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A meeting of the Federal iieserve Board was held in the office of tho Federal deserve :3oard on Wednesday, June 15, 1927 at 11:45 a.m. PiCSI]1,111: Governor Crissins.er Mr. Platt Hamlin Miller Mr. James Mr. Cunningham Mr. Eddy, Secretary :Tr. McClelland, Asst. Secretary The reading of the minutes of the meetings of the Board hold on ,j4116 10th, 13th and 14th was dispensed with. Telegram dated June 15th from the Chairman of the Federal _ieserve 1344C Of Philadelvkia, advising that the board of directors at their meeting c)11 that date made no change in the bank's existing schedule of rates of clisoount and purchase. 1:oted. Telegram dated June 14th from t.,e Chairman of the Federal :deserve 114414 Of Dallas, advising that the board of directors at their meeting on that date made no change in the bank's existing schedule of rates of 48 " 11nt and purchase. Telegram dated June 14th from the Chairman of the Federal .ieserve Bear, of Ri almond, advising that in accordance with the Board's suggestion the option held by the Federal ::eserve Bank for the lease of property in Oher, 4.0tte in which to house the branch to be established there has been e:O;0)1A '4.kked for a period of thirty days. -2-- The Secretary then read to the Board the following letter addressed to the Chairman of the Federal Reserve Bank of :inneapolis, prepared by in accordance with the instructions given by the Board at the meeting 04 June 13th as follows: "From a review of the record of the discussions which took place prior to the establishment of the Federal reserve collection system, and which have taken place during the period of its development to date, it is clearly evident that uniformity of procedure, insofar as practicable, on the part of the twelve Federal reserve banks in the matter of handling the various items received by them for collection has always been deemed desirable, if not indeed essential, to the successful operation of the collection system. The procedure adopted by your bank, with the approval of the Federal Reserve Board, and which has been followed since February 1, 1927, whereby your bank handles all non-cash items received by it by forwarding such items to member banks for collection and returns, was recognized by the 3oard at the time it gave its approval thereto to be a departure from the uniform practice which then prevailed throughout the System. -hile the 3oard at the time was not unanimous on the question of the necessity for uniformity in this particular phase of the collection system, and was willing that your bank Should make the change referred to in It nrocedure, the Board, in the 11:7ht of subsequent developments, has reached the conclusion that uniformity of procedure throughout the System is desirable and should be restored. The procedure referred to, which your bank is now following is, in the opinion of the Board, exercising a detrimental effect upon the collection system as a whole, and the Board has voted to rescind (effective as of July 1, 1927) the authority under which this procedure was inaugurated by your bank and to request that as of that date your bank handle all non-cash items drawn on Lannearmlis and Helena in accordance with the procedure followed by it prior to February 1, 1927. By direction of the Federal Reserve Board." Upon motion, the proposed letter was approved. The Secretary also read to the Board a proposed circular letter to the „, wlairman and Governors of all Federal Reserve banks regarding the handl1110. Of non-cash collection items, which after discussion was amended and EtIPI*Oved as follows: 30'7 % 6115/27 -3- • "The Federal Reserve Board in its letter of September 24, 1926 (X-4677), advised all Federal Reserve banks that the provisions of the Federal Reserve Act authorize, but do not require the Federal lieserve banks to handle non-cash items and suggested that each bank exercise its own option as to the collection of non-cash items at street addresses, but continue the collection of non-cash items collectible at banks. Subsequent to the date mentioned, the Board approved a proposal of the Federal Reserve Bank of lanneapolis to discontinue the direct presentation of non-cash items drawn on Minneapolis and Helena and to handle all non.-cash items received by it from its own member banks and from member banks in other Federal Reserve Districts by forwarding such items to member banks for collection and returns. At the same time, proposals were received from two other Federal Reserve banks, both limiting collection items which the banks Would handle to those drawn on or payable at banks. The Board requested the two banks referred to to make no change in their procedure of handling non-cash collection items until after the changed procedure at the Minneapolis bank had been followed by that bank for sufficient length of time to determine whether or not the effect thereof would be detrimental upon the collection system as a whole. ae Board is of the opinion, and has advised the Federal Reserve Bank of Minneapolis that the change in the procedure of that bank in .11.et handling of non-cash itams drawn on Minneapolis and Helena is havlug a detrimental effect upon the collection system as a whole, and the Board's authority under which the changed procedure was inaugurated by twat bank has been rescinded effective July 1, 1927. 