The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
1002 A meeting of the Board of Governors of the Federal Reserve Systel "ma held in Washington on Tuesday, Tuly 20, 1937, at 10:30 a. m PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Broderick McKee Davis Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary Mr. Clayton, Assistant to the Chairman Mr. Thurston, Special Assistant to the Chairman Mr. Wyatt, General Counsel Mr. Paulger, Chief of the Division of Examinations Mr. Goldenweiser, Director of the Division of Research and Statistics Mr. Vest, Assistant General Counsel Mr. Wingfield, Assistant General Counsel Mr. Leonard, Assistant Chief of the Division of Examinations Mr. Thames, Assistant Director of the Division of Research and Statistics Mx. Currie, Assistant Director of the Division of Research and Statistics Mr. Blattner, Assistant Director of the Division of Research and Statistics There was presented an application of The First National Bank Or 4ings M ountain, Kings Mountain, North Carolina, for permission to act, 41411 not in or trilat bers or contravention of State or local law, as trustee under deeds to secure debts. The file had been circulated among the meme Board for their consideration for the reason that it was Illiclerstood that the application had been made by the bank in order that It' fli.gbt Property obtain authority to act as trustee under a mortgage on a mill securing an issue of bonds which would not be distributed to t46121/blic but would be held by members of the family owning the mill Dtop rtY lotd it appeared that the officers of the bank had had no experi- 1,003 7/20/37 -2- elics in fiduciary matters and that the bank did not intend to estabilela s separate trust department or to accept any additional trusts. memorandum dated July 12, 1937, Counsel's office stated that it hallbsan the general policy of the Board to grant fiduciary powers only 111 the terns of section 11(k) of the Federal Reserve Act and not to al'ellt limited powers to act as trustee in particular cases or classes °tees", although some exceptions had been made to this general policy. Mx. Ransom stated that he had requested that the application be @vet. 'JPacial consideration by the Board for the reason that he was of the °Pinion that the general policy of the Board as above referred to all'4341 be adhered to; that, inasmuch as it did not appear that the szPected to comply with the provisions of the Board's Regulation 1111128t Powers of National Banks, which require the establishment of eb 8-.-axate trust department, the appointment of a trust investment cam,"ea, and that the trust business accepted by the bank be handled by °tficer qualified and competent to administer trusts, the applica- tio/, snould be denied; and that the Board should adhere to that positio41 la similar cases coming before it in the future. 41ring the ensuing discussion consideration was given to the ctlestio -T1 raised by Mr. McKee whether, inasmuch as the Board had preIttow 4•Ir authorized the exercise by small member banks of limited trust Powers ead anall nonmember banks might obtain trust powers, it was from the standpoint of the competitive position of the ap"leant ba„ to deny its application. 1004 7/20/37 -3Mr. Ransom moved that the application be not approved and that counsel be requested to prepare a letter to The First National Bank of Kings Mountain advising of the Board's decision and stating the reasons therefor as outlined by him. Carried, Messrs. McKee and Davis voting "no". There ensued a discussion of the draft of Regulation A, Advances to and R ediscounts for Member Banks by Federal Reserve Banks, submitted tO th e Board with Mr. Vest's memorandum of July 10, 1937, together with Dr°13°ead letter to the Federal reserve banks transmitting copies of the dr and requesting their comments and suggestions thereon. ehariges Several were agreed upon during the discussion. Mr. Ransom moved that the draft of regulation incoroorating the changes agreed upon be submitted to the Federal reserve banks for their comments and suggestions and that a letter to the Federal reserve banks transmitting the draft be prepared in the light of the discussion at this meeting and submitted to the Board for consideration. Carried unanimously. At 1:15 p.m. the meeting recessed and reconvened at 2:40 p.m. With the same attendance as at the morning session except that Messrs. Leonard, Vest and vvingfield were not present. Mr. Morrill stated that in a recent conversation with Mr. V. lAstler, Vice President of the George A. Fuller Company, the latter had eXPressed the hope that the Board would not insist upon retaining completion of the Board's new building the full 1070 of the 1005 7/20/3? -&amount of the work done on the building. It was agreed