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759 A meeting of the Board of Governors of the Federal Reserve S7etem was held in Washington on Tuesday, June 13, 1939, at 2:30 p.m. PRESENT: Mr. Mr. Mr. Mr. Ransom, Vice Chairman Szymczak McKee Draper Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Clayton, Assistant to the Chairnan Mr. Wyatt, General Counsel Mr. Paulger, Chief of the Division of Examinations Mr. amead, Chief of the Division of Bank Operations Mr. Dreibelbis, Assistant General Counsel Mr. Vest, Assistant General Counsel Mr. Wingfield, Assistant General Counsel Mr. Leonard, Assistant Chief of the Division of Examinations Mr. Ransom stated that early in April he received a telephone "11 from one of the secretaries in the office of Senator Glass asking that the record of service of Mrs. Maria D. Mlles, a file clerk in the Secretary's office, be reviewed for the purpose of deciding if her salary 11°41d be increased. He said that he had drawn the matter to the atten- ti°4 of the Board's Personnel Committee in a memorandum dated April 15, 1939 with which he transmitted memoranda received by him from the S"IletarY's office reviewing Mrs. Miles' case. He also stated that 1144er date of May 25 the Personnel Committee had advised him that it had r.4 1-Iren careful consideration to the salary of Mrs. Miles and that, 1/11.8 it had not approved and did not recaLumend a salary increase, it eked that the matter be placed on the docket for consideration of the 1\111 Board. 760 6/13/39 -2Following a brief discussion, the Board referred the matter back to the Personnel Committee with a request that it submit a recommendation to the Board with respect thereto. There was presented a letter dated June 2, 1939, from Mr. 81)1*°111, First Vice President of the Federal Reserve Bank of New 'York, ' l ecolumending that the enployment of Walter B. Matteson, Assistant ?ice President of the bank, be extended for an additional month, i.e., thlIcYligh July 31, 1939. It was explained that the New *York bank had t°111:hd it necessary to retain Mr. Matteson on active duty for the full period of six months beyond the date on which he was to have been retll'ed, such extension having previously been authorized by the Board, " ( I that the bank was now reconaending this further extension of his ettiPloYment in order that he might be given a month's vacation prior to his r etirement. Chairman Eccles, upon receiving the letter, had sug- 8ested that the matter be placed on the docket for consideration at a Itteeting. Mr. McKee celled attention to the fact that the New York bank cauo A under the existing policy supplement Mr. Matteson's retirement 811°Ivance by a cash contribution and that it was likely, judging from 11€18t experience, that such action would be taken. Mr. Ransom expressed the view that it might be well to suggest informally to the New York 4111c that Mr. Matteson be allowed to take his vacation beginning imme44telY and that the period of his employment be not extended beyond . 761 6/13/39 -3- Zune 30, 1939. A discussion ensued during which the members of the Board agreed unanimously that the matter should be referred to Mr. Szymczak in order that he might discuss it informally with President Harrison of the Federal Reserve Bank of New York and submit a recommendation to the Board as to the action to be taken. Consideration was then given to a letter dated June 6, 1939, tr°1a bh% Walter Lichtenstein, Secretary of the Federal Advisory Council, ' l eTaesting that the Board excuse the Council from further consideration °I' the topic "How Can the Federal Reserve System Increase the 'Value or Se°11e of its Services to Member Banks in Practicable or Desirable Ways?" in view of the inability of the members of the Council to agree unani144181Y upon identical reasons for its conclusions upon a number of the 4newere submitted to specific questions under this general topic. It was the consensus of the members of the Board in attendance ' et the meeting that, in view of the apparent inability of the Council t° Iseach an agreement as to the reasons underlying the conclusions 144ich it had previously expressed to the Board, it should accede to the request of the Council. Accordingly, the Board requested the Secretary to prepare for its consideration an appropriate reply to Mr. Lichtenstein's letter. Reference was made to the action taken at the meeting of the laQ " cl on May 19, 1939, approving a letter to the Chairman of the Senate 762 6/13/39 -4- C°Imattee on Banking and Currency reporting the views of the Board with l'eaPect to the merits of the Gillette Bill (S. 2035), "A bill to authorize the establishment of certain bank offices in communities which have rl° banking facilities", with the understanding that Mr. Ransom would diseuss the report with the Comptroller of the Currency and that in the absence of any objection on the part of the Comptroller it would be released. 