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meeting of the Federal Jeserve -1,oard. was held in the office of the Pea : era,1 .eeserve Board on holiday, June 13, 1927 at 11:30 PIE3EIIT: aota• The Chairmn Govern° r Crissinger i:r. Platt r. Hamlin L:r. hillor James .;unrl.in jiam ::r. Eddy, Secretary 1.1r. LicUlelland, Asst. Secretary The Governor stated that the Secretary of the 'Treasury had been reTlested to attend. the meeting in order that he might participate with the ill Consideration of the actions taken by the recent Conference of 1\ 'r'llore of the Federal ieserve banks with respect to the collection of 110:4,.e „ '4311 items by the "federal deserve banks, particzlarly in the light of the. ' t)rcycedure of handlinc: non-cash items which has been in effect at the 44ral -teserve Bank. of Liinnaapolis since February 1, 1927. he Secretur' e then read td the eard the actions of the Governors' eorkf,„ :votes: rJsultinY in the followin. (a) ?hat as definite recommendations on the subject of non-cash Collections have been made at successive (;onfere;ices of Governors ror the past three years to the Federal eeserve Board, after full d'isoassion, and as all members of the Conference as well as members 0f the Federal Ileserve Board are fully informed on the subject, there is no further information necessary in order to enable anyone to vote intellimitly on this subject. (Nine Governors voted in the affirmative. Governors Young, Bailey and %-fellborn voted in the liegative.) , (b) :hat the conference believes that this question should. not 00 held, in abeyance any longer, and requests the Federal iZeserve Board to make, at an .arly date, a definite ruling on the subject °no ;ay or the other. (Ten Governors voted in the affirmative. (.°7'orno rs young and. Thllborn voted in the negative.) -4 15 6/13/27 (c) That in the opinion of the conference it is desirable that any ruling made by the Federal Reserve Board should be uniform with respect to its application at all Federal reserve banks. (Nine Governors voted in the affirmative. Governors Young, Bailey and Wellborn voted in the negative.) (d) That the collection of all non-cash items, including those payable at street addresses, should be continued at all Federal reserve banks. (Nine Governors voted in the affirmative. Governors Young, Bailey and Wellborn voted in the negative.) The Secretary then read to the Board a memorandum outlining in detail Previous action by the Board on the subject of non-cash collections result- its action of December 30, 1927 in authorizing the Federal Reserve 411k of LAnneapolis to collect through its member banks non-cash items N'able in Linneapolis and Helena. A detailed discussion ensued as to the necessity or desirability of uniformity at all Federal Reserve banks in the manner of handling nnn-cash collection items and as to the effect which the present procedure of the Federal Reserve Bank of Minneapolis is having upon the Federal Reserve Collection System as a whole. Governor Crissinger moved that, effective July 1, 1927, the Board rescind the authority granted by it on December 30, 1926 to the Federal Reserve Bank of Minneapolis to collect non-cash items in LUnneapolis and Helena through its member banks. After discussion, Governor Crissinger's motion was put by the Chair and carried. The Secretary of the Treasury then left the meeting and the Governor t00lt the Chair. Thereupon ensued a discussion as to 'the form of the advice of the 4t4111 just taken by the Board which should be sent to the Federal Reserve 1141,1,, ' -4 Of Linneapolis. 6/13/27 -3- After discussion, the Secretarj was directed to .orepare and submit at a later meeting a letter to the Federal Reserve Bank along the line of suggestions made durinf„ , the discussion. The Governor then submitted a letter from the Governor of the Federal Reserve Bank of 2Iohmond, with reference to foundation work on the proposed Ba4.1more Branch bank building; the letter stating that due to soil conit has been deemed advisable to change from the concrete piling Provided for in the specifications as drawn to spread concrete footing, 4ad ret_luesting approval by the Board of an additional expenditure amountto , 8,387 which may be involved in the change. Upon motion, it was voted to approve both the change in specifications and the additional expense involved. The Governor then presented a letter dated June 9th from the Governor °I' the Federal Reserve Bank of "Zow York, with reference to the action of the Ilecent Conference of Governors in voting to approve the report submitted to the Conference by the Pension