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559 A meeting of the Federal Reserve Board. was held in the office of the Vice Governor on Wednesday, June 30, 1926 at 12:00 o'clock noon. PRESENT: Governor Crissinger Mr. Platt Mr. Hardin Mr. James Mr. McIntosh Mr. Eddy, Secretary Mr. McClelland, Asst. Secretary The minutes of the meeting of the Federal Reserve Board. held. on June 29th were read. and approved. 11r. Hamlin referred to the action of the Board yesterday in voting to refer to the Governor of the Federal Reserve Bank of Boston the communications received from raambers of the Tennessee delegation in Congress 7.-ith respect to the ccratroversy between the Fourth and. First National Bank of Nashville, Tenn. and the Federal Reserve Bank of Atlanta arising out of certain liberty bond tran.sactions of several years ago. Mr. Hamlin stated. that in looking over the file he had found previous conmunications from Governor Harding expressing his views regarding the transaction and he therefore moved that the Board reconsider its action of yesterday in voting to refer the present correspondence to Governor Harding. Unan imo us ly carried.. idemorandum dated June 30th from the 'Acting Director of the Division of -Research and. Statistics, reccmmending the appointment of J. Alvin Crojian to trle position of mssenger boy in the Division of Research and Statistics at a salary of V900 a year, effective July 1st, to succeed Robert Nelson whose resignation has been filed, effective ,July 9th. Approved. 560 -2- 6/30/26 Report of Committee on Salaries and E.A.penditures on the matter referred to it at the /meting yesterday, namely, letter d.Ited. June 23. from the uhairman of the Federal Reserve Bank of New York, submitting a modification of the g standardization of positions, grades aid salaries of the Auditin Department Of the bank; the Committee recommending that the modification be "noted" by the Board. Noted. Report of Committee on Examinations on letter dated JU210 28th from a.-oproval the Federal Reserve Agent at Boston, transmitting and recommending perof an application of the Fidelity Trust Company of Portland., I.:aine for mission to acquire the assets, liabilities and good will of the United States branches Trust Company of Portland, ::aine and to continue to operate the and now maintained and operated by that institution at Fryeburg, Harrison South Portland., ;,:aine; the Coirmittee recormendinc approval. Approved. leport of Committee on Salaries and Expenditures on letter dated co, June 24th from the Governor of the Federal Reserve Bank of San Francis recommending approval of increases in the salaries of officers and employees as follows; the Committee also recommenling, approval: Present Salary .)4500 - 4200 - 3600 Ludie 1.1cEitchie, Asst. Llanager, Los Angeles Branch - E. G. :lailliard, Asst. cashier, Read Office Fred. C. Bold, Asst. Cashier, Head Office 1(. 3. McBride, chief, Discount & Credit Department, flead Office, J. P. Read, Assistant Examiner C. R. Hupp, Examiner E. B. licBride, Examiner D. S. Thompson, Statistician - 3300 3420 4800 4800 2520 Proposed Salary '34800 4500 3900 3480 3600 5000 5000 2700 561 -3-, 6/30/26 e!) Approved. Report of uommittee on Examinations on letters dated June 18th and 25th from the (overnor of the Federal 2eserve Bank of Philadelphia awl letter dated June 17th from the Ohairman of the bank, requesting approval of increases as follows, in the salaries of officers of that bank, effective July 1st: Present Salary . Nara) C. A. McIlhenny, °ashler, J. M. Toy, Assistant Cashier F. LaBold, " y10,000 7,500 7,500 Proposed Salary „;11,000 8,000 8,000 Discussion then ensued regarding the recommendations inasmuch as the Committee on Salaries and Expenditures was divided in its report; Mr. Platt recommending approval and Mr• Jane s dis approval. Following the discussion, lir. Platt moved that the Board approve the increases recommended. 1:r. Platt's motion being put by the uhair was carried, the members voting as folloms: Governor Orissinger, "aye" Hr. Platt, "aye" 11r. Hatlin, Mr. James, "no" Mr. McIntosh, "no" Letter dated May 15th fram the Governor of the 'ederal Reserve Bank of New York replying to the Board's letter of April 27th, requesting advice as to the pxssent status of the credit which the Board on March 8th tentatively approved being el:tended by the .u'ederal Reserve banks to the National Bank of Belgium; the Governor stating that the transaction as then proposed was not and cannot be consummated and that the iederal Reserve Bank of New York is under no commitment of any kind to the National Bank of Belgium. kibted. 