14r. Ransom stated that he had taken the matter up with the C°14troller and that Mr. Delano had advised him that he did not see Objection from the standpoint of his office to the Board making the report in question, that the report did not exactly express the P081ti0n that his office might take if it were reporting on the bill, bIlt that in so far as the Board's report referred to national banks office saw no objection to the report being filed in its present r°1131. Mr. Ransom said that he had asked that the matter be brought Up n-, ln at this meeting merely for the purpose of obtaining the Board's 413Pr°val of the report in the light of Mr. Delano's comments. It was P°inted out in this connection that the action taken on May 19 contemMated that, after the letter is sent to Senator Wagner, Mr. Davis *1111d call on Senator Gillette, who was not a member of the Senate e°11/111.1ttee on Banking and Currency, and hand him a copy of the report t" hie confidential information. Upon motion by Mr. McKee, the Board by unanimous vote approved the letter to 763 6/13/39 -5Senator Wagner, Chairman of the Senate Committee on Banking and Currency, in the same form as set forth in the minutes of May 19, with the understanding that the Secretary's office would communicate with Mr. Davis by telephone in order to ascertain whether he had any suggestions regarding the matter before the letter was released. (Secretary's Note: On June 14, 1939, Mr. Davis was reached by telephone in Boston and advised of the above action taken by the Board and the substance of Mr. Ransom's conversations with the Comptroller of the Currency. Mr. Davis said that he felt the letter to Senator Wagner should be released without farther delay and that it would be satisfactory to him if a copy were held in his office until his return so that he might Personally hand it to Senator Gillette, in accordance with the understanding reached at the meeting of the Board on May 19, at as early a date as may be convenient. Accordingly, the letter to Senator Wagner was placed in the mails.) Mr, McKee referred to his memorandum of June 2, 1939, which 11Eld been circulated among the members of the Board prior to the meeting, l'el"ing to the report of examination of the Federal Reserve Bank of 411. as City made as of April 5, 1939. He stated that the Division of 4nniinations had called attention to the frequency of committee meetinvolving attendance of directors at the Kansas City bank. 5a1 d. He that, since the new chairman of the board of directors of the resides in Kansas City, he felt careful consideration Should be " to the question whether this is not the proper time to call the 764 6/13/39 -6- cheilman to Washington and explain to him the Board's attitude on this subject. He added that he had withheld approval of a proposed letter to the bank in the absence of Mr. Szymczak in order that the questions in7olved might receive consideration by the entire Board. Mr. Ransom referred to a somewhat similar situation at the 4cisral Reserve Bank of Atlanta and suggested that, while the meetof the discount committee of the Atlanta bank may not have been held as often as at the Kansas City bark, a decision should be reached °II the broad question of policy and should be applicable to all Federal Reserve banks where a similar situation exists. Mr. McKee referred to the correspondence which had passed between the Board and the Federal Reserve Bank of .Kansas City during the latter part of December 193? and to the fact that the Board in a letter dated January 10, 1938, advised the Kansas City bank that the 414rd interposed no objections to the amendments to the bank's by-laws tIitted at that time on the understanding that the matter would be 4eonsidered whenever a new chairman and Federal Reserve agent was designated. The matter was discussed at length and it was agreed unanimously that the problem should be referred to Mr. Szymczak for consideration and submission of a recommendation to the Board. It was understood that Mr. Szymczak would explore the matter from a policy standpoint and that 765 6/13/39 -7his recommendation should be broad enough to apply to the Federal Reserve Bank of Atlanta and any other Reserve bank following a practice similar to that in effect at the Federal Reserve Bank of Kansas City. Mr. McKee called attention to a memorandum dated June 7, 1939, addressed to the Board by Mr. Vest, Assistant General Counsel, which had been placed in circulation for the information of the members of he Board and was accompanied by correspondence which had been exchanged between the Board's General Counsel and Mr. Dunn, General Counsel for the Federal Reserve Bank of Chicago, regarding a situation which had I'eeelltlY arisen at the Detroit Branch with respect to the collection °r it drawn on local banks. had been