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209 A meeting of the Federal Reserve Board was held in the office of the 441111 Reserve Board on Friday, March 1, 1929 at 11:30 a.m. PRESEICT: Governor Young Yr. Platt Mr. Hamlin Mr. Miller 1,1r. James Mr. Cunningham Mr. Pole Mr. Noell, Asst. Secretary Mr. McClelland, Asst. Secretary The Governor reported a telephone conversation yesterday with Li.. Eugene keys,. 't rederal Farm Loan Commissioner, who advised him that 46,000,000 of Federal , 4 Int e Bank of ermeciiate Credit Bank debentures sold to the Federal Reserv tIallas are payable on March 15th, and that he would like to make arrangements tor a talked renewal Of the rchase agreement. The Governor stated that he over , `ha telephone regarding the matter with Governor Talley of the Dallas ballk, who does not wish advised that in the present situation the Dallas bank to renew the arrangement. Governor Talley also advised him, he stated, that the act.on of the Board at its meeting on February 8th in laying on the table 1 the act.on ish of the board of directors of the Dallas bank in voting to establ 1 is ineona 11641SCOtzlit rate of 5d on all classes of paper of all maturities, aggravated the bank in dealing with the situation there, which is bY the ses wide spread between the bank's discount rate and its rate for purcha (4 4 e"PtanCeS. been in Dallas and The Governor stated that Mr. James has is "40-liar with the situation. conditions Mr. James then moved that in view of ularly partic ct, in the Eleventh Federal Reserve Distri rates buying and the spread between the discount rate of the action the e of the Dallas bank, the Board approv votin Dallas of Bank directors of the Federal Reserve s classe all on ; 5/ of ing to establish a rediscount rate 2nd. :,:arch ow, tomorr ive effect Of paper of all maturities, 2,10 vim After discussion, Mr. James' motion was put by the Chair and unanimously carried. The Governor also reported to the Board a conversation this morning with kr. 11.1.uney reference Dad of the Citizens National Bank of Los Angeles, with to 4.,„ ""e protest of the Los Angeles Clearing House Association against the erec, tio site now awned. Of a building to house the Los Angeles Branch on the trip, Mr. James, who visited San Francisco on his in left be should matter expressed the opinion that the Reserve Federal the of rs the hands of the board of directo Bank of San Francisco. y The minutes of the meeting of the Federal Reserve Board held an Februar 27t1 "'ere read and approved. Commerce The Governor stated that the consolidation of the 'rational Bank of the to in the above minutes, Guaranty Trust Company of New York City, referred le to be effected under the charter of the Guaranty Trust Company. APPlication of the St. Charles National Bank, St. Charles, Ill, for partissio thereon 4 to exercise general fiduciary powers; together with a report bYthA I 44aW approval. Committee that it is unwilling to recommend The Governor by statecl that he has gone over the report, approval of which is recommended in the '414eoutive Committee of the Federal Reserve Bank of Chicago and concurs to that l'ecommendation for the reason that the difficulties in the bank appear be 18 let that the present management former management and the Examiner reports capable and supported by a strong board of directors. application was After discussion, upon motion, the approved, Mr. Platt voting "no". thton, Elizabethton, APPlication of the First National Bank of Elizabe r with a I, for permission to exercise general fiduciary powers, togethe 3/v29 -3.report thereon by the Law Committee that it is not willing to approve the aplaicatian. The secretary stated that the matter was referred to the Comptroller ore Currency that the apand presented a memorandum from him, recommending 131i-cat3.on be held until after receipt of the report of the next examination in "del. to ascertain what progress has been made in eliminating criticisms set 014 bY the ' . .xaminer in the last report. ' After discussion, upon motion, it was voted to defer action on the above application. The Assistant Secretary reported that in accordance with authority grantat the meeting on February 27th, LI'. J. A. Bennett has been employed as tele- h OParator in the aashington leased wire office, with salary at the rate of " 980 Per annum, effective Y.arch 4th. Noted, with approval. Aeserve Telegram dated February 27th from the Chairman of