Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, March 10, 1936, Volume 23, Part 2

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A meeting of the Board of Governors of the Federal Reserve Systern

Was

held in Washington on Tuesday, March 10, 1936, at 11:00 a. m.
PRESENT:

Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

Eccles, Chairman
Broderick
Szymczak
McKee
Ransom
Morrison

Mr. Morrill, Secretary
Mr. Bethea, Assistant Secretary
Mr. Carpenter, Assistant Secretary
Mr. Clayton, Assistant to the Chairman
Mr. Thurston, Special Assistant to the
Chairman
Mr. Wyatt, General Counsel
Mr. Smead, Chief of the Division of Bank
Operations
Chairman Eccles stated that he had talked with Mr. Joseph Wayne,
Jr*,

a Class "A" director of the Federal Reserve Bank of Philadelphia, over

the telephone yesterday and that the latter had advised that consideration Was being given by the directors of the bank to the appointment of
Mr
'J- S. Sinclair, now serving as Vice President, as President oC the
ha
nk, and of Mr. a. J. Davis, now serving as Assistant Vice President, as
F'
lrst Vice President of the bank. All of the members of the Board present
inaicated
that the appointments referred to would be agreeable to them.
Chairman Eccles then reported that, in accordance with the actiontien at the meeting on February 18, 1936, he had discussed with
resident Harrison the advisability of the Federal Reserve Bank of New
Ic)rk continuing the employment of Mr. S. O. Martin with salary at the
°f

2,000 a month in connection with the industrial loan activities

of the
bank, and that Mr. Harrison had stated that he would like to contirel
e Lir. Martin pending the completion of the plan of reorganization of




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3/10/36

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the functions and personnel of the bank, including the transfer of the
nonstatutory functions of the Federal reserve agent's department to the
operating
side of the bank.
Chairman Eccles said that he had also discussed with President
Harrison the salaries fixed by the board of directors of the New York
bsalk for vice presidents and assistant vice presidents of the bank for
the period
from March 1 to December 31, 1936, and that Mr. Harrison had
stated that he felt that, if the Board were unwilling to approve the
8alarlor for Vice President Sailer for the remainder of the year, it
should be approved at least until August 2, 1936, on which date Mr.
Sailer will be 65 years of age and will be eligible for retirement by
the Retirement System
of the Federal Reserve Banks.
President Harrison's suggestion was discussed, and Mr. Broderick moved that:
1.

With the exception of the salary of Mr.
Sailer, the Board approve, for the period
from March 1 to December 31, 1936, inclusive, the salaries fixed by the directors for the vice presidents and assistant
vice presidents of the New York bank in all
cases where such salaries are at the same
rates as the salaries they were receiving
as officers of the bank on February 294 19360

2.

Pending the completion of a survey and review
of the entire question of organization and
salaries of the Federal reserve banks, the
Board defer action on the increases in salaries approved by the directors for certain
vice presidents and assistant vice presidents
of the bank, and that the Board approve for
the period from March 1 to December 31, 1936,
inclusive, the payment of salaries to such officers at the same rates as the salaries being paid




543

them as officers of the bank on February
29, 1956, if fixed by the directors at those
rates.
3. The salary of 7fr. Sailer as Vice President
be approved at the present rate of $30,000
per annum until August 31, 1956, with the
understanding that he will be retired on
that date.
Mr. Broderick's motion was put by the Chair
and carried unanimously and the Chairman was
authorized to advise the Chairman of the New York
bank accordingly.
Mr. Broderick referred to the fact that action on the salaries
fixed by
the board of directors for the officers of the Federal Reserve
Bank of Minneapolis for the year 1956 had been deferred
by the Board, and
Stated

