The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
in,47, ‘Z.1" A meeting of the Federal Reserve Board was neld in the office of the Pederal Reserve Board on Tuesday, January 29, 1929 at 11:45 a. m. PRESENT: Governor Young Mr. Platt Mr. Hamlin Mr. Miller Mr. James Mr. Cunningnam Mr. Eddy, Secretary Mr. McClelland, Asst. Secretary The minutes of the meeting of the Federal Reserve Board held on January 25ths revised in accordance with corrections made at tne meeting yesterday, were r‘eaci and approved. Tne minutes of the meeting of tne Federal Reserve Board held on January 4V4 were then read and approved. Letter dated January 24th from the Chairman of the Federal Reserve Bank Dallas, advising of the establishment on January 23rd of the following ached111e of rates for purchases of acceptances: Bankers acceptances 1 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days Repurchase Trade acceptances _ _ - 4 1/2% 4 5/8% 4 7/8% 5% 5% 5% Noted. The Governor then presented a letter dated January 28th from the Chairlbart of tne Federal Reserve Bank of New York, confirming telephone advice yester- 4 4 that tne board of directors of the bank decided not to do anything, at present, 4104 C the lines of issuing a statement such as was referred to by Mr. McGarrah #114.1 4C his conference with the Board on January 25th. Noted. 9 1/29/29 -2- Letter dated January 28th from the Assistant Federal Reserve Agent at " II York, advising of the merger of the Garfield National Bank of New York int° the Cnase National Bank, the merger of tne State Bank and Trust Company, a nonmember bank in New York, into the Manufacturers Trust Company and the lollintary liquidation of the Little Neck National Bank, Little Neck, queens C°IintY, N. Y., and its absorption as a branch by the Bank of Manhattan Company; 411 effective at the close of business January 26, 1929. Noted. Memorandum dated January 28tn from Counsel, recommending that tnere be 11151ished in tne Federal Reserve Bulletin an opinion by the Court of Civil 4Peals of the State of Texas, upholding the negotiability of the standard to trade acceptance now in use, containing tne clause "The obligation f tIle acceptor arises out of tne purchase of goods from the drawer." Approved. Memorandum from Counsel dated January 24th with reference to the Etetioh of the Board at its meeting on January 11th in voting, subject to an %lion as to its legality by Counsel, to approve an application of the First 4Etti Bank of Brookfield, Mo., for permission to act as transfer agent in 0na1 elleh manner as to enable the bank to so act in connection with a particular 111811 of stock by one of its customers, The Consumers Public Service Company; 001h, -'sel stating there is no legal reason wny the Board shauld not authorize 411.4 -"''lonal bank to act as transfer agent, with the understanding that the power t be ° exercised only in a particular case, provided competing state instituti ' 13 are permitted to act as transfer agent, as they are in the State of 8°1111. In nis memorandum,Counsel pointed out that it has been tne practice 100 1/29/29 -3- °I the Board, however, with one or two exceptions, not to grant permission to exercise a fiduciary power in one specific case only, but to grant powers emierally to be exercised in any case. After discussion, upon motion, it was voted to authorize the First National Bank of Brookfield, Mo. to act, wnen not in contravention of state or local law, as transfer agent, with the understanding that the bank is not to act in any case under this grant of permission except as transfer agent for the Consumers Public Service Company in tne particular issue of stock referred to in a letter addressed by the bank to the Federal Reserve Bank 0/ St. Louis under date of October 1, 1928. The Governor then stated that Mr. Miller expects to leave Washington on 4bruerY 5th or 6th for an absence of about ten days, while Mr. James is leavillg on February 8th for a more extended absence. He therefore brought 11,P for consideration the memorandum presented by Mr. Cunningham at the meeting of the Board on January 18th, on the subject of qualifications and compen41tion of employees of the Federal Reserve Board, submitting the following rea olution: "BE IT RESOLVED BY THE FEDERAL RESERVE BOARD that the Governor is hereby authorized to appoint a committee consisting of the Governor as Chairman, and two other members of the Board, who are directed to make a study of the employment situation under tne Board in order to determine the efficiency of the service being rendered, and whether, considering the present cost of living, any adjustments in the compensation paid individual employees, should be made. BE IT FURTHER RESOLVED that the committee is hereby requested to make a full report of tneir findings, together witn any recommendations which they deem advisable, to the Federal Reserve Board, not later than June 1st, 1929." After discussion, upon motion, the resolution was adopted. The Governor designated Messrs. James and Cunningham to serve with him on the Committee referred to. 101 1/29/29 -4- The Governor then referred to the practice of the Board for the last three years of requesting the Federal Reserve banks to furnish the Board with a statement listing all member banks borrowing continuously during the year, 614'1 guggested that the request be amended so as to include also member banks that are frequent, even though not continuous, borrowers. After discussion, pare and submit to the letter to the Chairmen lines suggested 'during ditional information. the Governor was requested to preBoard at its meeting tomorrow a of all Federal Reserve banks along the discussion, requesting the ad- The Governor then advised the Board of two bills introduced in the Setlate by Senator Glass, one of which would increase the reserve requirements °f member banks on time deposits to 51; and the other, provides for the payment or at additional dividend by Federal Reserve banks, when earned, of 2%. He tated that the views of the Board on these bills will probably be requested it due course. Mr. Miller then read to the Board a further revision of the proposed 1 tter to all Federal Reserve banks, tentatively approved at the meeting of the, Qoard on January 24th, on the subject of the proper use of the credit 4eilities of the Federal Reserve System, as follows: e °The firming tendencies of the money market which have been in ov ridetce since the beginning of the year - contrary to the usual trend r money rates at this season - make it incumbent upon the Federal ieserve banks to give constant and close attention to the situation order that no influence adverse to the trade and industry of the 4ntrY shall be exercised 'by the trend of money conditions, beyond at may develop as inevitable. 