the Federal tarik ur Boston, letter dated February 28th from the Secretary of the Federal itese„ 4;fe Bank of New York and telegram dated February 28th from the Chairman of ti Federal 'deserve Bank of Kansas City, all advising that their boards of dis at meetings on the dates stated made no changes in the banks' existing Ile"°1 ' 8°44111es of rates of discount and purchase. Without objection, noted with approval. Letter uated February 27th from the Assistant Federal Reserve Agent v '"k, advising of the proposed merger, effective April 1st, of the ?i Qorrazer 'AIercantile cial Trust Company of New Jersey, a member bank, and the at cnm City, N. J. --PanY, a nonmember bank, both of Jersey Noted. 0.4 ‘71.4 -4- Letter dated February 27th from Lr. Ormsby L.cHarg, of New York City, 0141 .., ' cl for the plaintiffs in the so-called Lpfel (Foreign Financing dorpora- t5°11) case, making inquiry as to the action of the Board in permitting the 148ecn the word "banking" in the title of the "First Federal Foreign Banking e°rP°ration", formerly the "First Federal Foreign Investment Trust". Referred to Counsel for the preparation of a reply. Report of Committee on 6alaries and Expenditures on list submitted by the '.'egeral Reserve Bank of Chicago of employees for whom the directors of that b illness, ank have approved leaves of absence with pay, on account of the period January 25th to February 20th, where the total of such ab3ellees since January Board's Committee 1, 1929 has exceeded thirty days; the -"'ending approval of the salary payments involved. Approved. draft of reply Llemorandum from Counsel dated February 27th, sunitting tO *'utter dated February 19th from the Assistant Federal Reserve Agent at lad '414. Lewisburg, Pa., --1-4"a. inquiring whether the Union National Bank, has received permission from the board to exercise full trust powers, 404. holding that `• as Treasurer of a school district; the proposed reply 114tic41ea 114cler school districts banks in Pennsylvania may not act as Treasurers of Act. the provisions of Section 11 (k) of the Federal Reserve approved. Upon motion, the proposed letter was granted him at The Governor then reported that under the authority the an application of the "ttag on February 27th, on that date he approved 3/1/29 —5- 44114facturers Trust Company, New York, N. Y., for permission to accept drafts c1111141 upon it by banks and bankers in the countries heretofore designated by tlie Board, for the purpose of furnishinp7 dollar exchange, and he stated that IIPI"val was given upon receipt of a favorable recommendation from the Fedeal iteserve Bank of New York. Upon motion, the action of the Governor was ratified. Letter dated February 25th from the Governor of the Federal deserve kit of Boston, to which reference was made by Governor Young at the meeting "ebruary 25th, with respect to the eligibility of member bank fifteen-day 40tes secured by government obligations as collateral for Federal Aeserve ilotes,, Ordered circulated. Llatter approved on initials yesterday, namely, application on behalf ()ftlle IUdland Bank, Cleveland, Ohio for membership in the Federal Aeserve 434171 and for 3600 shares of stock in the Federal lieserve Bank of Cleveland, erfective if and when it is authorized by the State authorities to commence trazialess, subject to the regular conditions of membership set out in Aegulatiola „, /1 Series of 1928, and with the understanding that it will have a 41**1.11 capital and surplus of 46,000,000 when opened for business and that its board of acceptdirectors will ratify the application for membership and 411 0f "nditions. Formally approved. liatter approved on initials yesterday, namely, application of the 4.tY Trust Company, Philadelphia, Pa., for membership in the Federal 3/1/29 -6-- 8 System and for 4200 shares of stock in the Federal Reserve Bank of 1,1 subject to the regular conditions of membership set out in H, Series of 1928 and effective upon consolidation with the west l'hiladelphia Title and Trust Company. Formally approved. Draft of letter for the signature of the Secretary of the Treasury, addiressed to the Chairman of the Committee on Banking and Currency of the 1141 tect. States Senate on S. 5723: (1) to amend Section 7 of the Federal Re"Ila Act so as to provide for an additional 6,0 dividend to member banks Vhela arned and for the distribution of remaining earnings and (2) to amend seatioll -Lo of the Federal Reserve Act so