that advice had been received of the appointment of vice presidents

°f the
bank for terms beginning March 1, 1936.
He then presented the following draft of a
letter to the Chairman of the Federal Reserve Bank
of Minneapolis and moved that it be approved:
"Reference is Made to Mr. Peyton's letter of January 22,
1936,
transmitting a list of the salaries fixed by your board
Of dIrectors for the officers of the Federal Reserve Bank of Min!eaPolis for the year 1936, subject to approval
by the Board of
Governors
of the Federal Reserve System.
"As you know, the Board has called a conference of the
presidents of all Federal reserve banks in Washington on March
1936, for the purpose of discussing with them the question
of r
eorganizing the personnel and operating procedure of the Fed-Iai. reserve banks with a view to economy and efficient operaon. In this connection, the Board has taken the position that,
Pending the completion of a survey and review of the entire
of organization and salaries at the Federal reserve
banks,„
there should be no further increases in salaries of oflicers unless unusual circumstances justify
an increase.
"Accordingly, the Board approves the salaries fixed for
Officers
i
of your bank by its board of directors as submitted
'
41*. Peyton's letter of January 22, 1956, where such salaries
are the
same as the salaries the officers were receiving at the
_nd of 1935 and will interpose no objection to the payment of
to other officers of the bank at the rates previously
approved by
the Board and in effect at the end of 1935. The

J




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3/10/36

-4-

"Board also approves an annual retainer fee of C9,000 per annum for the bank's counsel.
"The Board advised Mr. Peyton in its telegram of February
24, 1936, of its approval for the period from March 1 to December 51, 1936, inclusive, of the salary fixed by your directors for Mr. Peyton as President of the Federal Reserve Bank
Of Minneapolis.
.
"Mr. Peyton's letter of February 25, 1936, advised that
at a meeting of the board of directors of your bank on February
24, 1936, the office of first vice president was left vacant,
but that Mr. Harry Yaeger was appointed as Vice President of
the bank, with salary at the rate of 06,000 per annum, and Mr.
Harry I. Ziemer as Vice President and Cashier, with salary at
the rate of $9,000 per annum. It is understood from the copy
of minutes of the meeting of directors which accompanied Mr.
Powell's letter of February 26, 1936, that Mr. Yaeger would
also serve as Secretary of the bank, and it will be appreciated if you will confirm this understanding. The Board approves, for the period from March 1 to December 51, 1936, inclusive, the salaries fixed by your directors for Messrs.
Yaeger and Ziemer in their new positions.
"The Board has fixed the salary of Mr. Peyton as Chairman
and Federal Reserve Agent at the Federal Reserve Bank of Minneapolis for the period from January 1 to February 29, 1956,
inclusive, at the rate of 20,000 per annum. As you were advised in the Board's telegram of February 26, 1936, your
salary as Chairman and Federal Reserve Agent has been fixed
bY the Board at the rate of 20,000 per annum for the period
From March 1 to December U, 1966, inclusive. The salary of
E. W. Swanson as Assistant Federal Reserve Agent is fixed
"
Id
at the rate of 0,500 per annum for the current year, and Mr.
Peyton was advised in the Board's letter of December 3, 1935,
that the Board approved the appointment of Mr. Powell as Assstant Federal Reserve Agent at the Federal Reserve Bank of
Minneapolis, and fixed his salary for the year 1936 at the
rate of ,j7,500 per annum."
Mr. Broderick's motion was put by the
chair and carried unanimously.
Chairman Eccles read a letter received by him under date of
'
11 5, 1936,

from Mr. C. C. Walsh, Chairman of the board of direc-

t°r8 and Federal Reserve Agent at the Federal Reserve Bank of Dallas,
exPre°sing appreciation of the action of the Board in connection with




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3/10/36
the

-5-

continuance of his designation until April 30, 1936, and his in-

tention to continue, after his connection with the Federal Reserve
SYstem is terminated,
his friendship to the System and his support of
its Policies.
The Chairman was requested to advise
Mr. Walsh by letter of the Board's appreciation of the expressions contained in his
letter.
There was then presented a letter dated :larch 7, 1936, from
President Harrison of the Federal Reserve Bank of New York, reading as
follows:
"You will recall that at the meeting of the Executive
Committee of the Federal Open Market Committee held in Washington on February 26 the question of procedure during the
interim between March 1 and a meeting of the new Open Market
Committee was discussed. The Executive Committee made a proposal for dealing with holdings in the open market account
as they might be affected by Treasury financing operations to
be announced on March 2. The committee's proposal was approved by the Board of Governors on February 28 and has been
put into execution.
"In addition to these operations it has been and will
be
necessary to deal with current maturities of Treasury bills
to avoid a decrease in System holdings of government securities. As reported in Mr. Burgess' letter to you of March 5,
maturities of
Treasury bills in System account amounting to
0.5,905,000 were replaced on Wednesday, March 4, with other
Treasury bills, and there will be a further maturity of
$15,550,000 of Treasury bills on March 11 to be replaced.
This bank has also arranged the replacement of 0_1,267,000
2f Treasury notes maturing April 15, 1936, for which the
rreasury offered an exchange on March 2.
"I am calling these operations to your attention solely
because the wording of the Banking Act of 1935 leaves the
question of technical authority with respect to open market
o perations in a somewhat ambiguous position prior to a meeting
of the new committee. We are presuming that the only practical procedure is to go forward as in the past with these
and any other routine open market operations under Section
-1-42 With the thought that they may be ratified by the new