562 6/30/26 The Secretary then read to the Board the following memorandum dated June 29th prepared by himself, Mr. Snead, Chief of the Board's Division of Bank Operations, and 17.r. Sailer, Deputy Governor of the Federal Reserve Bank of New York, addressed to and. approved by the Board's Committee on 5alaries and. Expenditures: "Toward the end of 1925, the ziederal deserve Bank of New york submitted to the Federal Reserve Board for its approval a plan establishing a permanent standardization of grades and salaries of the employees of the New York Bank. The plan provided for six groups of employees with varying salary ranges, the ma.ximum of which was „5,000, except in the case of the Chief of the Auditing Department, whose salary range was from y5,000 to y6,500. The plan also provided for a number of appraised positions, for which no salary ranges were prescribed. The plan was designed to simplify the procedure between the New York Bank and the Board which had prevailed for some time in connection with adjusting the salaries of the employees of the bank, an" to ilinnit the directors of the bank, from time to time throughout the year, to adjust, without first securing the Board's approval, the salary of any employee of tne bank whose position came within one of the six groups. It was definitely stated arrl understood that no employee would be moved from one grade to another unless his work was changed in such a way as to automatically move him to a higher grade. Are Board in formally approving the plan set up several conditions, one of which prevents operation of the plan as contemplated by its designers, namely, "That no promotion shall be nude from one grade to another where the salary to be paid is in excess of .„2,500 per annum, without the prior approval of the Federal .ieserve Board". It would appear that this condition was set up by the Board as an administrative control designed to check any disposition tward too rapid advancement in the salaries of the employees through promotion from one grade to another. The undersigned were instructed by your committee at its meeting this morning to work out and submit a plan of operation which would permit the ilew York Jenk to make promotions within the six grades and to ircrease salaries of employees up to ,n5,000, without first securing the approval of the Federal yieserve Board, but vilich would retain within the Board sufficient administrative control over salary payments. ',7ith this in view, the undersigned suggest the following in lieu of the several conditions imposed by the Board at the time it approved the plan, as set forth in its letter to Governor Strong of January 12, 1926: (1) That the directors of the Federal eserve Bank of New York shall have authority to promote or demote employees from one grade or group to another and to make adjustments in ri"*I g_)f.) 6/30/26 -5"the salaries of employees in such grades or groups, provided the mazinram salary to be paid does not exceed ,A,000 per year. (2) That the establishing of any new groups or grades, or any modification of salary ranges shall be approved by the Federal .Lleserve Board before becoming effective. (3) un or before December 15th of each year, the Federal Reserve Bank of New :ork shall submit to the Federal Reserve Board, for its approval, a report showing all employees of the bank according to groups, the salary paid to each such employee at the beginning of the year, the amount of salary adjustment made in the case of aach employee durin7 the year, and the salary which the bank proposes to pa-) each employee as of the beginning of the succeeding year. (4) In order that the Board may keep currently informed of the movemnt of the bank's anployees toward high,r grades and be in a position throughout the year to query the bank on its policy of promotion and salary increases, in the event it appears to the Board that there is any unusual movement of employees toward hicher grades, the Federal Reserve Bwfl.k of New lork shall at the end of each month report to the iederal -eserve Joard any salary changes or promotions in grades affecting employees receiving more than ,2,500 per annum. SIRiGESTED CLASSIFICATION OF APPRAISED POSIr2IONS. With respect to the so-called appraised positions referred to in the first Pa.ragraph of this memorandum and for which as stated no salary ranges have been provided by the Now York Bank, the undersigned believe that several of tilese positions can be classified and included in one or more of the six existing groups, the salary ranges incidental to such classification to be apProved by the Federal Reserve Joard. These particular positions are as follows: Social and Physical Directors Supervisor of the Federal eserve Glub Store Cafeteria Employees Secretaries to Governor, Deputy Governors and ederal Reserve Agent The undersigned further suggest that the examiners in the Jark Examinations iiePartment