The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
1' - A meeting of the Federal Reserve Board was held in the office of the Federal Reserve Board on Monday, June 10, 1929 at 12:00 o'clock noon. PRESENT: Governor Young Mr. Hamlin Mr. Miller Mr. James Mr. Cunningham Mr. McClelland, Asst. Secretary The minutes of the meeting of the Federal Aleserve Board held on June 6th were read and approved. Letter dated June 6th from the Secretary of the Federal Resevve Bonk Of New York, telegram dated June 7th from the Secretary of the Federal Reserve Bank of Cleveland and telegram dated June 6th from the Chairman of the Federal 4eserve Bank of San Francisco, all advising that their boards of directors at Meetings on the dates stated made no changes in the banks' existing schedules Of rates of discount and purchase. Without objection, noted with approval. Reports of Executive Committee on letters datea June 7th and 8th from the Comptroller of the Currency, recommending approval of salaries of V4,000 each for National Bank Examiners George R. Gaskell and Raymond G. Dam, assigned to the Fourth and Second Federal Reserve Districts, respective1Y; the Board's Committee also recommending approval. Approved. Reports of Committee on Salaries and Expenditures on lists submitted by the Federal Reserve Banks of Philadelphia, St. Louis and Dallas of e/aPloYees for whom the directors of those banks approved leaves of absence the total of with Pay, on account of illness, during the month of May, where absence3since January 1, 1929 has exceeded thirty days; the Board's 5-18 6/10/29 -2- Committee recommending approval of the salary payments involved. Approved. Report of Committee on Examinations on letter dated June 6th from the Secretary of the Federal Reserve Bank of New York, transmitting and recommending approval of an application by the Seaboard National Baak of the City of New York, on behalf of the Seaboard Bank of the City of New York, into which it expects to convert on or about June 17th, for permission to accept drafts and, bills of exchange drawn upon it up to 100/; of its paid up and unimpaired capital and surplus. The Assistant Secretary reported that an application for tembership on behalf of the state bank has also been received. Upon recommendation of the Committee on Examinations, it was voted to approve the application for permission to accept up to 100, effective if and when the Seaboard Bank of the City of New York begins business as a member of the Federal Reserve System. Report of Committee on Examinations on memorandum dated June 6th from the Comptroller of the Currency, recommending approval of an application of the l'oyette County National Bank of iest Union, Iowa, for permission to reduce its capital from c;A00,000 to :50,000; the Committee recommending approval on conthat no money be returned to the shareholders and that i386,000 of assets, Ilotating of all other real estate owned, all losses and doubtful assets and " 4P13r°xImately 12,000 of slaw loans, be eliminated from the bank. Upon motion, the reduction in capital was approved, subject to the conditions recommended by the Committee. Letter dated June 5th from the Deputy Governor of the Federal Reserve 4t1k Of New York, with respect to the status of the Open Market Investment '1 'count and the condition of the bill and government securities markets; the 6/10/29 -3- letter stating that there have been taken over into the account temporarily from the portfolio of the Federal Reserve Bank of St. Louis .0,125,000 of Liberty Loan and Treasury Bonds and from the Federal Reserve Bank of Kansas City 5,000 000 of 4/0 Treasury Bonds. The above letter was noted, and at the suggestion of the Governor, it was voted to make inquiry as to whether the Federal Reserve Banks of St. Louis and Kansas City in temporarily turning securities over to the other Federal Reserve Banks, so obligated themselves with reference to repurchase of the securities that they should be reported as a contingent liability. Draft of letter, prepared by Counsel, addressed to the Federal Reserve Agent at Chicago, advising that it will not be necessary for Yr. Otto N. Frenzel, jr., to whom the Board has previously granted a permit to serve as officer of the Merchants National Bank, as director of the Fountain Square State Bank and Ile a director of the Brightwood State Bank, all of Indianapolis, Ind., to file 4 formal application for permission to serve as director of the Merchants National 13414k in addition to his service as officer of that institution; the letter stetthat for the purposes of the records, however, Mr. Frenzel should write an 'formal letter to the Board asking its permission to so serve. Upon motion, the letter was approved. Letter dated June 5th from the Federal Reserve Agent at Minneapolis, reto the Board's letter of June 3rd (X-6320) on the subject of the preservati°4 of member bank records and raising question as to the desirability of transItlitting to member banks a copy of the letter on the subject which the Board refrom the ,A.ssistant Attorney General of the United States. After discussion, it was voted to transmit a copy of the Federal Reserve Agent's letter to the Assistant Attorney General for his information. 