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-6-

"committee at its first meeting. If you have any other suggestion with regard to procedure we should be glad to hear
from you.
For your information I am enclosing a copy of the tentative draft of the minutes of the meeting of the Executive
Committee on February 26."
By unanimous vote, the Secretary
was requested to advise President Harrison that the Board has no suggestions to
make with regard to the matter and feels
that, as the transactions referred to in
the letter are necessary in the proper
administration of the open market account,
the procedure outlined is a practical solution
of the problem presented pending the organization of the Federal Open Market Committee
pursuant to the provisions of the Banking
Act of 1935.
There were then presented drafts of letters to the Comptroller
f the Currency and the Federal Deposit Insurance Corporation advising

that as the result of a request from a State member bank, (Southington
8111* and Trust Company, Southington, Connecticut)
the Board was giving
e°nsideration
to the question whether it should exempt State member banks
Which are
subject to a condition of membership requiring that they deP°sit

securities for trust funds deposited in the banking department

from that
requirement, to the extent that trust funds so deposited are
illsured by the
Federal Deposit Insurance Corporation, but that before

the Board took action on the matter it would appreciate the comments
arid

euggestions of the two offices and advise whether, if such action

were taken by
the Board, the two offices would join with the Board at
411 aPPropriate time in a recommendation to Congress that an amendment
be
'de to
Section 11(k) of the Federal Reserve Act making a corresPcIldillg exemption applicable to national banks exercising fiduciary




547
3/10/36
powers.

-7Mr. McKee had attached a memorandum to the file, which had

been circulated
among the members of the Board, expressing the opinion that it would be unwise to eliminate the necessity for
the pledge
Of

securities to protect uninvested trust funds deposited in the com-

mercial department of a member bank. Mr. Ransom stated that he had
been

unwilling to approve the letters for the reason that he felt that,

in the
circumstances referred to, a member bank should be required
to

deposit uninvested trust funds in its own commercial department and

Pledge collateral therefor.
At the conclusion of a discussion,
during which it was indicated that other members of the Board concurred in the opinions
of Messrs. McKee and Ransom, the request
of the member bank was referred to Mr. Ransom for determination.
Chairman Eccles referred to the forthcoming organization meeting
°f the Federal Open Market Committee Pnd recommended that the Secretary
be authorized to
send to the five members of the Committee representing

the Federal reserve banks, for their study prior to consideration at
the meeting;
tentative drafts of regulations to be issued by the Commit
tee and by-laws to be adopted by it; the letter to state that the
cll'afts had been
prepared by the Board's staff and had not been coned or passed upon by the Board, and that they were being sent to
the five members of the Committee at the same time they were handed to

the

members of the Board.




Mr. Szymczak moved that Chairman Eccles'
recommendation be approved.
Carried unanimously.

