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11929 raeetin,g of the Federal Reserve Board with the Federal reserve and the governors of Federal reserve banks was held in WashingWednesday, June 27, 1934, at 10:45 a. in. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Black, Governor Hamlin Miller James Thomas Szymczak Mr. Mr. Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Martin, Assistant to the Governor Wyatt, General Counsel Goldenweiser, Director of the Division of Research and Statistics Mr. Parry, Assistant Director of the Division of Research and Statistics Mr. Vest, Assistant Counsel ALSO PRESENT: Messrs. Case, Austin, Hoxton, Newton, Stevens, Wood, Peyton, and Walsh, Federal Reserve Agents at the Federal Reserve Banks of New York, Philadelphia, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, and Dallas, respectively. Messrs. Young, Norris, Fancher, Seay, Martin, Geery, McKinney, and Calkins, Governors of the Federal Reserve Banks of Boston, Philadelphia, Cleveland, Richmond, St. Louis, Minneapolis, Dallas, and San Francisco, respectively. Mr. Stewart, Secretary, Federal Reserve Agents' Conference. Go 'iernor Black referred to the letter addressed by him under date 1 141e 20 '1934, to the Federal reserve agents at all Federal reserve Isequesting that they continue their efforts to effect the issuance .,rrea - stock by State member banks in need of additional capital, "e0- that it will be appreciated if the agents will continue 1.930 6/27/34 -2their efforts in accordance with the suggestion contained in the letter, "rithstanding the extension for one year of the temporary insurance 1117(37isions of Section 12B of the Federal Reserve Act. There were then distributed copies of an article appearing in the 'ew York herald Tribune" of June 12, 1934, in regard to a decision handed dOltm 111 the Supreme Court of New York in an action brought by the State 8/113erintendent of Banks against twelve officers and directors of the Bank or the United States. Governor Black stated that the Federal Reserve Board 48 been giving consideration recently to the question as to what responsibilltY it might have under the provisions of Section 30 of the Banking Act °I*1933 in connection with the proper discharge by directors of member 1111'':2 of their duties and that it was felt that the opinion above referred to, "ch takes a definite position with regard to the duties and responsiIlit' -e s of directors, would be of interest to the Federal reserve agents and 1 °'411‘11Ors in connection with their consideration of the question as to how the l'ederal reserve banks might improve the service rendered to member banks bY A4 ' rectors of such institutions without the necessity of resorting to the Pro cedare contemplated in Section 30 of the Banking Act of 1933. Governor Black stated that there have been received from the Seeret „ a--,7 of the Treasury agreements signed by the Secretary or the Under Se„ setting forth the terms and conditions under which the payments c(14te!mli 4—ated by Section 13b(e) of the Federal Reserve Act, as amended by the 1114/18trial credit bill, will be made to the Federal reserve banks by the T .... reas„ ' -st Department; that the agreement for each bank will be handed 1931 6/W34 —3— to the chairman or governor of the bank with the understanding that it 11111 be presented to the board of directors as promptly as possible for 4Prcval, following which the signed copy will be returned to the Federal lieserve Board for delivery to the Secretary of the Treasury. In this con— nection Governor Black said that it was very important that the boards of d11'sctors of the respective banks meet as promptly as possible to act on the agreement with the Treasury Department and to select the members of the Industrial Advisory Committee for the district. Governor Black stated that Mr. J. W. Pole of the Export—Import 4111:bed called on him this morning with a suggestion from Mr. George N. Peek Special Adviser to the President on Foreign Trade, that a committee (If the governors of Federal reserve banks be appointed to consider with lieBer8 Peek and Pole the question of foreign exchange. With the approval of the governors present, Governor Black appointed Governors Harrison, Young and Norris as members of the committee. Governor Norris, as chairman of the Securities Exchange Act ON1h.4 -ttes, stated that the committee had considered the two questions re— ed to it at the meeting yesterday and had adopted the following reso— lUtio ne with the thought that the statements contemplated therein would be by the Board as soon as possible before October 1, 1934, when the Nho "4‘' 448.tions to be promulgated by the Board under the Securities Exchange Act Of 1934 will be issued: (1) "The Committee recommends to the Board the is— suance of a notice to the Reserve Banks to be transmitted loY them to all banks in their respective districts with such preamble or such additional matters as the Board may 1_932 6/27/34 -4"think proper, this statement to indicate the characters Of bank loans that are not within the regulatory power of the Board under this Act." (2) "It is recommended that the Board issue a statement clarifying the meaning of Section 7 (e), which relates to the exemption of accounts outstanding on June 6, aad that this statement should in addition cover the status of accounts opened between June 6 and October 1." Governor Black then stated, for the information of the agents and "°r5, that the Board yesterday approved Regulation S, relating to loaals for industrial purposes, amended in accordance with the suggestions Y the agents and governors at the meeting yesterday morning and that Of the Regulation had been sent by telegraph to the banks last night '11(1 thn+. -- it would be released to the press