and the special representatives in the Limber Bank Relations Department be placed in a separate group, with salary ranges as follows: 1-,,5,000 and above crracie A ,,,;4,000 to ,;5,000 Grade B ,3,000 to ,,;4,000 Grade G • It is also suggested that the physicians and dentists be taken out of the 8.13:praised class arr3 in lieu thereof the bank enter into a contract at the beginni13€ Of each year for such service rendered by the physicians and dentists as 564 6/30/26 "may be required, but in no case shall the bank contract with any individual physician or dentist for a fee in excess of 4i;5,000 a year, without the prior approval of the Board. If the above suggestions are approved, the following only will remain as appraised positions: Chief of the Foreign Division Chief of the Loan Application Division Chief of the Securities Division Superintendent of the bank building Chief Engineer of the bank building The duties ani responsibilities of these positions are sadh that the value must necessarily be determined largely by the ability and training of the Incumbent. It is, therefore, suggested that no salary range be fixed at this Particular time, but that any increase in the salaries of such anployees shall be subject to the approval of the Federal Reserve Board." The Secretary stated that Mr. Sailer was not aathorized to act for the Federal Reserve Bank of New York in the matter and stated all that is desired of the Board at the present time is its general agreement with the suggestions contained in the above memorandum, which will later be submitted to the directors of the Federal Reserve Bank of New York and, if approved by them, formally submitted to the Board. After discussion, Mr. James moved that the Board give tentative approval to the recommendations set out in the memorandum, subject to favorable action thereon by the directors of the New York bank. Carried. Memorandum from Counsel dated June 2Dth on application of The First National Bank of Massena, N. Y. for permission to exercise general fiduciary powers, the bank having a capital of only 1?50,000 whereas under the laws of the State Of New York trust companies and state banks exercising trust powers in a Place the size of Liassena are required to have a capital of ,400,000; Counsel stating that although the First National Bank proposes to increase its capital to y100,000 if it receives permission from the Board to exercise trust povers, the Board is not authorized to issue its -remit to a national bank- to exercise trust powers unless such bank at thetime the permit is issued has the capital required of state banks and trust companies. In his memorandum, Counsel stated 565 -7- 6/30/26 however, that the Board can approve the arplication , such approval to become effective if and when the bank increases its capital to an amount equal to that required of state banks and trust companies. After discussion, upon motion by Mr. Hamlin, it was voted that the Board approve the application of the First National 3ank of :assena, N. Y. for permission to exercise general fiduciary rowers, effective if aniwben the bank increases its capital to ,100,000. The Governor then referred to the action of the Executive Committee on June and in voting to postpone indefinitely the hearing to be granted by the Board to Mr. Joseph L. Campbell, Deputy Governor of the Federal _Reserve Bank of Atlanta, in accordance with the resolution adopted by the Board at its meeting on June 9th. After discussion, upon motion by mr. Platt, it was unanimously voted that the hearing referred to be held • on Monday, July 19, 1926 at 10:00 a.m., and the Secretary was instructed to so notify Mr. Campbell and the Federal Reserve Bank of Atlanta. Memoranda= from Mr. James dated June 5th, as follows: "In accordance with the action of the Board taken on May 20th in voting 'That the conduct of Mr. McCrary be investigated by a sT;ecial committee with a view to determining whether or not he also should be eliminated from the Federal Reserve System', I beg to submit this as my report covering the result of my investigation. (1) Mr. McCrary accompanied the party headed by Deputy Governor Campbell which on April 10, 1926, accompanied a special shipment of a very large sum of money from the Federal Reserve Bank of Atlanta to Havana, Cuba, of his own volition and not at the request or suggestion of any officer Of the Federal Reserve Bank of Atlanta. (2) :Ir. McCrary took with him on the trip a friend or business associate without any authority whatsoever and over the protest of :Ir. Creed Taylor, Deputy Governor of the Bank, and against the wishes of Governor Wellborn and Deputy Governor Campbell. (See letter from Deputy Governor Creed Taylor marked Exhibit "C" in my report of JUMB 2). 