unanimously that, in view Of the unsatisfactory progress which had been made on the building and the resulting inconvenience and expense to the Board, the full 10% of the amount of the estimates of work done should be retained by the Board as provided for by the contract. ileference was made to a letter dated July 15, 1937, from MT. LS ine Vice President of the Federal Reserve Bank of New York, inclos- copY of a cable received by the bank on that date from Mr. Richard Qlieluit, Deputy Manager and head of the banking department of the Natiotal Bank of Hungary, who was in London. follows: The cable read in pert as "Referring to Governor Imredy's cable introduction and under authorisation obtained from him may I inform you of ElEreement with British Belgian Dutch and Swiss reprentatives of long term creditors of Hungary's nonstate long _ elm bonded debts reached in respect of three years settleIllent of interest service on these loans. As a result of exchange of cables between Foreign Bondholders Protective J.°Uheil New York and myself this council in their cable .1. 7th have agreed to said settlement. As according to lair communication council are not in a position to pubcommunique in their own name we decided in agreement p -6h council to publish it in the name of Cash Office of c) Credits Budapest. Would ask your kind consent to Yo i nstitutior tiorperforming technical procedure of publicato°11. All expenses incidental to procedure should be debited our account with you. Would ask you to publish communique te manY papers and as many places as you would consider ,i -essbrY. Above mentioned council will simultaneously isc'oe statement containing their recommendation to bondholders. teUncil of Foreign Bondholders London have mailed the Proarctive Council full text of communiaue by Steamship Bremen imri ,,vihg New York 14th or 15th. We have asked them to for01j; You copy of communiaue issued in London and Amsterdam ,th in Basle and Zurich on 8th in Brussels and Antwerp -12th. * * * * * j J 1006 7/20/37 -5- "Would be extremely grateful if you would proceed at mice with publication communicating date of publication both to me and to Foreign Bondholders Protective Council to enable latter to issue its statement. "Practical execution of offer requires clarification Of technical details with service bankers. As unfortunately ci rcumstances have not permitted my sailing to New York I would respectfully ask you to instruct an official of your i_nstitution to convene a meeting of American bankers being riscal agents of Hungarian loans and suggest to them to appoint representative in London to discuss matter with me. I Veutui.e to suggest Mr. Daniel B. Grant Vice President of he Guaranty Trust Company of New York who subject to his _ anksapproval personally declared his willingness to accept aut horization. Would like to suggest that if service bankers desire to appoint him. consent of Guaranty Trust Company of "ew York should be obtained there. * * *" t The matter had been discussed with Mr. Burgess over the telephone on 3'11. 415 '1937, and there were further telephone conversations with him 41 that and subsequent days. Under date of July 19, Mr. Burgess transbitted to the Board a copy of the communique referred to in Mr. Quandt's ".6 and on the same day submitted over the telephone a draft of a letter whtoh the Federal reserve bank proposed to send to the American bank"8 who are fiscal agents for the Hungarian bonds in question. After a discussion, Mr. Davis moved that, as it was understood that Mr. Burgess desired to discuss the matter over the telephone with Mr. Quandt today, Mr. Morrill be authorized to advise Mr. Burgess that the Board would interpose no objection to the Federal Reserve Bank of New York sending to the American bankers who are fiscal agents for the Hungarian bonds the letter proposed by the New York bank amended to read substantially RS follows: 1,0 "We enclose copy of 'communique of the Cash Office of mer ' elEn Credits Budapest, regarding offer for interest pay104ta cm Hungarian municipal, ecclesiastical, and private Ag term bonded debt' which will be published in certain ewsPellsrs in (list of cities) at the request of Mr. Richard 7/2o/37 -6- "quandt, Deputy Manager and head of the Banking Department of the National Bank of Hungary. Quandt, in a cable to us, has stated that the practi cal execution of the offer requires clarification of techdetails with service bankers and that, as unfortunately cumstances have not permitted his sailing to New York, he °sires that a meeting be convened of American bankers who are fiscal agents of the Hungarian loans and that they apPoint representatives in London to discuss the matter with him. r "We are accordingly delivering this letter and copy communique to the following