised that, under the provisions of section 5211 of the Revised Statutes of the United States and section 21 of the Federal Reserve Act, this is a matter coming within the jurisdic tion of the Comptroller Currency and of the Board has the no authority to act upon your request." Mr. McKee stated that beforetaking action on the letter referred to above he would like to call the attention of the Board to a letter received under date of January 20, 1942, from Mr. West, Vice Pl'esident, of the Federal Reserve Bank of San Francisco, with which was 'ed a copy of a letter dated January 15, 1942, from the President °t the First Trust and Savings Bank of Pasadena, California (a member bank) the control of the common stock of which and of the Temple City NatA " 1- Bank was recently acquired by Transamerica Corporation), in Which approval was requested for (1) the retirement of the preferred etock °I the bank, the sale of common stock, and the declaration of a e451111nofl -stock dividend which would leave the total capital of the bank 11"langed, (2) the acquisition of the assets of the Temple City Na40nal Bank in Temple City, California, which would be operated as a „ brneh 'and (3) the establishment of a branch at Alhambra, California. mr. west_ls letter there was also enclosed a copy of Mr. INestis l'el31 to the letter from the Pasadena bank, in which it was stated that there was no Of Governors condition of membership requiring permission of the Board for the retirement of the preferred stock, provided the 103 1/22/42 -8bank's capital was not reduced, and that a letter to the Board of Gov- erriors, to be transmitted through the Federal Reserve Bank, requesting Permission to acquire the assets of the Temple City National Bank and to Convert it into a branch and to establish a branch at Alhambra, was 411 that was necessary to place the matter before the Board. Mr. McKee added that, in accordance with the action taken at the meeting of Mr. the Board on January 16, 1942, he had discussed with Crowley, Chairman of the Federal Deposit Insurance Corporation, the application for membership filed by the organizers of the Peoples 1384* of Lakewood Village, Los Angeles County, California, and that the ?ederal Deposit Insurance Corporation was of the opinion that, because or the special circumstances involved, the application should not be approved. It Was pointed out that, since the Pasadena bank is a subsidiary to u4 Transamerica Corporation, permission by the Board to the former eatablish additional branches would be contrary to the policy of the ecImPtroller of the Currency of refusing to grant permission to Ba.tik•c3f Aj'lerica National Trust and Savings Association to establish adclitonal b ranches. During the discussion of this point, Mr. McKee I'ead e• xcerpts from the transcript of a telephone conversation which he had with • Clerk, First Vice President of the Federal Reserve Bank : t S" '1 '411cieco, on January 19, 1942, in connection with the matters -et"red to above. Chairman Eccles suggested that, because of the circumstances 1_04 11;W42 -9- inii°17ed including the fact that the capital of Transamerica Corporation had not been considered adequate to take care of the needs of its e3cistitig subsidiary units, the Board, the Federal Deposit Insurance CorPoration, and the Office of the Comptroller of the Currency should reach an agreement upon the position that they do not look with favor 1113°4 any further expansion of banking offices under the control of eamerica Corporation, either directly or indirectly. the He felt that reasons for the refusal of the Comptroller of the Currency to grant P"1115-e8ion to Bank of America National Trust and Savings Association to establish additional branches, including the question of adequate capital, Were sufficient to justify the Board in refusing to admit to mem-- bership any bank so controlled or to approve the establishment of a.ddi • tonal branches by any such bank. Mr. McKee expressed the opinion that the Board should seek lepb-; ion as promptly as possible in the field of bank holding comParlies and inquired whether the Board would be willing to authorize to +, va.Ke steps to seek legislation which would (1) prevent further bkIlt „ hel —rig-company expansion except in cases where the expansion was at the request of the supervisory authorities for the purpose of taking Care Of a bad banking situation, (2) prohibit loans on stock which WOtilci e' tend control of bank holding-company affiliates, and (3) preet a. b ank holding-company affiliate from acquiring or holding control Of an Un insured bank. 105 1/22/42 -10Chairman Eccles referred to conferences held last year with l'ePreaentatives of the Treasury and the Comptroller of the Currency in connection with the holding-company bill sponsored by the Treasury nd to the correspondence exchanged between the Board and the Treasury in Nhich the Board suggested a solution to the holding-company situation which was not acceptable to the Treasury. He also outlined the r'easons which occurred to him why the present was not an advantageous time to seek bank holding-company legislation and suggested that the three Federal banking agencies should follow the uniform policy of refue,4 'ag to permit further expansion by Transamerica Corporation to the extent that it was within their power to do so, and that if that dicin°t solve the problem legislation might then be sought. In a further discussion, Chairman Eccles made the additional 8liggeetion that the matter be taken up with the Comptroller of the eill'IllencY and with Mr. Crawley for the purpose of getting their agreetent t a uniform policy, and that Mr. Clerk be informed that the to ion of the Peoples Bank of Lakewood Village could be forwarded the Board by the Federal Reserve Bank of San