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1103 At a special meeting of the Federal Reserve Baird held in the office of the Board on Saturday, June 22, 1918, at 10:35 A.—., ?RESENT: Mr. Harding, presiding, Mr. Miller, Mr. Warburg, Mr. Williams, Lir. Hamlin, Mr. Willis, Secretary. The subject of guaranty of deposits which had been made the special topic for the day being brought up, Gorernor Harding read a series of resolutions on that subject which were submitted as a report on behalf of the Executive Committee as follows: :MEREAS, it is important that nothing should impede the unification of the banking system of the country under the Federal Reserve Act, to which the President called attention in his statement of October 13, 1917: 'The Federal Reserve Act is the only constructive financial legislation which we have enough to accomodate ever had Ahich was broad at the same time banks operating under powers granted by the General Government and banks whose charters are granted by the respective States. The unification of our banking system and the complete mobilization of reserves are among the fundamental principles of the Act'. ;HERS, such unification is threatened by the proposed plan for the guaranty of deposits in national banks: (1) Because it would tend to stimulate a spirit of competition and antagonism between State bank systems and the national banking system; 1101 (2) Because of the difficult and embarassing situation in which such State banks, which, owing either to insufficient capitalization or to existing contractual or trust obligations, could not convert into national banks, would be placed; (3) Because of the agitation which would be produced in many States to secure local legislation for the guaranty of deposits in State banks, thus destroying the harmony now happily developing and almost established between State and national bank systems, as evidenced by the increasing number of State member banks in the Federal Reserve System and the cordial cooperation which many States are giving to the policy of the Federal Reserve Board in seeking to bring about a unification of the American banking systely; 7,HIZEAS, there is no sufficient evidence to establish that there are great sums of currency and specie now in hiding, which would be drawn out and deposited in national banks were such deposits guaranteed, beyond what is already being accomplished by the Postal Savings Bank 'System and the 7;ar Savings Stamp associations; ':11±;REAS, in the judgment of the Board, no plan of insurance, either applied to bank deposits or to any other form of credit or property, is sound or can long be successfully maintained Where a uniform premium is assessed upon all participants, good or bad, alike; WHEREAS, relieving depositors of the necessity of exercising care and vigilance in choosing banks in Which to deposit their funds would make for weakness, rather than strength, in the orgnnization and conduct of banks; WHLREAS, the extension of the principle of insurance to bank deposits raises largo and most difficult questions of general governmental policy which ought to be decided only after the most mature consideration; HERS, the Government could not safely and wisely undertake the gurranty of bank deposits without .4 1105 exercising a degree of control over banking loans and investments, which would, in effect, amount to the governmont guaranty of such loans and investments and thus bring banking credit under the complete control of the Government; VaLREAS; the hardships now suffered by depositors of insolvent banks could be materially lessened by the establishment of a fund for the prompt liquidation of the valuable assets of failed banks; T1EREFORE, B IT RESOLVED, that the Board deprecates the injection into the banking situation at this time of the bitterly controverted question of guaranty of bank deposits as prejudicial to the development of the Federal Reserve System, and as menacing to the successful financial conduct of the war, because of the agitation of mind produced in the business and banking C ommunity; BL IT FURTHER RESOLVED, that it is the judgment of the Board that a fund, under the administration of the Federal Reserve Banks, might well be set up to provide and insure immediate determination of the value of the assets of failed member banks of the Federal Reserve system and an immediate distribution of the estimated value of such assets among depositors, pending their final liquidation; this to the end that the hardship and injury now sustained by depositors of failed banks, because of the delays to vkich they are subjected in receiving their pro-rata of the assets of failed banks, may be reduced to a minimun. (Signed1W.P.G.HARDING, 41.0.ZILLB,R Discussion ensued. Governor Harding stated his own position and described