Committee, including a recommendation for tlaa aPpropriation of .10,000 for further actuarial studies. After discussion, upon motion it was voted to approve the additional expenditure recommended by the Pension Committee, r. Cunninftham voting "no". The Governor then presented the matter ordered circulated at the beet. ng on June 10th, namely, report filed by Y.r. A. B. Trowbridge, Consulting Architect, in compliance with the request made of him by the Board on 14V 24th with reference to the plans, specifications and bidding in conwith the vault to be installed in the building being erected to 51_7 6/13/27 11°1z8e the Baltimore Branch of the Federal Heserve Bank of .Uchmond. After discussion, Mr. James sa-umitted the following resolution: ",7hereas, a controversy has arisen over the kind and quality of material which the Federal aeserve Bank of aichmond proposes to use in the construction of a vault for its Baltimore Branch; and Whereas, there is a difference of opinion between the vault engineers employed by the .Lichmond 3ank and the Board's Consulting Architect, as set out in the Architect's letter to the Board of ::ay 16, 1927 and his detailed report dated June 6, 1927; Therefore, Be It 1;esolved, that the Federal eserve Board arrange with the United 3tates Bureau of 3tandards for the conduct of tests of certain proprietary metals used by vault builders for lining Dank vaults with a view of determining the powers of resistance of such metals to penetration by acetylene torches, drills, etc." 12:55 p.m., the Board recessed, without action on the above resolution. 3:00 p.m., the Board reconvened, the following members being present: Governor Criss inger Platt hr. Hamlin Mr. :iller Mr. Janes Mr. Cunningham The Governor submitted a telegram addressed to the Chairman of the Fedela41 :leserve Bank of iiichmond as follovis: "Your proposal for housing Charlotte Branch involves necessity Of erecti)n of a vault. Until certain questions which have arisen with respect to Baltimore vault have been determined Board unwilling to act on matter of Charlotte vault and it is suEested therefore that you take immediate steps to have Option on rented property extended for at least 30 days." Upon motion, the ,roposed telegram was approved. The Board then proceeded to consider the various :.latters upon which 518 6/13/27 action was taken at the recent iionference of ;lovemors and which the kiorifercr.ce submitted to the Board for its advice or approval, or upon which the Board has asked for the opinion or recommendation of the 'Jonterence, as set out in a letter addressed to ti 1 ovornor of the Board 13:; the iecretary of the ,;oni'erence under date of ::ay 31, 1927, as follows: (1) "-,:here the conferee considered the procedure to be followed in connection with the collection of certain checks stamped "not payable throu:;h the Federal eserve Bank" and where it was decided that pending the action to be taken by Baker and the Federal eserve Board on this subject, each Federal reserve bank should 7ive instructions to its transit cle-oartment to watch out for checks of this chaI'acter, to handle them in the usual course and to forward them for collection to the Federal reserve bank of the district in which they are payIt was also agreed. that the collectim; Federal reserve bank should then forward these checks to the member bank for collection and, if returned. unpaid, should charge them to the account of the member bank under advice to the member bank." The Board having already arranged for the employment of :r. Baker, and having consulted with him and forwarded instructions to all Federal :eserve banks as to the handling of the checks in question, no further action on the above recommendation was considered necessary. It was voted, however, to request the Chairman of the Federal Reserve Bank of Atlanta to submit to the Board a report with regard to the present status of the practice adopted by certain banks in the Sixth District of stamping on their checks the legend quoted above. .