as to provide for the retirement of 1441°1141 Bank notes on July 1, 1930 and permit the issuance by the Secretary "the Trea sury of bonds against which the Federal Reserve banks could issue Pede. " Reserve bank notes. Ordered circulated. The Governor then submitted a pamphlet entitled "Instructions for "4eation of Financial Statements", prepared by a committee of the Amen Iii stivate of Accountants as a revision of the pamphlet "Approved :ethods th Pre 6 1.917 ion of Balance Sheet Statements" which appeared in the April asile of the Federal Reserve Bulletin and was distributed by the Board Pailltklet fOrm until 1928 when it was discontinued as obsolete. He stated that the Committee of Accountants has requested that this pamphlet be dis- tribtitea 4serve Y the Board, after an announcement regarding it in the Federal Bulletin. After discussion, upon motion, it was voted to approve distribution of the pamphlet, after insertion in the Bulletin of a statement along the following lines: 2,15 3/1/29 -7_, "In the April 1917 issue of the Federal Reserve Bulletin, the Federal Reserve Board announced that it Was nrepared to distribute to the general public at a cost of ten cents, a pamphlet entitled 'Approved Methods for the Prenaration of Balance Sheet Statements'. The demand for this information on the part of the public, has been evidenced by the fact that the Board distributed approximately 65,000 copies of the pamphlet. The 1917 edition of the pamphlet was prepared by a Committee of Experts, but since that time many chances nave been found necessary and new procedure has been developea with the result that a revised edition, entitled *Instructions for Verification of Financial Statements' has been furnished to the Board by a special committee of the Alerican Institute of Accountants, which was appointed to deal with this and certain other matters. dhile the Board does not care to set itself up as an authority on accounting and auditing procedure, it is SO impressed with the revised edition and with the desirability, from the standpoint of the general credit structure of the country, of having good procedure followed, that it is prepared to distribute the revised edition to the public practically at cost, or at ten cents per copy." 1461110randlun from Counsel dated February 26th on letter dated February 15th tri°111 the Federal Reserve Agent at Chicago, recommending that the Board take 419P1I0Priate action to require the State Bank of Ellsworth, Ellsworth, Iowa, t° sUrrenler its stock in the Federal Reserve Bank of Chicago and to forfeit 411 rioits an the privileges of membership in the System; Counsel advising that Federal .Aeserve Ap•ent states he is unwilling to recommend that proceedings be b4sea upon the reserve record of the member bank, but apparently feels that rliiriberehilp should be forfeited on the ground that its capital has been impaired (31I 04 the ground that it has violated the general condition of membership imr4sect 11 Pon it. 4/311's to In his memorandum, Counsel stated (1) that if the Board should may be forfeit membership because of impairment of capital, this cl°11e QtaY after notice iven to the bank to make good such impairment and the -8- failAire of the bank to do so within three months thereafter, and (2) that the cillestiola whether the bank has violated the general condition of membership is olle of fact for the Board to determine, that it is unlikely that the Board's would be questioned in the courts, and that if the matter should be taken to court the Board's determination of fact would probably be accepted as conOlusive although the court might go into the facts itself with the possibility that it would hold the Board to be without the necessary authority to forre It the bank's membership on the grounds stated. Mr. Hamlin, Chairman of the Law Committee, expressed himself in favor of the serving of a notice of assessment Oil the stockholders of the bank, but Mr. Platt suggested that some other method should be found. A discussion ensued, during which the Governor expressed the opinion that the necessary proceedings should be based upon the condition of the bank which, in his opinion, constitutes a violation of the so-called general condition of membership, at the conclusion of the discussion, the matter was referred to the Governor with power. The Governor then presented letter dated February 9th from the assistant Pecler '1„ al '-.erve agent at Minneapolis, requesting