6/10/29 Memorandum from Counsel dated June 5th on the matter referred to the Law Committee at the meting on May 23rd, namely, letter dated May 15th from the Secretary of the United States Civil Service Commission, requesting that the Board furnish the Commission with certain reports regarding its personnel; Counsel stating that while in the Federal Reserve Act it seems clearly to have been the intention of Congress that the employees of the Federal Reserve Board Should, not be affected in any way by Civil Service law, rules or regulations, there is an old statute passed before the enactment of the Civil Service Act srld apparently not rerealed, which gives the President broad powers as to regulating all employees in the Civil Service and is probably broad enough to apply to the employees of the Board. In his memorandum, Counsel suggested that if the Board, for any reason, should feel that the request of the Civil Service e°11411ission should not be complied with, or at least not until further information is obtained, some representative of the Board might confer with a representative (311 the Commission regarding it. The Law Committee concurring in the suggestion of a Conference, mr. Hamlin, Chairman of the Committee, was, upon motion, requested to take the matter up with the Civil Service Commissioner. Memorandum from Counsel dated June 4th, referring to the Board's action t IleY 29th and submitting drafts of proposed letters to the Chairmen of the e°111Mittees on Banking and Currency of the Senate and House of Representatives, tecloMmending that the limitations applicable to the establishment of foreign 1144011e5 by national banks should also govern the establishment of such branches by atete member banks and that, accordingly, in order to establish a foreign of bta4eh a state member bank should be required to have a capital and surplus rc-1. 4 1 6/10/29 -5- 01,000,000 or more, to obtain permission from the Federal Aeserve Board, and to be subject to such conditions and regulations as the Board may prescribe; the proposed letters submitting and requesting favorable action on a bill to amend Section 9 of the Federal Reserve Act in accordance with the recommendation. Upon motion, the letters were approved and ordered transmitted. Report of Committee on Examinations with respect to an application of the Brown City Savings Bank, Brawn City, Michigan, for permission to reduce its capital from 440 000 to 025,000, in connection with the removal of certain undesirable assets incident to an extension of its charter; 14,:.r. Platt, Chairman Of the Committee, concurring in a favorable recommendation of the Federal Reserve Agent at Chicago but 11.r. Ommingham recommending disapproval in view of the low ratio of capital to deposits which would prevail should the reduction in capital be Made. After discussion, upon motion, Mr. Cunningham was requested to take the matter up further with the Federal Reserve Agent at Chicago. Report of Committee on Examinations on the matter referred to it at the meeting on May 23rd, namely, memorandum dated May 22nd from the Chief Bzaminer submitting report of an examination of the First Federal Foreign tanking Corporation, New York City, made as at the close of business December 12, 1928; the Committee noting the report of examination. Mr. Cunningham, however, expressed the wish that the Chief Examiner might appear before the board and express his confidential opinion regarding some of the financial activities of the Corporation. At his suggestion, the Assistant Secretary was instructed to arrange to have the Chief Examiner appear before the Board regarding the matter when he is next in ,,ashington. f"-, 6/10/29 -6- Memorandum from Counsel dated June 6th, submitting in accordance with the action of the Board at its meeting on May 28th draft of reply to letter from the Vice President of the Union National Bank of New Brighton, Pa., inquiring Whether it would not be possible to increase Federal Reserve discount rates to those member banks carrying call loans and give a preferential rate to those using the Federal Reserve System for legitimate purposes; the proposed reply Pointing out that the sugestion could not be adopted under the existing law. Referred to the Governor with power. The Assistant Secretary then submitted application of the Security State Reserve 13411k and Trust Company, Beaumont, Texas, for membership in the Federal SYstem and for 81 shares of stock in the Federal Reserve Bank of Dallas. He Stated that in accordance with the action of the Board at its meeting an June Federal Reserve Agent 3rd the Committee on Examinations communicated with the hip coverat Dallas, regarding the imposition of a special condition of members bonds and the bank's charter power to guarantee stocks, bills of exchange, imposition of such a 111°1Igages and other securities, and was advised that the condition will be satisfactory to the applicant bank, which is not exercising the power. Upon recommendation of the Committee on Examinations, it was, upon motion, voted to approve the application of the Security State for Bank and Trust Company of Beaumont, Texas, and membership in the Federal Reserve System Reserve Federal the in for 81 shares of stock conditions Bank of Dallas, subject to the regular