(2) "dhere it was voted that the ..leport of the Standing ComMlttee on Collections should be received and studied by the various Federal reserve banks, with the understanding that each Federal ...eL,erve bank should submit its views or comments concerning the proposed Time Schedules to the Standing Committee 04 Collections before the next Conference of Governors." (I Upon motion, it was voted to approve the study of the Time Schedules contemplated by the action of the Conference. (3) "'Mere it was voted to approve the deport of the Pension ' 519 6/13/27 Committee, with the recommendations in that report, including the appropriation of ,.10,000 for further actuarial studies." The Governor called attention to the fact that this recommendation of the Conference was approved by the Board at its meetiaz this morning. (4) TYaere the conference discussed the procedure followed in various districts in handling for collection, items which are drawn on nonmember banks, and where it appears to be the oninion of the conference that such items should be sent direct to the nonmember banks on which drawn if they desire them to be so sent and if they are willing to remit in satisfactory exchange; the decision as to whether or not the exchae is satisfactory being a matter for the determination of the 'Federal reserve bank." After a discassion of the above recommendation, the Tiecretary was instructed to submit to the Board a digest as to the past policy and practice of the Zstem in the matter referfed to. (11 ,Where the subject of non-cash collections was discussed, (5) ' and whore the following votes are recorded: (a) that as definite recommendations on the subject of non-cash collections have been made at successive Conferences of Governors for the nast three years to the 7ederal deserve Board, after full discussion, and as all members of the Conference as ' well as mambevsof the 7ederal deserve -3o.ord are fully informed on the subject, there is no further infor:r.tien neaessar, in Order to enable anyone to vote Intelligently on this subject. (Nine Governors voted in the affirmative. Governors Young, Bailey and .:ellborn voted in the negative.) (b) that the conference believes that this question Should. not be held in abeyance any lonrer, and requests the Federal deserve Board to make, at an early date, a definite ruling on the subject one way or the other. (Ten Governors voted in the affinaative. Governors Young and 7:ellborn voted in the negative.) (c) that in the opinion of the conference it is desirable that any rulln made by the Federal deserve Board should be uniform with respect to its application at all Federal reserve banks. (Nine Governors voted in the affirmative. Governors • Young, Bailey and 'ellborn voted in the negative.) (d) that the collection of all non-cash items, including those payable at street addresses, should be continued at all Federal reserve banks. (Nine Governors voted in the affirmative. Governors Young, Bailey and ',:ellbora voted in the negative.)" Discussion ensued as to what action on the above recommendations is necessar or desirable in view of the actiontaken by the Board at its meeting this morning in 520 -7- iithority votinL; to rescind, of.'ective July 1, 1927, th :eserve Federal ..the :r 30, Decernb 1926, to raated on T;a,-L:: of : innear.ol Is to collect non-cash itenis in :AnneL;ertain memL1/11 helena t:11'011.1 its meraber badks. that no further cf)inion the bers of the oard exoressed t.•eir belief st;:ted action was necessary, while otheJ.is desirable. tut sa.-te affirl.letive action by the :oard. was a detailed c.3.isc - ssion, ;:r. hamlin moved tat a letter be addressed. to all l'o,decal reserve banks, advisin,e; that in the opinieil of the :ode:L.1 ,eserve 'card. the collection of 11.y.1-cash items should be restored to the status that it had at all I'leder-1 reserve banks -orior to the ,xc,...iption granted by the hoard. on December 50, 19„6, in f..ivor of the Federal osorvo)ad_: of ::innearolis ..hieh , 1, 1927." has today ueen revoked., of.ective Julhr. Platt mo ;ed. as a subs ti tit° for hr. ITaln.1 in's motion, that t..e Federal rese.rve 'ea-11,-a; be dvised that without Lcre,;ue.ice to future discussion of the question at street addresses of i.-ihether non-cash sdould be collected b;,, the Federal reserve bau;-..s free of cnarse, the Board. afnrovs the reconnendation of the Goveniors' ,Jonference "that the collection of all noncash items, 5_ ,Icltzdin,c those pa:able at street addresses, should Jo continued at all ederal reserve ea..lirs." Platt's substitute motion, bein.': pit by , was lost, the momloto vs vo tin . as follows: the Jhair, Governor jrissinr, "aye" .Sir. Platt "aye" Kaldin, "aye" "no" Janos, "no" Uunninl7ham, "no:' hr. Hamlin's original motion was then out by the chair and carried, hr. James voting "no". (6) "lhere (as already reported to the Board.) the conference voted, that it is in f.vor of having appropriate steps taken to employ hr.::e-aton D. '3aker to act as soecial counsel in the par cleaance case of the 3tate Baniz. of Hugo, :Ann. vs. . .innearlolis." the federal deserve Bank. of 1. L.rran.ne.1.ents having alread;7 'been made for hr. 3aker act as special counsel in the case mentioned, no to further action was taken by the Board. 