7/hen the Board granted permission to the Minneapolis bank to change its procedure wlth respect to the handling of non-cash items drawn on Minneapolis and Helena, it was understood by both the Board and the Minneapolis bank that if it should appear at any time that the nevi procedure was having a detrimental effect upon the Federal Reserve Collection Sysas a whole, the Minneapolis bank would, at the request of the Board, revert to the practice which had been followed in the handlof Minneapolis and Helena items. The Board has, therefore, re5Uested the Minneapolis bank to handle all non-cash items drawn on zdnneapolis and Helena in accordance with the procedure followed by it prior to February 1, 1927. The discussions which have ensued durinr: the period of the establishment and development of the present Federal Reserve Collection SYstem, and the reports made by various committees of officials of the Psderal Reserve banks relative to the operation thereof, clearly indi()ate that uniformity Of procedure, insofar as is practicable, on the i.lart of the twelve Federal Reserve banks in the matter of handling ! .telms received by them for collection, has always been deemed desirable, le not indeed essential, to the successful operation of the collection 3Ystem. The Board, therefore, feels that so long as the Federal Reserve btulks continue to afford collection facilities to their member banks 538 6/15/27 -4- "the function should be rogarded as a System function, based upon a common policy, questions concerning which to be determined by the Federal Reserve Board after consultation with all of the Federal ileserve banks, and with uniformity of procedure prevailing at all points, insofar as may be practicable. The ..Doard understands that with the reversion on July 1, 1927, 7 by the Federal Reserve 3ank of .„21nneapo1is to the procedure followad by it prior to February 1, 1927, in the matter of handling non-cash collections, the collection procedure followed by all Federal aeserve banks will be on practically a uniform basis, and the '3oard now requests that no Federal Reserve bank make any material change in its procedure prior to submitting a proposal to the Federal deserve Board and securing its approval thereto." Report of Committee on Salaries and Expenditures on letter dated 4t4Le 13th from the Secretary of the Federal Reserve Bank of Atlanta, submittj ' 16 for approval the action of the directors of that bank in voting to in°r-eeseteffective July 1, 1927, the salaries of the following employees: L. N. Clark, Chief Clerk, Failed Bank Department, from 2820 to ..;3,000 per annum J. W. Honour, Assistant Auditor, from 3600 to ,3900 per annum E. O. Huggins, Jr., Cashier, lashville Branch, from „4200 to „4500 per annum Starr, Assistant Cashier, Nashville Branch,frmm L. ‘. 7 02160 to „2400 per annum Upon recommendation of the Committee, it was voted to approve the salary increases recommended, calling attention to the desirability of the Federal Reserve Bank making adjustr:.ents of this kind at the end of the calendar year. Letter dated June 9th from the Federal Reserve Agent at Atlanta, - eference to previous correspondence with the Board regarding violation //Yth e Ban:r; of Locust Grove, Ga. of the conditions under which it was admitted to. r4Qml, ''-uorahip in the System; the Agent submitting notice filed by the bank of 4tIon to withdraw from the System,with recommendation of his Executive 539 -.5Comraittee that the bank be permitted to withdraw rather than have action taken looking to the forfeiture of its membership for violation of the terms CI its admission. Upon motion, it was voted to permit the member bank in question to withdraw from the System, Governor Crissinger voting "no". Memorandum from Counsel dated May 31st, with reference to opinion rendered 150emtly by the trial court in the case of the L & NRailroad Company v. Branch of the Federal Reserve Bank of Atlanta, wherein the court 4121eld the validity and effectiveness of the Board's Regulation J, Series °f 1924; Counsel recommending that the opinion be published in the Federal Reserve Bulletin, in view of the fact that it will not be reported officially 441 in view of the fact that it contains language which would be helpful in °°44ection 4ith the practice of certain member banks stamping on their checks the phrase "Not payable through the Federal Reserve Bank of Atlanta". In Memorandum, Counsel also stated that in his opinion it is not necessary to employ special system counsel to assist in the handling of the case on 44 ePpeal which it is understood will be made by attorneys for the plaintiff. After discussion, it was voted that the opinion be published in the Bulletin as recommended by Counsel, but that it be clearly stated that it is an opinion of the trial court and will come up later on appeal. It was also voted to be the sense of the Board that the services of special counsel should not be retained in the case. riamorandum from the Secretary dated June 3rd, approved by the Executive 1 ) ( 41111zattee, submitting in accordance with directions given at the meeting °t tIle Board on June 1st a list of all state banks which have voluntarily 540 6/15/27 -6- Withdrawn from the Federal Reserve System including eleven banks whose memberWas forfeited by action of the Board but not including any which relincillished membership because of suspension, conversion into national banks or coteolidation with other institutions. The Board then considered the request for the information contained in the list submitted by the Secretary, which V48 received from the Secretary and Treasurer of the Provident Savings Bank alid Trust Company, Cincinnati, Ohio. After discussion, the furnishing of the information was approved and the Secretary was instructed to submit to the Board draft of a letter to the Provident Savings Bank and Trust Company transmitting the information. The Governor then submitted the matter on which action was deferred at the Meeting of the Board on June 10th pending a meJting at which the Comp- t'01 1er of the Currency is present, namely, reports by Mr. Platt and Mr. C444i11gham, members of the Committee on Examinations, regarding the action °r the State Bank of radelia, Minn. in taking over the First National Bank (I llaaelia without the approval of the Board. 