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280
A meeting of the Federal Reserve Board was held in the office of the
Pederal Reserve Board on Thursday, March 21, 1929 at 11:00 a.m.
PRESENT:

Governor Young
Mr. Platt
Mr. Hamlin
Yr. Miller
Mr. James
Mr. Cunningham
Mr. Noell, Asst. Secretary
Mr. McClelland, Asst. Secretary

The minutes of the meeting of the Federal Reserve Board held on Larch

20th

were read and approved.
Telegram dated Larch 20th from the Chairman of the Federal Reserve Balk

Of

St, Louis, advising that the board of directors at a meeting on that date

n° change in the bank's existing schedule of rates of discount and purchase,

Without objection, noted with
approval.
Memorandum dated March 21st from the Division of Bank Operations, transIllitting statements of expenditures by the Federal aeserve banks for education41 and welfare work, etc. during the month of February and for the two months'
Period ending
February 28th.
Ordered circulated.
The Secretary then presented and read the following telegram dated March
20th r
rcin the Chairman of the Federal Reserve Bank of San Francisco:
"Answering telegram nineteenth separate conferences have been
held with presidents of banks which have been practically continuous borrowers aid the question of rediscounts thoroughly discussed with the understanding that they were to be gradually
reduced. We did not expect much reduction to be made until
after tax assessment day and income tax payment now both passed.
Rediscounts in district February fifth eighty two million reserve ratio sixty three point seven. March fifth tax assessment




281

3/21/29

_9-

"day reiiscounts one hundred one million reserve sixty
point four. Larch eleventh one hundred four million
reserve sixty point five. Larch nineteenth sixty eizht
million reserve seventy point seven. Ue have reason to
believe that further reductions will be prompt. All parties claim continuous rediscounting due to over-purchase
of bonds and certifigates and that decline in value prohibits sale except at considerable loss. Each officer
offered to sell wad assume loss should we request it.
'le did not desire to assume this responsibility and told
them that we considered it possible for them to adjust
Without sale. :/e know of no banks in this district that
are lending on call in New York or outside of this district which are persistent borrowers. Your telegram and
this answer will be presented to our board of directors
at meeting tomorrow.'
the discussion of the above telegram, the Governor was called from
the

room to bonier with the secretary of the Treasury.

Upon his return, he

l'ePOrted to the Board that a day or two ago Governor Harrison of the Federal
k3serlrie Bank of New York advised him over the telephone that Acting Chairman
'4(3°118Y oi that bank, whom it is understood has been opposed to such action,
4°11 feels
that the rate should be increased and that the action should be
tlIkell Promptly.

Governor Harrison suggested that Lr. Woolley and he might

eolma to
Washington for a discussion with the members of the Board and inquiry
W68 rn

u acle as to whether their visit should be prior or subseouent to the meeting
'

°t th6

board of directors of the bank today.

The Governor stated that he thought

-uld be better for them to come to Washington tomorrow after the matter had
been
alscussed by the airectcrs oi the bank, and arrangements were made accord,
He stated that this morning, however, Governor Harrison again called
hit a
4C1 advised that as market rates on acceptances have gone up and it will

be tleeessary
for the Federal Reserve bank to adjust its buying rates,

he

711" have to recommend Cu increase in rate to his directors at their meettoaay.

his own
He stated tnat Governor Harrison advised that disregarding




3/21/29

-3-

Pcsition, the condition of the security markets and the possible effect the
rate change might have on those markets, it is felt that the rate structure
i8 so upset in Hew York that the Federal Aeserve bank can not longer main]t3 present rate.

The Governor stated that he informed Governor Harrison

that he would advise the Board, which will -be prepared to consider any action
whichhis directors may take.

The Governor also stated that he discussed the

matter with the Secretary of the Treasury, who advised that as far as the De1)arttlent was concerned he did not care what action was taken.

He stated that

While he would prefer not to do so, if the Board wished, he would join the
rilaeting this afternoon and if an increase in rate is submitted by the New York
cUreotors, he would vote against its approval by the Board at this time.
A discussion of the proposed increase in bill rates ensued, and in44117 was made of the Governor as to whether he has been able, in accordance
With the

request made Of him recently, to arrange any change in procedure

by.whi
'ch Proposed bill rates would be submitted to the Board for approval In
a of their being made effective.

41(iI

The Governor stated that when he was

last 14 New York he discussed the matter, particularly with Deputy Governor
4azei
-

who is in charge of bill operations, who advised him that in ordinary

-8 he believed the bank could operate if it were authorized to adjust the

111

rate within one-half of one percent under the discount rate of the bank,
)014 th,
at at the present time with the bill market so uncertain he did not feel
that anYthing could be done except to follow the market rates.
The Governor suggested that, in his opinion, it would be most dealrabl
-a to have a conference between the members of the Board and the direct-




Q
6aLY!..)