Ur. McKee stated that the memorandum routed to him first in the absence of Mr. Szymczak and that, 111 'view of the broad questions of policy involved he had on Saturday, 41 "10, called Mr. Bass, Managing Director of the Detroit Branch, ill order to obtain further information. Mr. Ransom stated that he and Mr. Szymczak were at the Chicago 1)441c at the time and that President Schaller had acquainted them in k p aDener way with the situation. Mr. McKee reported the substance of his conversation with Mr. Buss and at the conclusion of a general discussion it was agreed that Messrs. Szywczak and McKee would consider what action, if any, Should be taken at this time, particularly in the light of the pending revision of the Board's Regulation J and of the uniform check collection circulars issued by the Federal Reserve banks pursuant thereto. 766 6/13/39 -8Mr. McKee referred to the action taken by the Board on March 8 '1939, in referring to Chairman Eccles and him with power to act, the question whether Congress should be requested to make permanent the authority granted to the Board of Governors by the second paragraph section 16 of the Federal Reserve Act to permit the Federal Reserve ballks to pledge Government securities as collateral for Federal Renotes. He also referred to the Chairman's report to the Board at its meeting on May 26, 1939, that he had indicated to Senator Glass, is chairman of the subcommittee of the Senate Committee on Banking alld Currency which would handle the matter, that he (Chairman Eccles) W°111d like to discuss the matter with him, and that the Senator had 41leed to communicate with him regarding it but had subsequently be°°111e ill and no opportunity had since been afforded him to present the raatter to the Senator. Mr. McKee stated that he understood the elielrinen had contacted Senator Glass' office a number of times since tha t date but had been unable to arrange to see the Senator. He said til "on yesterday he (Mr. McKee) had been called to Senator Glass' trice and that the Senator referred to the foregoing proposed legislati°11) as well as S. 1886, "An Act to extend to June 16, 1942, the llell°d within which certain loans to executive officers of member bEttit 8 of the Federal Reserve System may be renewed or extended". Mr. McKee said that, since he shared the responsibility with Chki Eccles for obtaining a continuance of the authority which 767 6/13/39 -g- e xpires on June 30, 1939, for the pledging of direct obligations of the *United States as collateral security for Federal Reserve notes, he desired to report his conversation with Senator Glass, the substance °f which was that the Senator is willing to introduce a bill extending alleh authority if he is furnished with a draft of the proposed legislaMr. McKee stated that, in view of the fact that Chairman Eccles has been unable to discuss the matter with Senator Glass personally, he would like to see the Board send a letter to Senator Wagner, Chair- till1/11 of the Senate Committee on Banking and Currency, with a copy or 411 i dentical letter to Senator Glass, recommending that the proposed legislation be enacted. He indicated, as did Mr. Ransom, that he felt it would be desirable to obtain the enactment of legislation continu146 the existing authority before the expiration date of the provision 14 the existing law. Mr. Ransom, however, said that the Chairman de- sired to discuss the matter personally with Senator Glass, and that he felt that it would be preferable for the Chairman to hand a copy r the proposed bill to the Senator or, for that matter, to send a e°Py informally to the 6enator's office. At the conclusion of the discussion, it was agreed that Mr. Clayton should discuss the matter promptly with Chairman Eccles with the view to giving it the direction suggested by Mr. Ransom. Mr. McKee reported also that among other things the Senator had explained the legislative situation in regard to a House amendment 768 6/13/39 -10— to S. 1886 which would repeal the provision of existing law that banks With deposits of ‘1,000,000 or more cannot be insured after July 1, 1942 unless they are members of the Federal Reserve System. Mr. Ransom stated that he did not think the Board should oppose the amendment. 