566 6/30/26 -8- ,1(3) Mr. McCrary was aware of the fact that tie off icers of the Cuban Gunboat at Key West -protested against a large party going aboard the -boat and. that objections had. been raised to the party going on the trip from Key 7/est to Havana, but he (Mr. McCrary) made no effort to prevent this party going aboard the Gunboat but on the contrary he and his guest did go on the uunboat a5.11 did make the trip to Cuba. Mr. McCrary admitted in my presence that he knew there was some drinking done by members of the Atlanta party vdaile on the Cuban Gunboat, and. also admitted. that he himself had participated. in this drinking. He further admitted that he had made no efforts to Trevent the drinking. (4) Mr. McCrary contrituted nothing whatsoever to the services rendered, by the Atlanta Bank in conveying the shipment of currency to Havana and apparently there was no reason whatsoever for his going other than that he wanted. to make the trip. It is, therefore, a question in my mind whether he was actuated by the desire to take a joy ride or to share in the glory that might accrue to those officials connected with the enterprise, or to further his own bu.siress interests by using this opportunity to make the trip without expense to himself. (5) From time to time during the past three years there has come to my attention in a more or less confidential way certain rumors that 2:4.r. McCrary was using his position as a Director in the Atlanta Bank for firthe ring his own re rs(Dual interests, espcially in a business way; that he had let it be knovm rather generally among a large number of the member banks in the Sixth District that he vras a Director and as such was also a member Of the Executive Committee of the Atlanta Bank which passed on such paper as Was sent to the Atlanta Baris'c for rediscou.nt or as collateral to loans, and that consequ.ently he was in a position where his influence could count very materially one way or the other in the relationship of the member banks with the Federal deserve Bank of Atlanta. In this connection, I desire to call attention to the memorandum dated June 5th to M3 from Mr. Eddy which is in reference to action taken by the Board on December 5, 1924 vthich action resulted in the Deoartrent of Justice making an investigation of Mr. McCrary's activities. This i2morandum is attached hereto and malczed Exhibit 'A' (6) As a result of the gossip which I heard regarding Mr. McCrary ani his using his position for his pan personal advantage, and, which was to the effect that Mr. McCrary made quite a nice little salary by his attendance at the bank each day, I made some inquiries along this line, particularly with reference to the Executive Coranit tee neetings and. I had 11r. •:/. S. Johns, General Auditor of the Atlanta Bank, prepare for me statements showing the amount of money drawn from the bank by each of the Directors of the Atlanta Bank for the years 1924 and 1925. This report from Mr. Johns I have slamitted with my report to the Federal eserve Board on June aid and is marked Exhibit "C" to that report. The report in question shows that Mr. McCrary's fees were greatlY in excess of the fees paid. to other directors of the Atlanta bank, the payments to him exceeding those of any other director in an amount in excess of ,,J,000 in 1924 arvi more than ,,,;1,100 in 1925. 567 -9- 6/30/26 "I had Mr. Ward Albertson furnish me extracts from the by-laws of the Federal Reserve Bank of Atlanta covering the authority for the Executive dums, Committee of that bank and. am attaching hereto his letter and. memoran marked Exhibit 'IP • Comnittee It appears that Mr. McCrary's attend.a.nce at the Executive and by-laws the of ty meetings of the bank continuously is without authori the in cation justifi is this, to my mind, is conclusive evidence that there . benefit al financi idea that Mr. McCrary has used his office for his own officers in the I might say also that I was advised. by one of the to Day bank the of Atlanta Bank that it was customary for the officers bank, the of ia (436.00 per month for their luncheons served in the cafeter per cents five Which made the cost of the luncheons approximately twentyhe that and tr 6.00 ; meal, and that Mr. McCrary made this contribution of took his luncheon in the bank practically every day accordingly. I have While I am not sure in my ovn mind, that the information remove to acting gained, is sufficiently conclusive to warrant the Board's am myI , Atlanta of Mr. McCrary as a Director of the Federal Reserve Bank redeem I which cations self convinced that he lacks many of the qualifi Reserve Federal a of quisite and necessary for a director or an officer Bank. the Board review I recommend, therefore, that each member of , and. also this thereto s carefully