a conversation he.had had with the Secretary of the Treasury on the subject and Mliams read parts of a personal letter from Tr. lIcAdoo dated June 15th. The pending question - the prcposed resolution stating the position of the Board - being called for, Mr. asked that the subject be laid on the table until the next meeting of the Board; and moved that Coansel be requested to submit to the Board on Vuesday, June. 25th, a memorandum re bank guaranty of deposits and that the pending question be tabled until Tuesday, June 25th. . Miller moved as a substitute that the pending question be tabled until Tuesday, June 25th, and voted on at that time. On being put to a vote the substitute prevailed. On recommendation of Committee No. 3, the application of the Union Trust Company of New York, to surrender 4,500 shares, and the application of the Union Trust Co., of New York, for 4,500 shares of stock in the Federal Reserve Bank of Now York, were approved. On recommendation of Committee No. 1, the payment of a dividend January 1,1918, to June 30, 1918, at 6,7) by the A Federal Reserve Bank of Minneapolis, was approved. The action of the Executive Committee in approving the purchase of a new bank site in Boston at a price which with adjustment of taxes, etc., amounted to about i'31,008,00u was ratified, the Governor to reply officially to the notification of 2edera1 Reserve Agent Curtiss. -1107 Mr. Harding presented business as follows; A telegram from Federal Reserve Agent Wellborn re personnel of directorate at Jacksonville and Birmingham; read and the subject was given general discussion. Mr. Miller moved that it is the sense of the Board there should in the organization of the Birmingham branch be no departure from the established policy of having the manager of the branch a member of the Board. The motion was defeated. Mr. Miller asked whether the by-laws adopted for the Birmingham branch required the inclusion of a manager in the Board of Directors. A negative reply was given. Mr. ;rilliams moved that Er. Oscar Wells be designated as a Government director at Birmingham. The motion prevailed. The question of the directorate at Jacksonville was presented for consideration. Mr. Miller moved that the selection of the Board's directors at Jacksonville be referred to Governor Harding and Mr. ;iilliams with power. The motion prevailed. On motion a salary of ,:';400 a month each for A.E. Ulker and Geo. R. DeZaussure, as managers at Birmingham and Jacksonville, respectively, effective on organization of the branches, were approved. Governor Harding stated that the Federal Reserve Bank of Atlanta wishes to fix the salary of :.lanager “alker of row Orleans at ':,7,500, and that he on behalf of the,Atlanta Committee, recommended it. On motion dt was voted that the salary of 1.1r. talker be fixed at :J7,500 effective July 1st. A letter from Federal Reserve Agent Austin, re dividends and increases in salary at the Federal Reservenk of Philadelphia was read and referred to Conmittee o. 1. letter from Federal Reserve Agent Hardy,proposing a dividend of 6,; per annum to June 31, 1918, was approved subject to checking by the Statistician. A letter from Assistant Treasurer Fort re the question of allotting bonds to Federal fleserve Banks offered by national banks during the quarter ending June 30, 1918. It was ordered that no bonds be allotted for this quarter. A report of Committee No. 1, re a reorganization of the Board's examination system was presented and ordered circulated to be again presented. on. Tuesday, June 25th, for vote. report of. the New York Committee, re a plan to establish a branch of the Federal Reserve Bank of 7ew York at 2uffalo, was read and discussed. On motion it was voted to advise the Federal Reserve Bank of New York that the :!oard is favorable to the establishment of a branch at Buffalo. - orage paper laid on the L report on Cold'31, table on June 20th, was again presented and referred to Committee ro. 2. :Aller read a letter from Colville Barclay re the conditions surroundini; the export of 2,merican currency. The matter was rufarred to the CTold Export Cowittee. 1.1r. ..arburg, for Committee No. 2, reported back favorably a letter from Assistant t3ecretary Leffingwell, recommending that the price of rupee exchange be fixed at 35.73 instead of 3'3.75, and on motion the price was so fixed. The question of new quarters for the Division of 2oreign —change in New York was referred to the -xecutive Committee with power. Applications for surrender of stook: shares District No. 2 Union Trust -Company, e, New York, N. Y. 4,500 1110 Application for additional stock: Diatrict No. 2, SharQ- Central Union Trust Company, New York, 1.Y.4,500 On motion at 1 P.11., the Board adjourned. APPROVED: Chairmaz
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