permission to make credit in- leatiga tions of the Iron Exchange Bank, Hurley, his., The Security Bank and 44st 0 Hed Wino. Minn., The Daly Bank and Trust Company, Anaconda, 40tt, !, ana the Miners Savings Bank and Trust Company, Butte, Mont. without 411111Pb: -th6 costs against the banks investigated; the letter stating that tEl4tat ilre arrangements were made with the Banking Commissioners to join with theta i 4 their examinations of the member banks, prior to receipt of the Board's letter (1/ January 26, 1929 (X-6223) on the subject of Examination of state fIff' 3/v29 -9- In this connection, the Governor submitted a memorandum from Mr. Herson, tIle Board's Chief Examiner, stating it is quite obvious that the work done by ei's for the Federal Reserve banks in cooperation with State Imthorities doss aot contemplate a comnlete examination of a state member bank as it does 44 include, among other things, reconcilement of the various bank accounts °I'verification of cash and securities, all of which is handled by the repreeettati, "Yes Of the State Supervisor; Mr. Herson stating that in the circumStalies 5 it appears desirable to permit the Reserve banks to limit the charges to be assessed against a state member bank for this type of investigation to cunt which will represent the salary cost of the Examiners while actuallY el-10c,09d. in the work. Discussion ensued, during which it was brought out that the bill recommended by the Board which would make charges for examinations discretionary With the Board, has passed the Senate and has been favorably reported by the House Committee on Banking and Currency, although it may not be possible to secure its adontion by the House during the remaining day or so of the present Congress. After discussion, upon motion oy Lr. James, it was voted that the following telegram be addressed to the Assistant Federal Reserve Agent at Minneapolis: "Your letter February 9th re credit investigation of four state member banks Board will interpose no objection to your proceeding as outlined, because of tentative arrangements made with Bank Commissioners prior to receipt of Board's letter X-6223." After further discussion, upon motion, action on Herson's memorandum was deferred until it is determined whether or not the bill recommended by the Board Will become law at this session of Congress. 241's Platt then announced that word was just received in his office of ICssr, 3/1/29 -10- the Passage of the bill recommended by the Board to exempt Joint Stock Land from the provisions of the Clayton Act, Letter dated February 27th from the Assistant Federal Reserve Agent at 8t* Louis, reporting that the First Eational Bank in 1.1t. Sterling, ill., had airerage deficiency in reserves continuously during twelve semi-monthly periods " b lell July 15, 1928 and January 15, 1929; the Assistent Agent recommending, 111)11revers after consultation with. the Chief National Bank Examiner of the distlrl°t, that action by the Board be deferred until after the next examination of the bank, Noted, without action. The Governor then referred to the discussion at the meeting of the 3/4111 to held on February 19th, as to the advisability of addressing a letter the Federal Aeserve banks on the subject of cooperation with their member al°13-' the lines of the recommendation made by the Federal Advisory Coun- 1)41 Olj at its meeting with the Board on February 15th. In view of reports which have been received by the Board of action being taken by the Federal Reserve banks since receipt of the Board's letter of February 2nd, it was the consensus of opinion that the letter referred to by the Governor should not be transmitted. It was felt, however, that it would be desirable some time later to address a letter to the Federal deserve banks inquiring as to the results of action which has been taken since receipt of the Board's letter of February 2nd. The Governor then brought up the matter on which action was deferred the 041 meeting of the Board on February 8th, namely, application for member- ill the Federal Reserve System and for 7800 shares of stock in the Fed- Iteserve Bank of Cleveland by the Peoples savinqs and Trust Company, Pittsikrth condition of mom44, Which was accompanied by a request that the usual 3/1/29 -11- 414 regarding the acquisition of stock in other banks be waived by the Board. The ar. v -Vernor presented a memorandum from Counsel, prepared in accordance with a Ileclueat made at the meeting on February 8th, stating that while the question is 4 (1311btfla one he is of the opinion that the Board has the legal authority to itpo. oe the condition of membership in question. 