3/21/29

-4-

Of the Federal Reserve Bank of New York for a full exchange of views rethe present situation, which, he believed, should take place in New
York a$
the directors of that bank, being engaged in their own businesses,
night not be able conveniently to come to Washington.
'
Mr. Hamlin moved that the Governor endeavor to
arrange to have a committee, at least, of the directors of the Federal Reserve Bank of New York,
come to Washington at their convenience for a conference with the Board.
Mr. Platt. moved, as an amendment, that a committee of the Board, consisting of the Governor,
Mr. Miller and Mr. Hamlin, and such other members
as may care to, go to New York for a meeting with
the directors of the Federal Reserve bank.
Yr. Miller moved, as a substitute, that the
Governor Advise Governor Harrison that during the
discussion today there was some expression that
probably matters would clarify themselves if the
members of the Board and directors of the Federal
Reserve Bank of New York got into contact with one
another, and ask that he submit the matter to his
directors and ascertain whether they have any suggestion to make.
Mr. Miller's substitute motion being put by the
Chair was carried, Mr. Cunningham voting "no".
Mr. Cunningham stated that he has no
objection to a conference at any time with
the directors of the New York bank or of
any Federal Reserve bank, but that he feels
in view of the circumstances and the suggestion which was submitted by the New York
bank for discussion, which is an increase in
the discount rate, the conference should be
held in ;iashington.
Telegram dated March 21st from the Deputy Governor of the Federal Reserve
klalk Of
this mornNew York, advising that following advances in market rates
14R, thA
es was made effective
-- new schedule 01 rates for rurchases of acceptanc




3/21/29

-5-

at that
bank today, as follows:
Bankers Lcceptances:
1 to 45 days
46 to 90 days
91 to 120 days
121 to 180 days
Repurchase
Trade Acceptances

-

5 1/42;
5 3/8/;
5l/2
5 5/8,;
5 1/47;
5 1/2

Noted, with approval, Mr. James
voting "no".
Telegram dated March 21st from the Governor of the Federal Reserve Bank
°t Boston, advising of the establishment of the schedule of rates for Fures Of acceptances made effective today at the Federal Reserve Bank of
41I York, as set out above.
Noted with approval, Mr. James
voting "no".
Telegram dated March 21st from the Chairman of the Federal Reserve
Of Chicago, advising of the establishment today of the following sched111e el

rates for purchases of bankers acceptances:
1
46
91
121

to
to
to
to

45 days
90 days
120 days
180 days

5
5
5
5

1/4'4
3/8,;
1/2f;
5/8/:,

Noted with approval, Mr. James
voting "no".
The Governor then left the room and communicated with Governor Harrison
°t thA
- Federal Reserve Bank of New York, whom he advised of the motion adopted
1).Y the
Board. Upon his return, he stated that Governor Harrison would be glad
t
° DIt the
matter up to the directors of his bank at their meeting this after114011
'
4*

H6 stated that Governor Harrison referred further to the recommendation




ACi

3/23129

-6-

for an increase in rate which he will make to his directors, stressing the
feet that large New York City member banks appear to be in favor of an inease as they are finding it increasingly difficult, in the face of the
"
Present rate, to continue their cooperation with the Federal Reserve bank
ill dealing with the credit situation.

The Governor stated that Governor

Harrison admitted that the only phase of the matter is that it would enable
the member banks to charge their customers a higher rate.
At 1:00 p.m. the meeting recessed, and reconvened at 3:30 p.m.,
the same members being present as attended the morning session and also Mr.
Pole,
The Governor reported a telephone conversation with Governor
lia
rrison of the Federal Reserve Bank of New York, who stated that the idea
01' a
conference with the Board appeals to the directors of his bank, who
now in session and who have asked Acting Chairman Woolley and Governor
Rerrison to
meet with the Board in Washington as soon as convenient.

He

lee stated that the directors would welcome any members of the Board who may
61re to come to New York for a meeting there.
Governor Young reported, however, that because of the increase
t4 the bank's schedule of rates for purchases of acceptances which was neces-

"
17 today, and the general firming of rates, with evidence of further in(*eases, as well as for other reasons which have previously been connunicated
thrcYugh him to the Board by Governor Harrison, the directors of the New York
balmhave voted to establish a rediscount rate of 6i; on all classes of paper
Of
al1
maturities subject to review and determination by the Board, with the




386
'
3/21/29

-7-

Understanding, however, that their action is predicated upon approval or
disapproval by the Federal Reserve Board today.