10 The extraordinary absorption of funds in speculative security ora46 which has characterized the credit movement during the past year iL"re in the judgment of the Federal Reserve Board deserves particutZ attention lest it become a decisive factor working toward a still i„ther firming of money rates to the prejudice of the country's commercial '"erests. 4 1/29/29 -5- "The resources of the Federal Reserve System Pre ample for meeting the growth of tne country's commercial needs for credit, provided they are competently administered and protected against seepage into uses not contemplated by the Federal Reserve Act. The Federrl Reserve Board hns on different occasions, notably in its Annual Reports, stated its position witn regard to tne use of the fsediscount privilege by member oanks for purposes tnot come witnin the intent of the Federal Reserve Act and, tnerefore, are to be regarded as proper. Broadly speaking, borrowing by a member bank from its Federal reserve bank is proper wnen tne credit accommodation so4,nt and obtained le for productive and distributive operations - in agriculture, inaustry or trade. The Federal Reserve Act does not, however, conteuplate tne use of the resources of the Federal reserve banks for tne creation or extension °I speculative credit. A member bank is not within its reasonable claims or rediscount facilities at its Federal reserve bank when it borrows either for tne purpose of making speculntive loans or for tne purpose of r:aintaining speculative loans. The Federal Reserve Board nas no disposition to assume authority 0 interfere with the loan practices of member oanks so long as tney do !lot involve the Federal reserve banks. It has, however, a grave responsipility whenever there is evidence that member banks are maintaining speculative security loans with the aid of Federal reserve credit. When such is the case the Federal reserve bank becomes either a contributing or a sustaining factor in the current volume of speculative security Credit. Tnis is not in harmony with the intent of the Federal Reserve Act nor is it conducive to the wholesome operation of the banking and credit system of the country. You are desired to bring this letter to tne attention of the ulrectors of your bank in order tnat they may be advised of tne attitude °f the Federal Reserve Board with respect to a situation and a problem e3nfronting tne administration of the Federal reserve banks, which for Inc)re than a year has been exciting widespread interest and concern. The Board realizes tnat the proolem of adequate control against ellse of the credit facilities of the Federal reserve banks of the that have given rise to this letter is not free of administrative ' lfficulties. It views tne matter primarily as one of good operating Poractice. It also appreciates tnat no one metnod of procedure would ! t 3 equally effective in all districts and in all circumstances. It is, ellerefor e, not disposed to be dogmatic in its own attitude. It is, howof the opinion that, taking the Federal reserve banks as a whole, aue problem has not yet been completely met and that the situation of improvement. It is also of the opinion that methods of handling e problem suitable to the situation and not invasive of the privacy alember bank operation can be worked out by each Federal reserve liank b'at will hgve the approval and support of the majority of the member anks of the Federal Reserve System and the general body of public opinion. 0, The Federal Reserve Board will await with deep interest the reply 01 Your directors to tnis letter and bespeaks their prompt attention in 'der that it may have their reply at an early date." 4 1_03 1/29/29 -6- After discussion, Mr. Gunningnam moved that the above letter be approved as a substitute for that tentatively approved at the meeting on January 24th. Mr. Hamlin then moved, as a substitute, that the revised letter quoted above be made special order of business for a meeting tomorrow and tnat a copy thereof be furnisned to each member of the Board. Mr. Hamlin's motion being put by the Chair was carried, Governor Young voting "no". The Governor then reported that during a telephone conversation yesterlaY with the Governor of the Federal Reserve Bank of New York, it was suggested that members of the Board, if tney think it advisable, come to New York for the Purpose of sitting in with the directors of the New York bank at their meeting on Thursday. The Governor stated that he thought it advisable to go. ;)) Mr. Platt also intimated that he would attend the meeting. 414)(311TS OF STANDING COMMITTEES: 134ted, January 28th, Dttte January 26th, Recommending changes in stock at Federal Reserve banks as set forth in the Auxiliary Minute Book of this date. Recommendations approved. Recommending approval of the application of Mr. Nelson Morris for permission to act at the same time as director of the West Side Trust Savings Bank, Chicago, III., as director of tne Nati Stock Yards National Bank, National City, Ill., an as director of the Drovers National Bank in Kansas City o. Approved. The meeting adjourned at 1 APPrOyei: 1 17/, Secretary Alt,/ governor. (Ii
@FedFRASER