institutions, which are listed in Mr. 4uandt's cable with the loans served by them, res pectively: (list of bankers would be inserted here) "vie shall be glad to provide a room on the tenth floor ?I' this bank for a meeting of representatives of the above institutions at o'clock, m., on July , 1937, or 811ch other time as may be arranged." Carried unanimously. At this point Messrs. Goldenweiser, Thomas and Currie withdrew *041 the meeting and Mr. Wingfield, Assistant General Counsel, entered the roam. Mr. Ransom stated that on July 17, 1937, Mr. Edgar E. Mountjoy, le1)11tY Manager of the American Bankers Association, called on him and "Iqsed that on Monday afternoon, July 19, 1937, the Review Committee °t tile Federal Home Loan Bank Board would have a hearing on the applicathe Peoples Federal Savings and Loan Association, Peoria, 1111)18' tOr /1411.Q,, PerraiSSiOn said to establish a branch at Pekin, Illinois. Mr. that Mr. Mountjoy stated that the America Bankers Asson "''Iti°11 had not had an opportunity to take a definite position either or against the granting of branches to Federal savings and loan LiNciations in States in which national banks are not permitted to 1008 7/20/37 -7- have branches, but that he considered the question one of importance and telt that the Board would like to have it called to its attention. Kr. Renaora also stated that he had requested that the matter be brought to the attention of the members of the Board and placed on the docket for he Purpose of determining whether or not the Board should give it conelderation in the interest of member banks. After a discussion during which Mr. Wingfield reviewed briefly what occurred at the hearing on the application of the Peoples Federal Savings and Loan Association, it was agreed unanimously, upon suggestion by Mr. Ransom, that Mr. Wingfield be requested to keep in touch with the matter and report to the Board any developments in connection therewith which would be of interest to the Board and that Mr. Mount joy be requested to furnish the Board with a copy of any statement filed by him with the Federal Home Loan Bank Board. Reference was made to a letter addressed to Mr. Ransom under date or ' 111Y 13, 1937, by President Hamilton of the Federal Reserve 1411. 01, 4anses City with respect to the organization and duties of the - e committee and administrative committee provided for by the lews of the bank. Mr. Ransom moved that Mr. Morrill be requested to draft a reply to President Hamilton's letter along the lines suggested and that the proposed reply be submitted in draft form to the members of the Board for approval. Carried unanimously. At this point Mr. Wingfield left the meeting. Mr. Davis stated that in accordance with the understanding 1009 7/20/37 -8- reached at the meeting of the Board on May 25, 1937, Mr. McKee had diselleeed further with Mr. Harry F. Harper of Lansing, Michigan, his availElbilitY for appointment as a director of the Detroit branch of the Fed- "Ea Reserve Bank of Chicago for the unexpired portion of the term ending neceraber 31, 1939, and that it had been ascertained that Mr. Harper was 1111141114 to relinquish the Vice Presidency of the American State Say-4°1)6°1k of Lansing in order to qualify as a director. *. Davis then submitted the recommendation of the Personnel et1Mmittee that the Board request the Deputy Chairman of the Federal 1438erw ve "thEl Bank of Chicago to indicate to Mr. H. Lynn Pierson, President Detroit Harvester Company, Detroit, Michigan, that the Board is °0116ideri ---ng him for appointment as a director of the Detroit branch for the u 4expired portion of the term ending December 31, 1939, and to ascellain and advise the Board by wire whether he would be willing to eccept the appointment if tendered. Mr. Davis also submitted the recommendation of the Personnel e°1°Mittae be that the Chairman of the Federal Reserve Bank of San Fran- requested to indicate to Mr. Carl Newman, President, Calavo Association, Santa Ana, California, that the Board is considering him r°1* aP pointment as a director of the Los Angeles branch for the unex1)1red Portion of the term ending December 31, 1937, and at the end of the Year for the succeeding two year term, and ascertain and advise the Board by wire whether he would be willing to accept the appointment it temered. 