The Governor also reported.

that Mr.
Woolley would be glad to discuss with any members of the Board over
the

telephone the reasons why it is felt that action is.necessary today.
Mr. Hamlin moved "That the Federal Reserve
Bank of New York be advised that the Federal
Reserve Board has received the advice that the
directors of that bank have established a rediscount rate of six per cent, with the understanding, however, that their action is predicated upon approval or disapproval by the Federal Reserve Board today, and that the Board
disapproves the action of the New York directors, and has determined that the rate of the
bank be five per cent."
Mr. Platt moved, as substitute for Mr. Hamlin's
motion "That the rate of 6; established by the
directors of the Federal Reserve Bank of New York
on all classes of paper of all maturities be approved, effective tomorrow, March 22nd."
kfter discussion, Mr. Platt's substitute motion was put by the Chair and
lost, Yr. Platt voting "aye".
Mr. Hamlin's original motion was then
put by the Chair and carried, Mr. Platt
voting "no".
The Governor stated that he voted "aye",
not because he is opposed to an increase
in rate at this time, but solely to support the position of the majority of the
Board.
Ur. OunninP;ham stated that his position on the motion just adopted,

Illlarding the action of the directors of the Federal Reserve Bank of New
YOrir

13 explained in part in a resolution which he submitted, reading as

to.lows




F
,
rc

3/21/29

-8_.

"Whereas, on Larch 7th, 1929, Counsel reported to the
Federal Reserve Board on the subject 'Power of the Board
to enforce principles regarding the proper use of credit
facilities of the Federal Reserve System laid down in the
Board's letter of February 2nd, 1929'; and
Whereas, quoting the language of paragraphs two (2) and
three (3) on page three (3) of said report, as follows:
'(2) The Board could, if it deems it advisable, prescribe
a regulation forbidding any Federal reserve bank to rediscount any paper for, make any loan or advance to, or purchase any bills of exchange, bankers' acceptances, or government, State, or municipal securities (under repurchase
at the
agreements or otherwise) from, any member bank which
in
dealers
or
brokers
to
ding
outstan
time: (1) Has loans
has
(2)
or
ies;
securit
ent
investm
stocks, bonds or other
ding
unreasonably large amounts of speculative loans outstan
to customers secured by stocks, bonds, or other investment
are to be
securities, or the proceeds of which have been or
used for the purpose of carrying or trading in stocks, bonds,
or other investment securities.
'(3) The Board has ample power to enforce such a regulation by suspending or removing from office the officers and
s it.'
airectors of any Federal Reserve bank which violate
reTherefore, Be It Resolved that the counsel is hereby
Board
quested to prepare and submit to the Federal Reserve
2or its approval, a regulation providing in substance the
Federal
following: That except with the permission of the
not less
of
vote
tive
affirma
an
upon
granted
Reserve Board
than five (5) members of said Board, no Federal Reserve
or
Bank is permitted to rediscount for or make any loan
acadvance to, or purchase any bills of exchange, bankers
ies
securit
ceptances, or government, State or municipal
member
(under repurchase agreement or otherwise) for any
or
brokers
bank which at the time has loans outstanding to
or
ies
securit
dealers in stocks, bonds, or other investment
doutstan
loans
has unreasonably large amounts of speculative
ent
investm
other
or
ing to dustomers secured by stocks, bonds
or are to be
securities or the proceeds of which have been
stocks, bonds,
in
used for the purpose of carrying or trading
or other investment securities."
Although Lr. Cunningham did not request
immediate action on the above resolution, inaswith
much as it merely directs counsel to proceed
subbe
to
ion
the preparation of a form of regulat
ration,
the
mitted to the Board later for conside
Governor Young
resolution was,upon motion,adopted,
voting "no".




c.)

3/21/29

-9_

Mr. Miller then left the meeting to talk over the telephone with Director Woolley of the Federal Aeserve Bank of New York, and upon
his return
advised
a

the Board that Yr. Woolley will be in :
- /ashington tomorrow morning for

conference*
Telegram dated :::arch 21st from the Chairman of the Federal Heserve

Bank of
Richmond, advising of the establishment today of the following schedule of
rates for purchases of bankers acceptances:
1
46
91
121

to
to
to
to

45 days
90 days
120 days
180 days

-

i .
5 3/8/0
5l/2
5 5/8/?
5 3/4/0

Noted with approval, Mr. James
voting "no".
Telegram dated March 21st from the Governor of the Federal Reserve
Bank of St.
Louis, advising of the establishment today of the following schedIlla of
rates for purchases of bankers acceptances:
1
46
91
121

to
to
to
to

45 aays
90 days
120 days
180 days

51/4'
53/8
5 1/2%
5 5/8

Noted with approval, Mr. James
ng "no".

meeting adjourned at 4:05 p.m.

N/Aie

44roved:




Assistant Secretary.

vernor.