Francisco without recomm endation as involving a matter of policy for determination by the Board. It was agreed unanimously that Chairman Eccles' suggestion should be followed and that Mr. McKee would confer with Mr. Crowley and with the Comptroller of the Currency for the purpose of getting their 106 1/22/42 -11approval of the Program. It was also understood that Mr. McKee would suggest to Mr. Clerk by telephone that the membership application of the Peoples Bank of Lakewood Village be forwarded to the Board without the recommendation of the executive committee of the Federal Reserve Bank of San Francisco as a matter involving a question of policy for determination by the Board. Upon motion by Mr. McKee, the letter to Mr. Everard was approved unanimously in the form set forth above, with the understanding that copies thereof would be sent to Mr. Clerk, Mr. Crowley, and the Comptroller of the Currency. At this point Messrs. Wyatt, Goldenweiser, Dreibelbis, Wingfield, Le°rlard, and Cagle left the meeting and the action stated with respect t° each of the matters hereinafter referred to was then taken by the Blxirch The minutes of the meeting of the Board of Governors of the Peda-_, ' 41 Reserve System held on January 21, 1942, were approved unani11101181 3r. Memorandum dated January 201 1942, from Mr. Goldenweiser, Illl'eet°1 'of the Division of Research and Statistics, submitting the Isesigtlation of Philip M. Kaiser as a junior economist in that Division, t0becclae effective as of the close of business on January 19, 1942, 44°1 l'ec°rninerlding that the resignation be accepted as of that date. The resignation was accepted. Letter to Mr. Hale, Vice President and Secretary of the Federal 11, eserve Bank of San Francisco, reading as follows: 107 1/22/42 -12- "Referring to your letter of January 15, 1942, the Board of Governors approves the fees and allowances fixed IDY your board for the directors of the Federal Reserve Bank of San Francisco and its Branches for the year 1942." Approved unanimously. Letter to the Presidents of all the Federal Reserve Banks, with a. e°11LT to the Federal Reserve Defense Contract Officers, reading as fol- an "Enclosed you will find copy of a letter, dated 20, 1942, addressed to the Board of Governors by y the Honorable James Forrestal, Under Secretary of the and a copy of Governor Draper's reply thereto, relating to Executive Order No. 9001, dated December 27, 1941. "In all probability the Defense Contract Officer at Y°ur head office and branches, if any, will receive refrom Inspectors of Naval Materiel, Supervisors of g, Commandants of Naval Districts, and conc--ng officers of the Navy for confidential reports re i garding industrial concerns in connection with the awardof contracts and the making of advance payments. It !Ill be appreciated if you will forward to this office a °PY of each of the reports made by the Defense Contract ,;ficer at your head office and branches, if any, advising name of the officer to whom the report was furnished rild the name and address of the concern involved. In wree cases where the report is furnished in connection 4 th an advance payment request, please also set forth 411/1 - the copy of the report forwarded to this office the trber and amount of the contract, the date of its execuartt°43 the article or articles contracted for, and the ' cunt of the advance payment requested. Your cooperation in assisting the Navy Department wi4.1 be very much appreciated." 8 Z Approved unanimously. Letter to the Presidents of all the Federal Reserve Banks, reactizi g aa follows: 108 1/22/42 -13- "There are enclosed for your information a copy of a Code of Wartime Practices for the American Press and a.copy of Rules for the Guidance of Persons Corresponding With Foreign Countries issued by the Office of CensorThat office has also recently issued a Code coverthe operations of radio stations and a copy of this Code will be furnished you as soon as available. "Arrangements have been made with the Office of Censorship to furnish Governor Draper with a supply of cOS of future releases by the Office of Censorship to enable him to furnish a copy of each such release to each O. the Federal Reserve Banks. "In connection with the press and radio Codes above referred to, we have been advised by the Director of Censorshi , p as follows: 'Upon instructions from the President, the Office of Censorship has undertaken to enlist the voluntary cooperation of the press and radio to prevent the domestic dissemination of information of aid to the enemy. Pursuant to that undertaking, this Office has distributed the attached codes of practice for publications and radio stations. 'This voluntary effort cannot possibly succeed if there are confusions and contradictions in the dealings of individual departments and agencies of the government with the press and radio. 'It therefore is requested that if at any time any official of your System either In Washington or in the field, desires that the press or radio or any part of it be requested to withhold JiaLunixatian. 91 information, the request be transmitted to the Office of Censorship, rather than to any newspaper or news agency or any radio station direct. 'It should be emphasized that this request relates solely to the withholding of information from publication or broadcasting, and in n° way refers to any affirmative action on the Part of your System in making news available.' As You have heretofore been advised, Governor Draper '67 been designated as the Board's representative on the 1 Operating Board and, if you should have any pr2"shiP ' - 4.em of the kind indicated in the above quotation, he 109 1/22/42 -14- be glad to take it up with the Office of Censorship.tt Approved unanimously. Thereupon the meeting adjourned.
@FedFRASER