1.1r. Cunnintham then moved that the application Of the Peoples Savings and Trust Company of Pittsburgh for membership in the System and for 7800 shares of stock in the Federal Reserve Bank of Cleveland be approved subject to the regular conditions of membership contained in the Board's Regulation H, Series of 1926. Mr. Platt moved, as a substitute for Yr. Cunningham's motion, that the application be approved subject to the regular conditions of membership, but that the following paragraph be inserted in the Board's letter of advice to the applicant bank: "Condition No. 3 above (referred to in Mr. Robinson's letter of January 25th to Mr. Decamp) is not to be interpreted as an effort to prohibit the purchase Of stock in another bank, even to the extent of acquiring control in all circumstances. The Board considers each request on its merits, and in case of a request for further purchases by your bank would doubtless take into account the fact that your bank has carried out this policy successfully for a number of years, to the apparent advantage, as Mr. DeCamp informs us, Of the outlying banks, whose stock you hold, as well aS to the advantage of your own bank. The Board does not believe that jr. Robinson is warranted in his belief that the requirement of permission before purchasing stock would necessarily operate to prevent the acquisition of any further banks or bank stock." Platt's substitute motion, being put by the Chair, was lost, Messrs. Young and Platt voting "aye". Mr. Cunningham's original motion was then put by the Chair and carried, Ir. Platt voting "n0". Mr. Platt stated that he voted "no", because in his opinion to permit this bank to become a member with- 0 220 3/1/29 -12- out giving the bank any information as to the attitude of the Board on the question specifically asked by its president was treating the bank unfairly. n uF STANDING COMMITTEES: hteat February 27th, Recommending changes in stock at Federal Reserve banks 28th, as set forth in the Auxiliary minute Book of this date. March 1st, Recommendations approved. Dated, action on an application for fiduciary Recommending 28th, FebruarY powers as set forth in the Auxiliary Minute Book of this date. Recommendation approved. Dated, FebruarY 27th, Recommending approval of the application of Mr. John B. Strauch for permission to serve at the same time as director of the First National Bank in St. Louis, Yo., and as director of •the St. Louis Union Trust Company, Dated, FebruarY 26th, Dated, PebruarY 28th, beteti, Februal7 26th, Deted, PebruarY 28th, St. Louis, Mo. Approved. Recommending approval of the application of Er. R. S. Powell for permission to serve at the same time as director of the National Exchan9,9 Bank, Milwaukee, as director and officer of the First National Bank, Appleton, Wis., and as director and officer of the First National Bank, Niagara, Wis. Approved. Recommending approval of the application of Er. John Y. Davis for permission to serve at the same time as director and officer of the Exchange National Bank, Little Rock, Ark., as director and officer of the Southwest Joint Stock Land Bank, Little Rock, Ark., and as director of the Little Hock Branch of the Federal Reserve Bank of St. Louis, Mo. Approved. Recommending approval of the application of Mr. Moorhead Wright for permission to serve at the same time as director of the Union Trust Company, Little Rock, Ark., as officer and director of the Southwest Joint Stock Land Bank, Little Rock, Ark., and as director of the Little Rock Branch of the Federal Reserve Bank of 3t. Louis, Mo. Approved. Recommending approval of the application of Mr. Frank E. Gorman for permission to serve at the same time as officer and director of the Capital National Bank, Lansing, Mich., and as director of the Fidelity Trust Company, Detroit, Mich. Approved. 3/1/29 -13- ING CM'ITTEES: C Ont d Date Februa-1-,y 28th, Recommending approval of the application of Mr. F. W. Niemayer for permission to serve at the same time as director of the Bankers Trust Company, Little Rock, Ark., and as director of the Southwest Joint Stock Land Bank, Little Rock, Ark. Approved. The meeting adjourned at 1:00 p.m. Assistant Secretary.
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