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464
A meeting of the Federal Reserve Board was held on Monday, Tune 6,
1932
at 12:15 p.
PRESENT:
Governor Meyer
Mr. Hamlin
Mr. Miller
Mr. Tames
Mr. Magee
Mr. Morrill, Secretary
Mr. McClelland, Assistant Secretary
Mr. Harrison, Assistant to the Governor.
The Board considered and acted upon the following matters:
Telegraphic reply, approved by five members of the Board on Tune 3,
1932, to a telegram of that date frau Mr. H. F. Strater, Cashier of the
Federal Reserve Bank of Cleveland, stating that the National Bank of
Commerce, Lorain, Ohio, has requested a renewal of the advance of :425,000
blade by the Cleveland bank in accordance with the provisions of section
1°( 3) of the Federal Reserve Act, as amended, and under the authority granted
by the Board on April 5, 1932; Mr. Strater stating that the bank expects to
repay the advance from proceeds of a loan from the Reconstruction Finance
Corporation and that approval of the bank's request is recommended.
The
reply stated that the Board authorizes the renewal, for a period of thirty
claYs, at a rate of 5 1/2% per annum.
Reply unanimously approved.
Memorandum dated Tune 2, 1932, from Mr. F. T. Drinnen, examiner in
Charge, recommending the appointment of Mr. Fred W. Troup as an assistant
ecleral reserve examiner, effective Tune 8, 1932, with salary at the rate
c't ;:ii2,400 per annum.
Upon motion, it was voted to appoint Mr. Troup
an examiner for all purposes of the Federal Reserve
Act, as amended, and of all other acts of Congress
pertaining to examinations made by, for, or under
6/6/32
-2the direction of the Federal Reserve Board; to designate
him as an assistant Federal reserve examiner, and to fix
his salary at the rate of $2,400 per annum, all effective
June 8, 1932.
Memorandum from Counsel dated June 4, 1932, recommending the appoint-
ment of Miss Margaret Wisner as a stenographer in his office, with salary
at the rate of 4,800 per annum.
Upon motion, it was voted to appoint Miss Wisner
stenographer
in Counsel's office with salary at
as a
. 1,800 per annum, effective when she rethe rate of $
ports for duty.
Reply to a letter dated May 31, 1932, from the Federal Reserve Agent
at Chicago stating that because of the additional work required of the bank
examination department at the present time, consideration is being given to
the addition of an examiner and an assistant examiner to the staff of the
department, but before making a definite recommendation in the matter he
would like to have the Board's reaction to the proposed appointments; the
reply stating that the Board appreciates that under existing conditions it
113aY be very difficult, with the limited force which the agent now has in
his examination department, to carry out the policy of obtaining complete
information regarding the condition of state member banks which is essential
to the Federal reserve banks and the Federal Reserve Board, and that, accordingly, the Board will entertain definite recommendations from the agent for
the appointment of an additional examiner and an assistant examiner at the
Federal Reserve Bank of Chicago.
Reply approved.
Reply, approved by five members of the Board on Tune 4, to a letter
dated May 20, 1932, from the Federal Reserve Agent at Minneapolis reporting
Continuous deficiencies in reserves on the part of the State Bank of Revere,
466
6/6/32
-3-
Minnesota, which have continued for six and one-half months; the reply
stating that, in accordance with the agent's recommendation, the Board will
take no action in the matter at this time, but requests, in view of the unsatisfactory condition of the bank and the agent's statement that it is not
a desirable member, that he keep the Board advised of developments in the
Premises, and that he call the matter, and the Board's decision thereon, to
the attention of the State banking authorities with a request for their
c°°Peration in any steps which in the circumstances can be taken to bring
about a correction of the condition existing in the institution.
Reply approved.
