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518 Ameetinc of the Federal Reserve Board was held in Washington on 17Pdnesday, March 22, 1933, at 12:00 o'clock noon. PIESENT: Wood in, Chairman las. Meyer, Governor Mr. Hamlin Niller Mr. Tames Mr. Morrill, Secretary Mr. 1.IcClelland, Assistant Secretary Er. Harrison, Assistant to the Governor Er. '.iyatt, General Counsel. The Board considered and acted upon the follouinL, natters: Letter dated March 20, 1933, from the Secretary of the Federal ere Bank of Kansas City advising of the establishment at that bank as (111'1:z-1'cl-117, healkers' 1933, of the following schedule of effective buying rates on acceptances: 1 to 90 days 91 to 120 days 121 to 130 days Witout objection, noted with approval. Telecrams dated March 21, 1933, fram the Chairman of the Federal Resel, "e Bank of Richmond and the Secretary of the Federal Reserve Bank of 111411eapolis advis inc of the establiahnont at those banks on that date of the 2°110u1ncr schedule of effective buyinc rates on bankers' acceptances; the sc hedule at Minneapolis also including a rate of 2 1/2(;) for purchases °r bazlzors, acceptances under agreement to resell: 1 to 90 days 01 to 120 days 121 to 100 days 2 1/2:, 2 5/E3','J 3;) 'Jitiout objection, noted with approval. ?ecier TeleCzam, dated March 22, 1933, frata Deputy Governor r_enzel of the al Re2erve Bank of New York stating that on Monday and Tuesday bill 519 3/22/33 -2- (lealers in New York City bought approximately 321,000,000 of bills at the €1tea and sold slightly more than that anount so that the new rates eeela to bring the supply and demand for bills reasonably close together, tbat accordingly, the Federal Reserve Bank of New York, in order to bring its rates more in line with the market, established this morning the follm- ite "cued1110 of effective buying rates on acceptarc es: Bankers'Acceptances: 1 to 90 days 91 to 120 days 121 to 180 days Repurchase Trade Bills 25 2 1/8,7/ 2 1/2% 3 1/2;7/ Without objection, noted with approval. Telegrams dated March 22, 1933, from the Chairman. of the Federal 11153e1176 sank of Chicago and the Governor of the Federal Reserve Bank of St. Lotus advising of the establishment at those banks today of the following schedule Of effective buying rates on bankers' acceptances: 1 to 90 days 91 to 120 days 121 to 180 days Without Objection, noted with approval. T elegraphic reply to a telegram dated March 21, 1933, from the 11*ecierea. Reserve Agent at San Francisco requesting approval by the Board of tellkocrary appointnent of Mr. E. B. McBride as an examiner for the bank kt4 —4arY at the rate of 0300 per month. 11111)1 /8 The reply stated that the Board the tmmporary appointment as requested. Approved. 3/22/33 -3Letter dated 1,1arc.h 20, 1933, from Deputy Governor Craw of the -?'ecieral Reserve Bank of New York stating that advice has been received tzola the Bank for International Settlements that all participants in tie el'edit to the lieichsbank have agreed to a renewal of the credit in the 11114ciPal sum of %)70,000,000 for a further three months period ending Xune 6 '1933, on the same terms and conditions as the last previous renewal e4cept that the rate of interest is 4x,"; and that clause 5 of the renewal 4ezee larrt has been formulated more precisely than heretofore. Not ed. Telegrams to the Federal Reserve Agent at Chicago, referring to the 41)1)11eations filed by the State Bank of Plymouth, Viisconsin, and the Bank or Baraboo, '.iisconsin, far permission to withdraw immediately from membership 4 ' a tha Federal Reserve System, and stating that the Board waives the 18LIE1.1 recillirement of six months notice of intention to withdraw from IllerpberehiP alxi that, accordingly, upon surrender of the Federal reserve bttlak 3tcelz issued to the two institutions, the Federal Reserve Bank of CilleEt° is authorized to cancel such stock and make refunds thereon. Appr med. to the Federal Reserve Agent at Dallas, replying to his teleeraril of March 19, 1733, with regard to the application filed by the Citi" z State Bank, -Trost, Texas, for permission to withdraw immediately trora ' abersb.ip in the Federal Reserve System. The reply stated that the toe.ra viEttves the usu.al requiranent of six months notice and that, accordingly, 841"1"ender of the Federal reserve bank stock issued to the Citizens Ette Bellits the Federal Reserve Bank of Dallas is authorized to cancel such 3/22/33 -4- steep, : and. 'flake a refUnd thereon. The reply also stated that before su.ch stQck is canceled, the agent should obtain from the counsel for the $ederal l'eserve bank advice that the notice of desire to withdraw filed by the State bezic complies substantially with the recluirinents of Section 7I11 of the 13°Ircit a elation H, prescrbed pursuant to provisions of Section 9 of the 26(1°1'8.1 :Reserve Act. Approved. Telegram to the Governors of all 7'ederal reserve banks stating that 11° 11131)1exint to the 2ecieral reserve par list will be issued as of April and that, therefore, mail and telegraphic advice of changes in tile the Par list for use in prenaring the supplement need not be forwarded. to doard, Appr ov ed. Telerara to the Governors of all Federal reserve banks stating that attelition has boon called to the fact that lengthy messages are being o.z ad between iederal reserve banks over the leased wires regarding the appoint of conservators for banking institutions not licensed to resume ' ' 6-1 14in5 operations; That two Federal recerve banks have expressed such messages are not of sufficient iiinortance to warrant the Of leased wires during the lwesent period then they are already over- 1(3e.(teci Tlith more urgent business, airl that, therefore, the Board suz7ests tle't the banks consider the cuestion of the necessity during the present etIorftLencY -for the use of leased wires where mail advices or cormercial 111*e8 vtill serve all reasonable purposes. Approved. 