my report of June 2nd and the exhibit then the mtter that and d, report with Exhibits trAit and tign hereto attache as to rdiat reached ion be discussed in open ,.;oard meeting ani the conclus to 17.r. McCrary ce referen would be proper action on the part of the Board with and his activities. Respectfully submitted, (s) Geo. Re James action 6/16. See letter this date from Mr. Newton with reference to the advance of 'Part as bank Of Mr. McCrary on June 7th, 1926 in returning to the .' ,)36.13 of Agency , to J. L. Campbell, Deputy G•overnor, 4-14-26, by Havana put be to 17th June on bald letter and auditor's statement handed Ia.. •,7yatt 1171th Campbell file. (S) G. R. J. It In this connection, Mr. James referred to the action of the Board at its meting on December 5th, 1924 in adopting the following come to the resolution - 'Whereas statements have from time to time of Atlanta, Bank Reserve Federal Board reflectingupon conditions at the gate investi conditions 6 to 7 t the Board directs its Committee on Distric that purpose, for at the Atlanta bank, incurring any necessary expense the for ion foundat In order to ascertain whether or not there is any is necesaction any, statements, and to recommend to the Board. what, if sary in the premises.' 568 6/30/26 -10He stated that pursuant to the above resolution the Committee had caused, throuji. the Department of Justice, an investigation to be made concerning certain alleged unethical practices indulged in by Director LieCrary in the matter of obtaining ban.z'c credit and other matters. The investigators, he stated, had. been handicapped through the Joard's informal decision not to parmit the use of Mr. McCrary's nama in connection with their investigations arx1 that finally the investigation had. been suspended. He expressed the opinion thzit the matter should be reopened and moved that the Board request the Department of Justice to proceed with all authority and with full permission of the board, to complete the investigation regarding Mr. McCrary. Mr. James' motion being put by the Chair was unanimously carried. Mr. James then moved that a spacial meeting of the Board be held tomorrow morning at 10:00 o'clock to read the board's past records with reference to Mr. MtCrary. Unanimously carried. Telegram dated June 30th from the i''ederal deserve Agent at Kansas City requesting approval of the appointment of Mr. E. J. Julick, audit clerk at the Oklahoma City Branch, as Assistant Federal Reserve Agent at the branch at a nominal salary of one dollar per year to succeed Mr. Oliver A. Leann, Who has resigned effective duly 1st. The Secretary called attention to the fact that ::r. Julick is at present an employee of the branch and that under the Board's previous interpretation of the law he can not properly be appointed Assistant Federal Reserve Agent. He pointed out, however, that in other similar cases appointments have been made by transferring employees of a Federal Reserve bank or Branch to the Federal Reserve Agent's Department, designating them as Assistant Federal Reserve Agents, and permitting the loan of their services by the 1:edera1 Reserve Agent's Department to the branch. Upon motion, it was voted to approve r. Julick's appointment at Oklahoma City, effective July 1st, under a similar arrangement. 569 6/O/26 -13.- 1.:r. James then referred to the letters presented at the 1.-,oard meeting yesterday from Congressman Byrne and hull and Senators Tyson aal. Y.cKellar of . . L'ennessee, regarding a controversy between the .vederal Reserve dank of Atlanta and the Fourth and First National Bank of Nashville, _2ennessee; his memorandum reading as follows: "This matter has been before the Federal Reserve Board many times during the past three years and. the Board has held. rei)eatedly that this was a matter strictly between the Fourth and First National Dank of Nashville and. the Federal 'Reserve Bank of Atlanta. The question involves the payment of money by the Federal Reserve bank of Atlanta out of its surplus which, as I see it, practically the sane as being paid out of the Treasury of the United States. If the claim is a proper one, certainly there is recourse through a court of law. If the claim is merely a 'moral' obligation, then I submit that the payment of the money so claimed can be made properly only on or through authorization by uongress. I, therefore, move that the letters above referred to be answered. in accordance with the above statement." Following a brief discussion of the matter, the Comptroller of the Currency was called. from the meeting and due to lack of a quorum the Board adjourned without action on the above memorandum. The meeting adjourned at 1:15 o'cl 7 Secret ary Approved:
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