11r. McKee concurred. Mr. McKee stated that at the meeting on May 19, 1939, the Board held requested that he discuss with Mr. Leo Crowley, Chairman of the l'aderai Deposit Insurance Corporation, the desirability of reducing tile maximum rates of interest prescribed by the Board's Regulation Q. which may be paid by member banks on time and savings deposits. He eald that in accordance with this action of the Board he had talked With Mr. Crowley on this subject, that Mr. Crowley was in sympathy With the idea that some action in that direction should be taken, and that he would be glad to come over and discuss the matter with the 1131ard. Mr. McKee inquired whether the Board wished to meet with Mr. Crowley for this purpose and at the suggestion of Mr. Ransom it was agreed unanimously that Mr. Crowley and the other members of the board of directors of the Federal Deposit Insurance Corporation be invited to meet with the Board of Governors and the Secretary was requested to contact Mr. Crowley for the purpose of extending an invitation for such a meeting and setting a date which would be mutually agreeable. Mr. McKee referred to the fact that the copy of the month- ly statement showing the status of matters in the hands of members or the Board which were still under consideration as of June 2, 769 5/13/39 -11- 1939, showed that he and Mr. Draper were to give further consideration elld submit a recommendation to the Board with regard to the memorandum l'ePered by Counsel relating to section 8 of the Clayton Act and a suggested revision of that section. Mr. McKee pointed out that since legislation was now pending before Congress (S. 2150, which was favorb1 reported on by the Senate Committee on Banking and Currency on 121 1939) to extend from February 1, 1939, to February 1, 1944, the Period during which a director, officer, or employee of a member Of the Federal Reserve System, or any branch thereof, who was 1111A111Y serving on August 23, 1935, as a private banker or as a diofficer, or employee of any other banking institution or bIllrich thereof, may continue such service, it did not appear that 44Y good purpose would be served by giving farther consideration to the Inemarandum referred to at this time. He suggested, therefore, that he and Mr. Draper be relieved of the above assignment and that the matter be eliminated from the monthly statement of matters which "e still under consideration. Accordingly, it was agreed unanimously that the action suggested by Mr. McKee should be taken. At the request of Mai. Ransom, Mr. Wingfield reported briefly °II the revised draft of H. P. 5220, "A bill to provide for the regalett0 11 of the sale of certain securities in interstate and foreign !4, 1WiTh :14.] 6/13/39 -12- c0mmerce and through the mails, and the regulation of the trust indentures under which the same are issued and for other purposes", intr°duced by Representative Cole on March 22, 1939. It had been pointed in a memorandum prepared by Mr. Wingfield under date of March 29, 1939) that H. R. 5220, in general, follows Confidential Committee Print N°. 2 of the Barkley bill (S. 477) on which the Board reported to Senator Wagner under date of March 4, 1939. Mr. Winfield said that fllullber of changes had been made in the bill to make it more workable elld that a large amount of the discretion left in the Securities and 4ehange Commission by the earlier draft had been eliminated. He Pointed out, however, that the Securities and Exchange Commission 114de:c the revised bill would still have to p:o over each indenture and e°111pare it with the requirements of the bill. Mr. Wyatt called at- ten tion to the fact that the several pages dealing with conflicting interests renain in the revised bill. In conclusion Mr. Wingfield said that the revised draft was an improvement over the earlier draft in that it was more specific in many respects but that this resulted in greet deal of detail being incorporated in the bill. Attention wes called to the fact that the Committee on Interstate and Foreign e°11111erce of the House of Representatives had not adopted any of the Ileeestions regarding overlapping supervision of banks contained in the -moard's report to that committee with respect to this legislation. 791 6/13/39 -13At this point Messrs. Wyatt, Paulger, ead, Dreibelbis, Vest, 7111gfie1d and Leonard left the meeting and the action stated with re8Pect to each of the matters hereinafter referred to was then taken by the Board, Chairman Eccles who was not available when the meeting convened participating: The minutes of the meeting of the Board of Governors of the Pedarel Reserve System held on June 12, 1939, were approved unanimously. Letter to Mr. Leach, President of the Federal Reserve Bank of Ric 4mond, reading as follows: "In accordance with your recommendation, the Board ePproves the establishment and operation by the 'Wachovia Bank & Trust Company', Winston Salem, North Carolina, of B branch at Charlotte, North Carolina, upon the consuimmation of the proposed plan of the Wachovia Bank & Trust Company to purchase the assets and assume the liabilities Of 'The Charlotte National Bank', Charlotte, North Carolina. "From the information submitted it has been noted that the purchase of assets and assumption of liabilities Of The Charlotte National Bank by the Wachovia Bank & Trust Company will not result in any material change in the character of assets or scope of corporate powers exercised by the trust company within the meaning of the general condition