1.010 7/20/37 -9-Mr. Davis moved that these two recommendations of the Personnel Committee be approved. Carried unanimously. Mr. Broderick referred to the schedule of salaries of officers which had been included in the galley proof of the complete annual reOf the Board for the year 1936 and suggested that the Board conthe question of the advisability of the inclusion of such salaries the report in this form rather than in the manner followed in the 41111441 report for 1935. The schedule of salaries of officers as con- tained in the galley proof of the annual report for 1936 contained lists Of the names and salaries of the Presidents and Vice Presidents (11. the r espective Federal reserve banks. At the conclusion of a discussion, Mr. McKee moved that the salaries of officers of Federal reserve banks be published in the annual report for the year 1936 in the same form as that used in the annual report for the year 1935. Carried unanimously. Reference was made to a memorandum dated Tuly 16, 1937, from 14r. 1Vin 11 recommending that the Board accept the bid of 0,924 made -" orrice Commercial Office Furniture Company for furniture in the Board's a which had been listed as being in such condition as to warrant d141Dosill -- at the time of the removal of the Board's offices to its new 144adi ng. It was stated that this was the highest of three bids reN11.v. ' 4 The morandu also recommended acceptance of the offer made Illy /44 Iter Bros., rental agents for the Washington Building, of $1,500 1011 7/20A7 -10tor the air conditioning units in the board room and in the offices of rraan Eccles and Mr. McKee. Mr. Morrill called attention to the fact tllat the equipment in the board room was three years old and obsolete and that the other two units were two years and one year old respectively, thq the price offered ;vas about 50% of the original cost and that its "ceptance would relieve the Board of the necessity of disposing of thera, Approved unanimously. In response to an inquiry from Mr. McKee as to further expenditAlres that might be incurred in connection with the new building Mr. 4011111 stated that consideration had been given to the question whether .trI katcftbile, motorcycle or other means of conveyance Should be proed rc)r tr ansportation of official documents between the Board's new and the Treasury Department and other offices in Washington t114t it was felt desirable to have a light businessman's coupe for that Plzrp ose. There ensued a discussion of the desirability of the 1314'eh48e °I' an automobile to provide transportation for the Board mem13" and members of the staff between the Board's new building and us governmental offices on official business and it was suggested that tor that. -- purpose a seven passenger automobile as well as a light Bedell Ch would also meet the need for messenger service should be 11111'Cilia -Bed. The members present concurred in the suggestion and the Personnel Committee was authorized by unanimous vote to arrange for the purchase of two automobiles. 1.012 7/20/37 -11At this point Messrs. Thurston, Wyatt and Blattner left the 'fleeting I' and consideration was then Fiven to each of the matters herein- referred to and the action stated with respect thereto was taken by the Board: The minutes of the meetinv of the Board of Governors of the Federe] . Reserve System held on July 19, 1937, were approved unanimously. Telegram to Mr. Sargent, Secretary of the Federal Reserve Bank or 44 ollt its Francisco, stating that the Board approves the establishment with- change by the bank today of the rates of discount and purchase in existing schedule. Approved unanimously. Letter to Mr. Gidney, Vice President of the Federal Reserve Bank Of New York, reading as follows: ,,,,, "Reference is made to your letter of June 28, 1937, T"' Previous correspondence, with regard to the 'Savings _tvestment and Trust Company', East Orange, New jersey, 'rid the transactions involved in the various efforts to rehab. that institution since the banking holiday of " 0 31 which include the absorption of the East Orange Trust 1Peny, East Orange, New Jersey, by, and the merger of e Trust Company of Orange, Orange, New Jersey, with, the a vinRs Investment and Trust Company, and the establishment crid °Aeration of a branch at the former office of The Trust °14PanY of Orange. cire"Phe Board has given consideration to the facts and tio Luzstances relating to the absorption and merger in quesit all-Li elld now confirms the tentative position taken by it in hat etter of September 30, 1935, that those transactions th e not resulted ir any change in the general character of th :essets of, or broadening in the functions exercised by, Savings Investment and Trust Company, which would violate whi the general condition of membership numbered 5 to chnthe continuing institution is subject. With respect to the Orange branch of the Savings 0. Inye8t.11"4 and Trust Company, which was established and op- rn°11 1013 7/20/3 -12erated at the former office of The Trust Company of Orange, and approval of which was deferred by the Board on September °O) 1935, because of a question of doubt as to the sufficiency c)f capital of the parent bank to meet the legal requirements, co nsideration has