SIR
3/10/36

-8Messrs. Thurston, Wyatt, and Smeud left the meeting at this

Point and
consideration was then given to each of the matters hereinafter referred to
and the action stated with respect thereto was taken
by the
Board:
Memorandum dated March 6, 1936, from Mr. Goldenweiser, Director
of the
Division of Research and Statistics, stating that Mrs. Joyce Moss,
a statistical
clerk in the Division, desired to resign in order to
devote her time
to her home, and that, therefore, it was recommended
that her
resignation be accepted effective at the close of business on
April 30, 1936, and
that, in view of her long service with the diviEdo
n) she be granted the thirty days leave of absence with pay to which
she would be
entitled if she remained on the payroll of the Board for
the entire
year.
Approved unanimously.
Letter to Mr. Case, Federal Reserve Agent at the Federal Reserve

Bank
of New York, reading as follows:
"This refers to Mr. Gidney's letter of February 10,
to the status of 473
Holding Corporation, Saratoga Springs, New York,
a holding company affiliate under the provisions of seetion 2(c) of the Banking Act of 1933, as amended by section
601 of the Banking Act of 1955.
"The Board has determined that 473 Broadway Holding Cor90ration is not engaged, directly or indirectly, as a business in
holding the stock of, or managing or controlling,
panzs, banking associations, savings banks, or trust companies, within the meaning of section 2(c) of the Banking
Act of 1933, as amended by section 301 of the Banking Act
of 1955,
and, accordingly, that corporation is not a holdCompany affiliate for any purposes other than those of
-'Section 23A of the Federal Reserve Act.

9 61 and its inclosures, relating
1Broadway




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3/10/36

-9-

"Inclosed herewith is a letter to 473 Broadway Holding
Corporation advising it concerning the Board's action in this
matter. Please transmit the letter to that corporation. A
copy of the letter is also inclosed for your files.
"As you will note, the Board expressly reserves the
right to make a further determination of this matter at any
time on the basis of the then existing facts. In this connection, it is requested that you advise the Board if, at
any time, you believe this matter should again be considered
by it."
Approved unanimously, together with
a letter to the 473 Broadway Holding Corporation, Saratoga Springs, New York, reading as follows:
"This refers to the application of your corporation for
a voting permit entitling it to vote the stock which it owns
or controls of The Adirondack Trust Company, Saratoga Springs,
New York; to the general voting permit issued to your corporation on December 22, 1933; and to your corporation's request
that the Board determine that it is not engaged, directly or
indirectly, as a business in holding the stock of, or managing or controlling, banks, banking associations, savings banks,
or trust companies.
"The Board understands that your corporation was organized
by certain
stockholders of The Adirondack Trust Company for the
1?Illyose of consolidating their interests and simplifying their
Joint action; that your corportttion owns or controls 1,200 of
the 2,500 outstanding shares of stock of the Adirondack Trust
ompanY; that such shares constitute more than 50% of the number of shares voted at the preceding election of directors of
The Adirondack Trust Company; and that your corporation does
not own or control any other bank stock or manage or control
any other
bank.
"In view of such facts, the Board has determined that
i'our corporation is not engaged, directly or indirectly, as a
!Abusiness in holding the stock of, or managing or controlling,
1"?'flic3, banking associations, savings banks, or trust companies,
within the meaning of section 2(c) of the Banking Act of 1933,
as amended by section 301 of the Banking Act of 1935 and,
accordingly, your corporation is not a holding company affiliate for any purposes other than those of section 23A of the
Federal Reserve Act. If, however, your corporation should
at any time own or control a substantial portion of the
3tc3ck of, or manage or control, any other bank this matter
Should again be submitted to the Board for its determination.




550
ik

3/10/36

-10-

"The Board reserves the right to make a further determination
of this matter at any time on the basis of the then existing
facts.
"In view of the fact that your corporation is no longer
a holding company affiliate for any purposes other than those
of section 23A of the Federal Reserve Act, the general voting
Permit heretofore issued to your corporation is void and of
no effect. If your corporation should later be determined
by the Board to be a holding company affiliate subject to the
provisions of law relating to voting permits, it would be necessary for your corporation to obtain a new voting permit before
it could lawfully vote the stock of a member bank."
Letter to the Federal reserve agents at all Federal reserve banks,
reading as follows:
.
"The pamphlet which has been distributed by the Board
since 1929 under the title 'Verification of Financial Statements' was recently revised by the American Institute of
Accountants under the title 'Examination of Financial Statements by Independent Public Accountants' and is sold by the
Institute at 15;L, a copy. Accordingly, the Board will make
further distribution of the pamphlet 'Verification of
tinancial Statements' except to persons desiring a copy of the
old edition."
Approved unanimously.

Thereupon the meeting adjourned.

7
.7
Secretary.

APProved.




Chairman.