of Series H, ion Regulat set out in the Board's ons: conditi special ng 1928 and to the followi Board, you shall "Facept with the permission of the Federal Reserve to guarantee charter your under have not exercise the power which you other securities. stocks, bills of exchange, bonds and mortgages, and -7- 6/10/29 "As provided in the Federal Reserve Board's regulation H, series of 1926, you shall increase your paid-up and unimpaired capital within five years after the approval of your application by the Federal Reserve /3oard to ,200,000. ior the purpose of providing for such increase, you shall set aside each year in a fund exclusively applicable to such capital increase not less than 50 per cent of your net earnings for the preceding year prior to the payment of dividends, and if such net earnings exceed 12 per cent of your paid-up capital, then all net earnings in excess of 6 per cant of your paid-up capital shall be carried to such fund, until such fund amounts to 475,000. Whenever such fund shall amount to 475,000, or at such other tim:: as the Federal Reserve Board may require, such fund or as much thereof as may be necessary shall be converted into capital by a stock dividend or used in any other manner permitted by state law to increase your capital to the required amount. Such increase in capital may be provided in whole or in part by the sale of additional stock." Bank Operations, Memorandum dated May 29th from the Chief of the Division of the Board's letter submitting replies received from the Federal Reserve banks to to undertake the Of April 23rd (X-6295), inquiring whether they would be willing redemption of Canadian currency for member banks and if so how they would disPose of the currency and what discount they would expect to have to charge member banks normally in order to cover expenses in connection therewith; the memcurorandum stating that all Federal Reserve banks are willing to accept such the redemption of such rency provided satisfactory arrangements can be made for currency and recommending that a committee be appointed to determine the most efficient and economical means of effecting the redemption. After discussion, upon motion, the Governor was authorized to appoint a committee to study the matter and he stated that he would request the Federal Reserve s Banks of New York and Chicago to appoint representative the of Chief Smead, Mr. to serve on the committee with Board's Division of Bank Operations. Company, Letter dated June 5th from the President of the Union Trust -8- 6/10/29 Newark, Ohio, member of the Federal Reserve System, commenting upon the credit situation and suggesting a prompt and firm declaration of policy by the Board along whatever lines may be deemed most proper. Noted, and referred to the Governor for reply. Letter dated June 6th from the Chairman of the Federal zieserve Bank of San Francisco, transmitting a report approved by his directors, formally replying to the Board's letter of May 2nd, requesting further and fuller cooperation in the Board's policy of preventing the misuse of the discount facilities of the Federal Reserve System by member banks. Upon motion, the Assistant Secretary was directed to furnish a copy of the above letter to each member of the Board. The Governor then reported a conversation with the Comptroller of the Currency, regarding difficulty being experienced with the Farmers National Bank of Bridgewater, S. D., which has been making excessive loans, has been deficient in its reserves and fails to comply with commanications addressed to it by the Comptroller regarding corrective action. He stated that the Comptroller's only remedy in a case of this kind seems to be suit for forfeiture of charter but that there is question whether such action could be justified in the case under discussion. At his suggestion, the Governor was authorized to communicate with the Federal Reserve Agent at Minneapolis and inquire as to the record of the bank with the Federal Reserve bank. The Governor called attention to a notice sent out by him on Saturday Of a special meeting of the Board at 11:00 o'clock tomorrow morning for a dis- cussion of credit conditions and System policy. , -9- 6/10/29 Ilg2ag_g_g STANDING COMMITTEES: Recommending changes in stock at Federal Reserve Banks as set forth in the Auxiliary Minute Book of this date. Recommendations approved. on an application for fiduciary powers action ing Dated, June 6th, Recommend Minute Book of this date. Auxiliary the in as set forth Recommendation approved. Dated, June 6th, Recommending approval of the application of Mr. Jacob Post for permission to serve at the same time as director of the Hampton Bays National Bank, Hampton Bays, N. Y., as director of the First National Bank, Rockville Centre, N. Y. and as director of the Richmond Hill National Bank of Richmond Hill, New York, N. Y. Approved. Dated, June 7th, Recommending approval of the application of Mr. Eugene V. R. Thayer for permission to serve at the same time as director and officer of the Central Trust Company of Illinois, Chicago, Ill., and as director of the Stock Yards National Bank, Chicago, Ill. Approved. Dated, June 6th, The meeting adjourned at 1:15 p.m. 6q&k,t41&e4z./ Assistant Secretary. APProved:
@FedFRASER