521 x 6/16/27 -3_ (7) "Where it was voted that :Ir. Harrison be requested to confer with the counsel of the Federal ileserve Board with a view to determining ehether a revisibn miht not be made in the form of clause now stamped upon trade acceptances so as to avoid the obstacles raised in the decision by the 1.1preme Court of Texas in the case of Lane Co. vs. Crum et al." 1".r. Hamlin called attention to the fact that the Board on 1lay 27th directed that a circular letter be sent to all Federal reserve banks and a statement publisried in the Federal deserve Bulletin suggesting that in view of the doubts raised by the decision referred to in the case above mentioned, it is advisable to change the wording of the standard clause on trade acceptances to read: "The transaction giving rise to this instrument ie a purchase of goods by the acceptor from the drawer." In view of the Board's previous action, the above recommendation was passed over without further consideration. (8) "Where it was voted that the ' ,:eport of the Sub-Committee Of General Committee on Bankers Acceptances be received and approved and that a cony should be transmitted to the Federal Reserve Board for its information." 1;oted, without action. (9) ":There it was voted that in the opinion of the conference 411Y note offered for rediscount which is endorsed by an officer of a nonmember bank puts the federal reserve bank on notice to investiCate the facts and if the facts show that the note is not being ?ffered in effect for rediscount for the benefit of the nonmember oanks, there is nothing in the endoreenient to impair the ?I the paper. It was also the sense of the conference that there ls no need for a ruling by the Federal lieserve 73oard on this subject." After discussion, it was voted to refer the question covered by the above recommerslation to the Federal Advisory Council at its next meeting. • .(10) "Where it was voted in connection with the expense involved in payin Federal Fann Loan coupons, to be the sense of the conference that in principle a Federal reserve bank shuald be reimbursed for services perforeed for L;evern:,eat agencies other than ?reasary, when the expense involved is sufficient to justifLi such bank's asz:in: :or relmeursement." rte.-3 6/13/27 _Ito'. discussion, ::r. ja,,..es moved tat the man of the uovur_ors t Conference be advised, that the Federal -oserve hoard i not in h'...r:.lony with the vii .endatio.1 of the :oaference. efiress,:d in t.1.; above recol:-.., James' motion, bei2J; 1:ut '0-,„7 the ;hair, was carried, :.r. Platt votin,:, "no". re. (11) "Viler° it was voted that the Federal deserve hoard be asked to r4Lerisicler its Drevioasrulilid to the effect that bran, flour, cottonseed - erishable readily :liar,-etable staple aricultural ctc•, are not, non- ; llets within the I.leanin„:;. of 3ection 13, it Leill,":; 00illted out that the ' ! r rtleular para‘sra ,a in c,uestion does n3t contain the limitation "in the stat0.1 as in the previous pa.ra_:ra-oh of the is;. It v.as understood. bes. reported in Oara;ra»h 19 of the ::inutes) that this topic should :also fo 4%•)ferred. to the ,',dvisory Ammittee of Averaors on Le .,7islativo :Tatters :6311 considerat ion and recomondation in the event that it is not - ossible tile Federal _1.eserve hoard to accomplish the desired results by an 'erla.'aent to its relations." Upon motion, the above recommendation was referred to the hoard's Law Oonmittee for report. - (12) ',7here it was voted that the conference recomend to the federal 40 ; e1-70 earl that, if agreeable to the hoard, a comittee represe.ltin_7 a.sked. to assist the counsel of the Board 1altie.erL.1 reserve banks tese"IVirlf; consideration to the suiTestions made by the various Federal tio -Grlie banks relative to the preliminary redraft of the hoard's rerzulati,„lis Pre*,)ared. by the counsel of the federal .ieserve hoard, and to assist c'eunsel in rearaftin the new rermlations, with the request that each til Qral reserve uank. be -iven op-ortunity to examine such redraft before that any proposed surestions would understood Drolnall •:ation. It was led, they could be available for use so that by 12?