Reply to a letter dated May 26, 1932, from the Federal Reserve Agent
at Kansas City reporting that the Farmers and Merchants National Bank,
Hooker, Oklahoma, was continuously deficient in its reserves during the
Period of six and one-half months ending May 15, 1932; the agent stating
that the deficiencies have been occasioned to a very large extent by withdrawals of deposits and the bank's inability to make a corresponding reduction
in its loans, and that the president of the bank, who is not active in its
4rfairS
but apparently controls the institution, is arranging to visit the
bank within a few days with a view to correcting its unsatisfactory condition.
The reply stated that, in accordance with the agent's recommendation, the
Board will take no action with regard to the matter at this time other than
to forward a copy of the agent's letter to the Comptroller of the Currency
tor the information of his office.
Reply approved.
Reply to a letter dated May 24, 1932, from the Federal Reserve
Agent at San Francisco reporting that the Farmers State Bank, St. John,
467
6/6/32
-4was deficient in its required reserves during fourteen consecu-
tive computation periods in 1931 and five of the first seven periods in
1932; the agent calling attention to the fact that there has been a recent
Change in the mAnagement of the member bank which it is thought will
considerably strengthen the institution and accomplish much toward restoring
the confidence of the community.
The reply stated that, in view of the
information submitted, the Federal Reserve Board is taking no action in the
Matter at this tine although it is requested that the agent advise the Board
if the desired correction in the bank's condition is not effected by the
new management.
Reply approved.
Reply to a letter dated May 26, 1932, from Assistant Federal Reserve
Agent Dillistin at New York, advising that the Peoples Trust Company of
Danellen, New Jersey, had purchased as an investment, fifty shares of stock
the National City Bank without first securing the permission of the
Federal Reserve Board as required by one of the bank's conditions of membership in the Federal Reserve System, the member bank having inadvertently
overlooked the requirement of the condition.
The reply stated that the Board
has considered the circumstances and will interpose no objection to the
trust company holding this small amount of stock in its assets, although the
bank will be expected to adhere strictly to the condition of membership in
the future.
Reply approved.
Reply to letters dated May 19, 1932, from the Federal Reserve Agent
"New York, and May 27, 1932, from Assistant Federal Reserve Agent Dillistin,
468
6/8/32
-5-
with regard to the application of the Mid-City Trust Company, Plainfield,
New Jersey, for approval by the Board of a reduction in the capital stock
or the trust company from $200,000 to $100,000, which was effected in January,
1932, without obtaining the Board's permission as required by one of the
bank's conditions of membership.
The reply stated that in view of the in-
formation submitted end the favorable recommendation of the discount committee
of the Federal Reserve Bank. of New York, the Federal Reserve Board approves
the reduction referred to.
Reply approved.
Letter to the First National Bank, Baker, Oregon, approved by five
Members of the Board on Tune 4, 1932, stating that the Federal Reserve
134ftrd has considered the application for fiduciary powers filed by the bank
thl'ough the Federal Reserve Agent at San Francisco and has authorized the
bank to act, when not in contravention of State or local law, as trustee,
executor, administrator, registrar of stocks and bonds, guardian of estates,
assignee, receiver, committee of estates of lunatics, or in any other
riduciary capacity in which State banks, trust companies, or other
corporations which come into competition with national banks are permitted
to act under the laws of the State of Oregon, only in the specific trusts
in which the Baker Loan and Trust Company, Baker, Oregon, had been appointed
and was acting when taken over by the First National Bank of Baker on May 2,
1932, the exercise of such powers to be subject to the provisions of the
Federal Reserve Act and the regulations of the Federal Reserve Board.
The
letter also stated that action has been deferred on the bank's application
tor Lull fiduciary powers until after the next report of examination of the
bank has been received.
469
-6-
6/6/32
Letter approved.
Letter, approved by five members of the Board on June 4, 1932, to
the First National Bank of Seattle, Washington, which was formed through a
consolidation
on December 9, 1931, of the Metropolitan National Bank of
Seattle and the First National Bank of Seattle, under the provisions of the
Act of November 7, 1918, the letter transmitting a certificate in the form
recently approved by the Board of the consolidated bank's authority to
exercise the fiduciary powers Previously granted to the constituent national
banks.