under which it was admitted to memberShip and, accordingly, the approval of the Board to the acquisition of the business of the national bank is not required. It has been noted in the report of examination as of March 6, 1939, that The Charlotte National Bank held three issues of corporate stock in its investment account As you know, member banks are prohibited from purchasing corporate stocks and it is suggested that you advise the bank that such stocks should be disposed of prior to the conclusion of the transaction or as soon thereafter as Practicable. "As indicated in your letter, the consolidation of the two banks will improve the ratio of capital structure to deposits of the Wachovia Bank & Trust Company. However, 6/13/B , -14- "it has been noted that after the consxwaation of the transaction the capital structure of the trust company Will still be low in relation to its deposit liabilities. In previous correspondence relative to this bank you have indicated that the management of the bank, as well as the Commissioner of Banks, recognized the desirability of having additional capital and it is suggested that you advise the management that its constant and vi,Porous attention to strengthening the bank's capital structure is anticipated." Approved unanimously. Memorandum dated June 9, 1939, from Mr. Foulk, Fiscal Agent, l'ecommending that an assessment of two hundred and fifty-nine thousandths of one per cent (.00259) of the total paid-in capital (irplus (Section 7 and Section 13b) of the Federal 8 eserve barks Of the close of business Tune 30, 1939, be levied to cover the elleral expenses of the Board during the last six months of 1939, 111c1 that the Federal Reserve banks be instructed to pay in the assesltent in two equal installments on July 1, 1939, and September 1, 1939. The following resolution levying an assessment in accordance with the Fiscal Agent's recommendation was adopted by unanimous vote: "WHEREAS, Section 10 of the Federal Reserve Act, as elnended, provides, among other things, that the Board of Governors of the Federal Reserve System shall have power to levy semiannually upon the Federal Reserve banks, in Proportion to their capital stock and surplus, an assessment sufficient to pay its estimated expenses and the salaries of its members and employees for the half year succeedint4 the levying of such assessment, together with 773 6/13/39 -15- "any deficit carried forward from the preceding half year, and "WHEREAS, it appears from a consideration of the estimated expenses of the Board of Governors of the Federal Reserve System that for the six months' period beginning July 1, 1939, it is necessary that a fund equal to two hundred and fifty-nine thousandths of one per cent (.00259) of the total paid-in capital stock and surplus (Section 7 and Section 13b) of the Federal Reserve banks be created for such Purposes, exclusive of the cost of Printing, issuing and redeeming Federal reserve notes; "NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, THAT: "(1) There is hereby levied upon the several Federal Reserve banks an assessment in an amount equal to two hundred and fifty-nine thousandths of one per cent (.00259) Of the total paid-in capital and surplus (Section 7 and Section 13b) of each such bank at the close of business June 30, 1939. "(2) Such assessment shall be paid by each Federal Reserve bank in two equal installments on July 1, 1939, and September 1, 1939, respectively. "(3) Every Federal Reserve bank except the Federal Reserve Bank of Richmond shall pay such assessment by transferring the amount thereof on the dates as above Provided through the Inter-district Settlement Fund to the Federal Reserve Bank of Richmond for credit to the account of the Board of Governors of the Federal Reserve SYstem on the books of that bank, with telegraphic advice to Richmond of the purpose and amount of the credit, and the Federal Reserve Bank of Richmond shall pay its assessment by crediting the amount thereof on its books to the Board of Governors of the Federal Reserve System on the dates as above provided." Memorandum dated June 8, 1939, from Mr. amead, Chief of the tillision of Bank Operations, submitting a letter dated June 7 from Mr. 11 11 h --'s, Vice President of the Federal Reserve Bank of New York, which Ilegllested approval by the Board of a change in the personnel classifi°4ti°n plan of the bank to provide for a transfer of the position 774 6/13/39 -16- °reign Analyst" from the Foreign Department, Foreign Exchange Divitalcms Reports Section to the Research Depal. Went, Foreign Research 41rision and a minor change in the description of work for such position. The memorandum stated that the proposed change had been reviewed end recommended that it be approved. Approved unanimously. Thereupon the meeting adjourned. Secretary.
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