*i direct to hr. Harrison an-i the committee, if a-oeroved by Counsel ti ° ::ederal .1.eserve hoard's re2orted orally to the Fedwas conference the er43,-4arkl• ?his action by comrnunicated to me in its was action thehoard's hoard, and, ' er Of day 16." In view of the procere for the handling of the revision of the reLulations aionted by the Board at the meetinz on :ay 17th, no action on the above recomendation was deemed necessary. (4) "Where it was understood that the question of amending the l'%111 to.1, 4-atioli relative to the method of computing member bank reserves S•tko, P311a1ties, would be referred to the committee which the conference ' af2') 3etasted- should be a.yoointed to assist the counsel of the ,l'ederal, tat:Itj'rt) -oard, in redraftin,-; new regulations. It is assumed that this er,' l 7[111 be handled in accordance with the su$,-_;estion contained in 4arti's letter of Hay 13, referred to in the above paragraph." 1 523 6/13/27 -10- Upon motion, the above matter was referred to the Law Committee. 4 (14) "77here the conference discussed the question of reserves against "Ine deposits, and where it was voted that the Governors of the Federal reserve banks view with grave concern the weakening of the reserve position the banks of the country due to the constantly rawing tendency to transwha.t are in effect denand deposits into so-called time certificates or savings accounts, and respectfully suggest that if the Board finds that it ?annot adequately cope with this tendency by regulation, steps should be aIen to impress upon the Congress, at its next session, the importance of laending the reserve provisions of the Federal 2 ! - eserve Act in such manner *45 to safeguard the banking position of the country." iifter discussion, upon motion by ::..r. Hamlin, it was voted that the above matter be referred to the Law Committee for report. Y.iller than moved that the Lovernors of all jederal reserve banks, all Federal _leserve Agents, and the Federal Advisory Council, be requested to report to the Board any suggestions which they may have to make as to action which can be taken by the Board, under existing law, to deal with the present trend toward converlAon of deposits from Aenand to time classification. Carried. 1, (15) "Where, in discussion of the Report of the Committee on Safekeep111, previously filed with the Board, the view was expressed that the recomllaations contained in the report are consistent with the procedure now 414;ral1y followed by most Federal reserve banks, and where it was accordVoted that the report be received and approved." g The various recommendations contained in the report referred to were considered by the Board separately, and .ecommendations ilos. 1, 2, 3 and 7 were tentatively approved. .lecommendation :o. 4 was tentatively approved, with exceptioa recommended by Avernor Younr; of the Committee, relating to the safekeepinq,. of securities pledc,ed by member banks to secure State or other public deposits, subject, however, to an opinion from the Board's Counsel, to be submitted thrugh the Law Committee, as to the legality of the latter function. tiO Cl .t6.24 t 6/13/27 di econ.mencle.,:;ions Jos. 5 and 6, re1atinF7 to charces for safee:eepins., were referred to the Law rjorzeittee for advice as to the legal points involved. the above tentative action, it was voted that eollowin2 final action be deferred. .0(3nd1ns. receipt of reports from the Law Uo:-..mittee on the matters referred to it. ,t (16) " -here it is voted that the conference respectfully call to telition the "Federal -es ;rya eoard the f.ct that the raliw; in its 'O ::a 4es el 24, 11:7, (X.-(16161, in reply to letters from the Federal of hew 1-ork dated :Iovebmer 3, 1926 and i'eDruary 16, 1927, will 1-147e 11 ;r1rtieloBoe:2-1 %c, if r,en3ral1y adopted as a practice by member banks, or rethe vcry codeieerably the liability in the item 'due to banks" upon waich of v-eservecalculation is male, which appeare to be unjustifiable because clet)04e fact that the items so deducted need. not have been credited to the 4it Ore' account:: under the terms of the 3oarcl's rulin '." eeferred to the 'Law eorreittee. Okhihe 7:iecretar7 then reported that as leformally instructed at the f this morainT, he had communicated with the iureau of e'tandards and that 1 tl-le ere-eared to conduct the vault tests contemplated in the motion t41 ozzlitt0, by at the morninT session as soon as the matrials which • te JaM3S -card e.eeires to have tested are submitted to it. .A.ft,r discussion as to the oroeedure to be followed by the board in the matter, it was voted to defer action on hr. James' /notion, and the qovernor was reefuested to arran • to have the Board's Consulting. :erchltect, hr. rowbrids-a, Ci erJor 3eay and directors Of the Federal .2.eserve Bank of eichr d, aepear before tao :hoard for a discussion of the matter at s earliest oossiblo ?he nueti24: : : adjourned at 5:00
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