Letter and certificate approved.
Reply, approved by five members of the Board on June 4, 1932, to a
letter dated May 17, 1932, from the Chairman of the Commercial Credit
Corporation, Baltimore, Maryland, with further reference to the eligibility
for rediscount by Federal reserve banks of the paper of factors engaged
Principally in the textile business in New York City; the reply stating that,
except with respect to the paper of factors making advances exclusively to
Producers of staple agricultural products in their raw state
which is
made eligible for rediscount by a specific provision of law, the principles
Which are applicable in determining the eligibility of factors' paper also
govern the eligibility of the paper of finance companies; that, as pointed
in the Board's letter of May 16, the Board is advised that funds or
"
le
credits advanced to the manufacturers of goods by the textile factors in
question constitute in fact partial payments for such goods
and when the
Proceeds of notes are used in the first instance in making payments for goods
PUrchased and not for the purpose of making loans to others, the notes are
eligible for rediscount.
470
6/6/32
-7Reply approved.
Letter to Mr. John C. Lever, Secretary of the Allegany County Division
Of the Cattaraugus-Allegany-Bankers Association, Andover, New York, approved
by five members of the Board on June 4, replying to his letter of May 23,
19321 with regard to the eligibility fcr rediscount of paper the proceeds of
which are used for the drilling of oil wells; the reply being the same as the
rePlies approved by the Board on May 31, 1932, to similar letters received
rran the presidents of the First National Bank, Allegany, New York, and the
Citizens National Bank of Wellsville, New York.
Reply approved.
Letter to the President of the Senate of the United States, approved
by five members of the Board on Tune 4, 1932, submitting, in accordance with
the request contained in Senate Resolution No. 211, adopted on May 9, 1932,
a table Showing the amount of United States Government securities held by the
Federal reserve banks, together with the amount of the purchases and amount
°f the sales (including securities retired by payment at maturity) of such
securities, each month from January, 1919 to April, 1932; the letter also
Stating that the table does not include special short-term certificates of
indebtedness issued to the Federal reserve banks by the Treasury from time
to time, as it is assumed that such transactions were not intended to be
covered by the resolution.
Letter approved.
Letter to Congressman Fred M. Vinson, approved by five members of the
/3(Dard on Jana 4, 1932, replying to a request made by him of the Under Secretary
clt the Treasury for information as to the amount of bonds purchased by the
redaral reserve banks, with dates of the purchases, subsequent to the passage
4 71
6/6/32
-8-
of the Glass-Steagall Bill; the reply inelosing a table showing the purchases
and sales of United States Government securities by Federal reserve banks from
February 29 to Ilay 25, 1932.
The reply also called attention to the fact that
the figures shown in the table do not include special temporary certificates
issued by the United States Treasury to the Federal reserve banks nor
securities sold in the market by the Federal reserve banks for the account of
member banks, as it is assumed that these types of transactions were not
intended to be covered by the inquiry.
Reply approved.
Reply, approved by five members of the Board on Iune 4, 1932, to a
letter addressed to the Governor under date of May 21, 1932, by the Chairman
cf the Banking and Currency Committee of the House of Representatives requesting suggestions and an expression of opinion on H. R. 7370, a bill to provide for the advancement of funds to receivers of insolvent banks and for
Other purposes; the reply stating that the Board is in favor of legislation
that would establish a corporation for the purpose of expediting payments to
the depositors of insolvent member banks, but it does not favor the enactment
°I' H. R. 7370 in its present form because it would create a corporation with
c4Pita1 provided by the Federal reserve banks, in addition to capital provided
by the
United States Treasury, for the purpose of making advances to the
receivers of nonmember State banks as well as to the receivers of menber
banks; and that, while provision is made for assistance to nonmember banks in
the Reconstruction Finance Corporation Act, the Board believes that the
benefits of any Federal legislation creating a permanent corporation for this
154rPcse should be confined to member banks.