today for publication in the raor 414; papers tomorrow. There followed a discussion of the payment by the banks of the ex1)1ellze s incurred by the Industrial Advisory Committee in each district, and vm Pointed out that no reference was made to this matter in Regulation S the thought that it would be left to the Federal reserve banks for 4terrai aation within the limits imposed. by law. At this point, Mr. Morgenthau, Secretary of the Treasury, and Mr. co()lid ge, Under Secretary of the Treasury, joined the meeting, and Governor l'eviewed for their information the matters which had been considered krizt. the meetings with the Federal reserve agents and. governors. .1113°n inquiry from Mr. Morgenthau, Governor Black stated that the _ %tell governors had indicated agreement with the proposed arrangement Y the funds for the first $10,000,000 of loans under the industrial a„4, -- will be advanced by the Treasury Department, the second $10,000,000 A 6/27/a4 -5t 13Y --ePederal reserve banks, and so on until the aggregate amount to be Nkid to the banks by the Treasury Department has been transfe rred to the 8* There was a short discussion of the procedure to be followed by the l'es11131117 Department in making the payments to the Federal reserve banks con, ter1Plated by Section 13b(e) of the Federal Reserve Act, and, in response to k11111.4rY from Mr. Morgenthau, the agents and governo rs indicated that, on tile basis of the information now available, there will be a large number of atoris submitted for industrial loans. 14r- Morgenthau stated that, in the absence of any unforeseen change the Present situation, the Treasury Department does not contemplate any 411eIlle operations until the 15th of September. At the request of Mr. Morgenthau, the Federal reserve agent or 4e'r from each Federal reserve bank, except Kansas City (Messrs. McClure kcl zszai lton were not in attendance at the meeting), briefly reviewed present bizst4ess corlditions in his district, following which Messrs. Morgenthau and Co qtace _eft the meeting. There followed a detaile discuss ion of the question of interest and d "ec)Illat rates to be charged on loans and advances made by the Federal reserve 4— -441t4 1111der „ the industrial credit act, and Governor McKinney, as chairman of UZt--al Credit Committee, stated that his committee had considered 4Iatte r and had felt that there might be a preferential rate applied to e, o4 - acquired by Federal reserve banks from member banks as distt 11 A ' from obligations acquired from other financing institutions, t4at rates ,aight be different in a Federal reserve district, depending 11)o, q the a. ' 1°Iant of the loan, the character of the credit risk, and the rate 6/27/34 -6- ailing in the particular locality where the application originates. The Bilegestion was also made, Governor McKinney said, that the rates charged 211°111d be such that Federal reserve banks will not compete with commercial During the discussion, the suggestion also was maie that the Federal l'eser7e bamks should make a charge for any commitments to take over from tirialleilag institutions advances made by them to industrial or commercial c°11cerns for the purpose of furnishing working capital. Governor Norris moved that it be the sense of the conference that a commission should be charged for commitments made by Federal reserve banks, and that a preferential rate should be established for member banks from which loans are acquired, or which participate with a Federal reserve bank in loans made pursuant to the industrial el-edit act. Purther discussion ensued, during which the opinion was expressed that Governor Norris, motion may be somewhat premature because of the fact tlIeLt the Federal reserve agents and governors, and the members of the Board, 14We ttot had an opportunity to give careful consideration to the question, 441 al)verner Black inquired whether the agents and 7,overnors would like to 47e a written expression from the Board with regard to the matter, with tliethet4at that any such statement made by the Board would not be contr°11111 upon the Federal reserve banks in the fixing of rates, and that ths statement would contain not only an expression with regard to the rates to), -e charged by the banks, but also as to the opportunity offered the l'otierea reserve banks and the obligations placed upon them by the industrial Au aet in making advances for the purpose of furnishing working capital. Of the agents and governors present indicated that such a statement 4°41 the Federal Reserve Board would be helpful, and Governor Black said 1935 6/27/34 -7hat it would be prepared and forwarded to them as soon as possible. Governor Black stated that he could not stress too strongly the Dortance of the obligations of the Federal reserve banks nnder the industilal credit act; that he felt that there will be no difficulty experienced 13taining from the Treasury Department the additional funds which it is " e templated will be paid to the Federal reserve barks by the Department I larit to the act; that the entire responsibility of making successful Ilae of the powers granted by the act is placed upon the Federal reserve banks 411(1 the Board; and that if the authority is exercised effectively it will be Qost helpful to the Federal Reserve System, whereas if it is not effect' velY exercised it will be extremely harmful to the System. I The other elbere of the Board expressed agreement with the statement made by Governor kack. azd the Federal reserve agents and governors present indicated that thepe deral reserve banks would do everything within their power to ad11111.eter effectively their new duties Trader the act. Thereupon the meeting adjourned. \tru p Secretary. ' 41 1''"yed:
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