been given to the information heretofore submitted in regard to the rehabilitation program completed in march, 1937, from which it appears that the institution how has sufficient unimpaired capital to meet the legal requirenents for the head office and its out-of-town branches. "It is noted that the Commissioner of Banking and InsUrance of the State of New Jersey has previously authorized the e stablishment and operation of the Orange Branch, and that your counsel has rendered opinions approving the legal aspects of the absorption, merger, and establishment of the branch. The Board, therefore, in accordance with your recamllndation, approves the establishment and continued operaa, on by the Savings Investment and Trust Company of its branch Orange, New Jersey." I Approved unanimously. Letter to Mr. J. W. Adams, Division Manager, American Telephone •vol'aPh Company, Washington, D. C., reading as follows: "As the result of a survey recently made by your company, it has been decided that TWX equipment should be installed c) cs an expertmental basis on the Chicago-Kansas City circuit the Federal Reserve Leased Wire System in place of the '11',.?8eht full time leased wire facilities on that circuit. t:448 office is advised that the cost of the TWX service be4;iYesn the two points is 80 cents for each three-minute call In/d4 25 cents for each additional minute over the three-minute 11,tmam. The equipment in each office will consist of a wTZrr 19 teletypewriter machine which will be installed t,."4°1-1t cost. This machine is equipped with an automatic laZnsalitter for which a monthly rental charge of $25.00 is Th et making a total monthly cost of $50.00 for equipment. bue contract covering the service will also provide that atsillsss in the minimum amount of $10.00 will be originated each end of the circuit during each month of its operauion. th, a ,:It is desired that this new service be installed on pri' oim ilicsgo-Kansas City circuit to became effective as stZttlY as the installation can be made, with the underco;"'ing that it is to take the place of, and that your -PanY agrees to discontinue as of the date upon which 1014 7/20/37 -13"th3 new service goes into operation, the existing leased wire, your contract No. ?,-10, covered by the contract between the Board of Governors and the American Telephone and TelegraPh Company. "It is understood that the DIX service between Chicago and Kansas City is not handled directly by the American TelePhone and Telegraph Company but that the Illinois Bell Telephone C°mPahY, an associate of your company, will handle the Vice in Chicago and that the Southwestern Bell Telephone ComPahY, also an associate of your company, will handle the service at Kansas City. It is further understood that you will Obtain and submit to this office for execution the necessary t covering this service and that you will arrange to a° ?aye the monthly vouchers, covering the service rendered the previous month, forwarded to reach this office l'ot later than the sixth day of the month. It is also understood that these vouchers will be rendered on the basis the number and length of calls initiated by the respecoffices so that the Illinois Bell Telephone Company will 4.,_ubliu.t vouchers covering the calls initiat ed by Chicago and -°ta Southwestern will submit voucher coverin the calls s g initiated at Kansas City." Approved unanimously, together with letters to Mr. Olson, Assistant Vice President of the Federal Reserve Bank of Chicago, and Mr. Hamilton, President of the Federal Reserve Bank of Kansas City, reading as follows: to( "There is attached a copy of a letter being addressed laY to the American Telepho ne and Telegraph Company with ' t IlesPect 6i to the installation of TWX telegraph service between Federal Reserve Banks of Chicago and Kansas City. It will be noted that the Telephone Company is being 0 rueted to render monthly vouchers to this office in or! r that all of the bills covering lines and equipment charges uhe mainlines of the Leased Wire System may be handled polf°rralY. However, in order that this office may be in a t118.;! tion to audit the vouchers submitted, it will be necessary the' You advise as promptly as possible after the first of andm°nth the number of connections initiated by your office klrithe number of additional minutes used on connections such zatiag the preceding month. It is suggested that this inforto tc)n. be included in the monthly telegram sent by your bank z ,216 Board giving the amount of operators' salarie s and u-u - er of words sent by your bank over the main lines of the 1015 7/20/37 -14- Wire Systan during the month covered by the report. , "A letter similar to this is being sent to the Federal rieserve Bank of Chicago." Thereupon the meeting adjourned.
@FedFRASER