The reply also inclosed a copy of
472
6/6/32
the Board's report of March 27, 1932, to the Chairman of the Banking and
Currency Comndttee of the Senate on S. 4115, which contains the Board's views
on this general subject.
Reply approved.
Letter to the Federal Reserve Agent at Dallas referring to his reply
May 11, 1932, to the Board's letter of May 2, inclosing a letter from
the Governor of the bnnk end a copy of a report submitted to the board of
directors by a special committee of officers of the bank regarding the adjustments and corrections that have been made as a result of the comments of
the Boardts,examiners in the report of examination of the bank as of
February 13, 1932.
The Board's letter noted that the Federal reserve bank
does not contemplate establishing a special rate of interest on past due
PaPer or issuing any circular letter to its member banks on this subject,
but, where a member bank habitually fails to take up its discounted paper
4't Maturity, the Federal reserve bank proposes to advise the officers of
the member bank that after a specified date it will cease to waive the
interest above the discount rate on past due paper and will collect the full
contract rate after maturity according to the tenor of the paper; the letter
elso stated that the Federal Reserve Board knows of no legal or practical
l'eason why the Federal reserve bank should not retain the interest
collected on discounted paper after maturity, but that if the Federal reserve bank adopts the plan submitted in Governor McKinney's letter it should
continue to make every reasonable and practicable effort through administrative action to induce member banks to take up or renew their discounted
13%:1)er at maturity in order that the amount of past due paper held by the
Federal reserve bank may be reduced to a minimaim or eliminated entirely.
47:3
6/6/32
-10Letter approved.
Telegraphic reply, approved by five nenbers of the Board on nine 4,
19321 to a telegrm of that date from Deputy Governor Crane of the Federal
Reserve Bank of New York, stating that advice has been received from the
Bank for International Settlements that all participants in the Reichsbank
credit have agreed to a full renewal of the credit for three months from
kne 4, 1932, on the same terns and conditions as heretofore, except that
the rate on the renewal will be ato instead of 6%, and in accordance with a
request of the Bank of France, the renewal agreement will include a clause
requiring amortization of the credit in an amount proportional to any
Increase in the average gold and foreign exchange reserves of the ReichsbRnk
during the period of the renewal, as compared with the past three months;
the reply stating that the Board will interpose no objections to these
changes in the terms and conditions of the renewal of the credit.
Reply approved.
At this point Mr. Goldenweiser, Director of the Division of Research
and Statistics, joined the meeting.
The Secretary presented a proposed draft of the text of the Federal
Reserve Board's Annual Report for the year 1931, copies of which had been
rUrnished previously to each member of the Board.
A discussion ensued and, after minor amendments,
the report was approved for presentation to the
Speaker of the House of Representatives and for release to the press on a date and at a time later to
be determined by the Board.
At this point the Chatham joined the meeting.
The Board then considered a telegram dated JUne 6, 1932, from
DePtIty Governor Rounds of the Federal Reserve Bank of New York, requesting
474
6/6/32
-11-
approval of an advance by the Federal Reserve Bank of New York, in accordt
;1
ance with the provisions of section 10(b) of the Federal Reserve Act, to
1;
the Jefferson Trust Company, Hoboken, New Jersey, in the amount of :100,000,
for a period of ninety days, at a rate of 5 1/2% per annum, and on the
security of customers' collateral notes secured by miscellaneous listed
securities and building and loan shares; the application for the advance
being made as a result of the withdrawal from the trust company of a large
municipal deposit.
Upon the unanimous vote of the members
present, the advance was approved, subject to
the terms and conditions recommended.
Reference was then made to memoranda dated May 23, 1932, from Mr.