1,:r. Cunningham referred to the motion made by him at the meeting on June 10th and stated that he wished to withdraw said motion "That in view of the analyses prepared by Mr. Gilbert and his adverse recommendation, copies of the analyses be :orwarded te the Federal lieserve Agent at Minneapolis with a request for his further recommendations as to whether the State Bank of iladelia should be permitted to continue as a member of the Federal Reserve System". He stated that he wished instead to move adoption of a recommendation contained in his report dated June 7th that "In view of the adverse report an the two institutions involved in the consolidation, and the further report that the merger had been consummated without first obtaining the approval of the Federal Reserve Board, I recommend that the analysis hereto attached be foraarded to Mr. Mitchell, Federal Reserve Agent of Minnearolis, with the request that he proceed 541 -7- 6/15/27 ”to make an examination of the State Bank of ::adelia, ;Ann.; and that :Ir. Mitchell be further advised that the services of Mr. Black, an examiner of the Board's force, are available for making this examination; and that on completion of the examination, a report of same be forwarded immediately to the Federal deserve Board. I would also recommend that further consideration of this question be deferred until the report of examination herein requested is before the Board." After discussion, the file was referred back to :Ir. Cunningham with the request that he take up the recommendations incorporated in his motion with the Comptroller of the Currency. The Governor then presented two copies of an analysis made by Mr. Gilbert, Of 44, 6"El report of examination of the Pacific Southwest Trust and Savings Bank Of„ '''vfa Angeles, Cal. made as at the close of business February 5, 1927. After discussion, one copy of the analysis was ordered circulated for the information of the members of the Board and the other was referred to the Committee on 1-3xaminations for report. The Governor then presented a letter dLited June 14th from the Deputy ()Irelllor of the Federal 'Aeserve Bank of New York, transmitting for the 11114ormation of the Beard copies of telegram and letter addressed to the 1)14ers of all other Federal Reserve banks concerning the sale to the 11411k Of France of approximately 6.0,000,000 of gold held under earmark illthe Bank of England for account of the Federal :aeserve banks, as reportedN ilOrMally by the Governor at the meeting of the Board on June 14th. Thereupon ensued a discussion as to the authority of the Federal Reserve Board in connection with transactions of this kind entered into under the provisions of Section 14 of the Federal Reserve Act. The relations between the Federal 2eserve Bank of New York and the Bank of England were also discussed, and by direction of the Board the Secretary opened and 542 6/15/27 -aread to the Board the formal agreement between the New York bank and the Bank of :2,g1and which has been carried in the files under seal. He also read the action of the Board at its meeting on December 19, 1916 in voting "That the Federal 2eserve Bank of New York be authorized to appoint as its correspondent and agent The Bank of ngland of London, England, and that it be further authorized to open and maintain banking accounts with and for said correspondent and agent for the purpose of purchasing, selling and collecting bills of exchange, in accordance with the provisions of Section 14 and other provisions of the Federal Reserve Act, as amended; and for such other purposes as may be permitted under said Federal Reserve Act, as amended." Following the discussion, it was voted to request the Law Committee to report to the Board with respect to what limitations and restrictions the Board is authorized to impose on operations conducted by the Federal Reserve banks under Section 14 and as to the Board's general authority in such transactions. In this connection, Mr. James requested that the Committee include in its report an opinion as to the authority of the Federal Reserve banks in connection with tha purchase of foreign bills, to impose a commission such as was imposed on the National Bank of Belgium and the Bank of Poland in connection with the agreements entered into with those institutions by the Federal Reserve banks to purchase prime bills bearing their guarantee. 1, 0 3 OF 32ANDral 0012,1ITTEES: 1)61.t ea 9 June 14th, .aeconznending changes in stock at Federal Reserve banks as f this date. set forth in the Auxiliary liinute Boo Recormnendations approved. The meeting adjourned at 1:05 p. 414 Secretary. V prQlreci
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