Goldenweiser, as Chairman of the Committee on Branch, Group and Chain
Banking of the Federal Reserve System, and Mr. Smead, as Chairman of the
SYstem Committee on Member Bank Reserves, submitted at the request of Mr.
in connection with the budgets of the Federal reserve banks for
statistical and analytical work for the year 1932.
Mr. Smead's memorandum
reported that the expenses of his committee have amounted to
22,591.22 to
date and that there will be no further expenditures except those required
to Print the statistical tabulations and studies which were undertaken in
the course of the committee's investigations.
Ur. Goldenweiser's memorandum
outlined the activities of, and work done by, his committee since its
organization and reported that the expenses of the committee to April 15,
1932, amounted to $108,000, and that it is estimated that expenditures from
APril 15 to the end of the committee's work which will be completed between
October and the end of 1932, will amount to about $35,000, exclusive of
costs which may be incurred in printing the committee's report.
Mr. Miller
;i•
475
6/6/32
-12-
expressed the opinion that whatever value the committee's report night have
w°uld not justify the expense involved.
He stated that, in his opinion,
the necessary
studies could have been completed before now, at a much smaller
cost, had the scope of the committee's activities been more definitely
Planned at the inception of its investigation, which was initiated in the
SPring of 1930.
Mr. Goldenweiser stated that the personnel of the committee
was the same as that of the System Committee on Member Bank Reserves, that
it had not
been practicable for them with their other duties to give much
individual
time to the work and that in view of the wide scope of the
subjects to be covered it had been necessary to employ a number of people
fc)r a considerable length of time.
He added that, while it might be
Possible to reduce the proposed future expenditures somewhat, an arbitrary
reduction might mean
the elimination of certain data which would be very
Valuable in the completed report.
Action was deferred on the matter.
The Secretary then stated that the Governor of the Federal Reserve
13411k of San Francisco, as Chairman of the Governors' Conference, had advised of the appointment of Mr. Kenzel, Deputy Governor of the Federal
Reserve Bank of New York, 1,117. McKay, Deputy Governor of the Federal Reserve
Bank of Chicago, and Mr. Clerk, Deputy Governor of the Federal Reserve Bank
°I' San Francisco, as members of the committee suggested by the Board in its
letter of May 6, 1932, for the purpose of making an investigation of American
acceptance practice and reconnendations for such correction of procedure
ancl/or revision of the Board's rulings and regulations with regard to
acceptances as may be found necessary or desirable.
He raised the questions
Or Board representation on the committee and of the scope of the committee's
?'6
6/6/32
-13-
activities,
as having a bearing on the possible expenditures in connection
With the investigation.
After some discussion, the Secretary was requested
to have prepared for the use of the Board in this connection,
a memorandum setting forth the rulings of the Board, and the
changes which have been made in the Board's regulations with
regard to acceptances, during the past 12 years, together
with a tentative outline of information which might be desired by the Board in connection with its consideration of
possible future changes in its rulings and regulations.
Reports of Standing Committee dated Tune 3 and 6, 1932, recommending
agproval of the following changes in stock at Federal reserve banks:
A
lication for ORIGINAL Stock:
District No. 3.
L:iners National Bank, Shenandoah, Pa.
Shares
160
160
30
30
120
120
1,950
1,950
3
3
11J-strict No 10
'curity National Bank, Independence, Kans. (V.L.Abs.
by Citizens-First National Bank of Independence) 300
Total
300
2,373
AtZplication for ADDITIONAL Stock:
District No. 3.
RidgwaY National Bank, Ridgway, Pennsylvania.
Akklications for SURRFTIL'R of Stock:
G
loucester National Bank, Gloucester, Nass.(V.L.
Sue. by Gloucester National Bank)
District No. 2.
Liberty National Bank & Trust Company in New York,
r.Y. (V.L.Abs. by Harriman National Bank &
Trust Company)
I
ll&q1211:9.! (""
l'irst National
Bunk, flillen, Ga. (Decrease in
surplus)
Approved.
Thereupon the meeting adjourned.
A
pproved:
@FedFRASER