3/22/33 -5- Letter to the Federal Reserve Agent at New York, referring to the analysis of report of examination as of October 18, 1932, of the Peoples sank of Hamburg, New York, and suggesting that the agent consider the advisability of discussing with the Superintendent of Banks of the State Of New York the question of a further reduction in the bank's dividends, if not an entire elimination thereof, advising the Board of the results of anY such discussion. The letter also requested information with regard to the Hamburg Finance Corporation Which appears to be owned by the directors °f the member ly-mk, and advice as to the action taken by the bank in connection with the disposition of 20 shares of its own stock held as collateral to a loan, and as to any improvements of the other features of its unsatisfactory condition. Approved. The Secretary stated that some of the Federal reserve banks have illquired whether they are under any duty, under the regulations issued by the Secretary of the Treasury, to ascertain whether checks and drafts '" are chargeaLle to the reserve accounts of unlicensed member banks subject to any of the limitations applicable to such banks; that the 1114tter has been discussed with Assistant Secretary of the Treasury 00110.1- znd that the Treasury Proposes, if the Federal Reserve Board ap- P1'°Ire e, to send the following rgply to the inquiries received: "Treasury does not require Federal reserve banks to make investigations to determine whether withdrawals by or discounts for or advances to unlicensed banks are for purpose of transactions authorized and within limitations prescribed by Treasury Regulations, but it is hoped that Federal reserve banks will cooperate with Treasury Department to the extent of not permitting 3/22/33 -6"withdrawals by or DakinG discounts for or advances to unlicensed banim in cases where the reserve bank has reason to believe that the pfoceeds ray be used in Violation of Treasury Regulations. In this connection, as regulations 6 and. 10 have been rescinded Treasury regards regulation G as no longer in effect." Approved. :it this point 1:r. Goldenweiser, Director of the Division of Research eald 3t atistics,joined the neetinL,*. The Governor reviewed fca• the information of the Chairman the 11°Ints considered during the discussion regarding the gold situation which took Place at the afternoon and evening sessions of the 1ecutive Cornittee Yesterday He presented drafts of the proposed executive order to prohibit lloaraing„ and a press staterent which had been tanta.tively agreed upon by tile .,Pointive laa,nhers of the Board, and revised in accordance with 1311EZeetions made at the evening session. He also presented a revised draft of the statement submitted by him at the meetin, Ye3telsc1aY, the purport of which is that after reports of the names arra Etactre "eu of those who have withdrawn gold_ have been received filDra the (ktrc-i-L. reserve banks on March 27, 1933, the Board will decide whether to 4ak thm — President or the Secretary of the Treasury to invoke the emergency Defter., ' 13 Possessed by them in order to brinc, , back any gold withdrawn for Itich has not been returned. 1:1%lller stated that he had proposed the procedure outlined in th t 4teLisnt prepared by him as a l'ans of deferring a decision on whether Eui eelltive order is necessary, because of the many ramifications of such °I'cler) all of which it is exceedingly difficult to foresee. 3/22/33 524 -7- The executive order above referred to was then discussed and the Chairman of the Board stated that he was inclined to favor the issuance Of such an order rather than an order looking to the mobilization cf all ths r,old in the country or the procedure suggested by L '. Filler and he referred to the question what further steps should be taken in the event such an order is issued. The suggestion was made that as soon as the results sought to be accomplished by the order have been achieved the President can declare by further proclamation that the emergency has Passed and remove all restrictions on the payment and holding of gold 0°111, gold bullion and gold certificates. The Chairman stated that he would like to consider the proposed order further, and, upon being advised that it is felt that some changes in the phraseology of the order and Press statement are desirable, he stated that he would consider the drafts furnished him as in tentative form only. Governor Meyer then brought to the attention of the Chairman copies f the telegrams dispatched by the Reconstruction Finance Corporation to it8 various loan agencies thich were discussed at the meting yesterday, indieLitinC a Policy of shirting to the Federal reserve banks loans to Lev,. 4s already made by the Reconstruction Finance Corporation as well as alDPlications received from banks for new loans. The Chairman stated that he had already taken the matter up with the Reconstruction Finance Corporat and that it is going to advise its agencies that the policy indicated i in the telegrams is not to be followed. La'. Harrison read to the Board a telegram received from the Federal Rezerv,, Agent at Dallas under date of Liarch 21, 1033, transmitting a re- 3/22/3u —a— (Illezt from the Texas 13ank and Trust Oorapany, Sweetwater, Texas, for waiver by 3oard of the six months notice of intention to withLraw from manber- 811113 in the federal Reserve System, in order that the bank may withdraw rot' raerabershio immediately; the reason ziiven for the recuest being, thElt tile bank had reopened on a non-restricted basis under authority received trail 'tile COMMiSsioner of 73ankinf-,, followinc which the bank's officers (li " °70red that the authori ty received from the State commissioner appears t° /DC in conflict with that of the Secretary of the Treasury from whom a 1 licen..?'e to resume operations has not been received; that tbs.,- bank is also lalleervn t 1 of its rights with referee to transactin,2; business with the .0ede rdu. deserve Bank of Dallas as a reither bank; and that its directers believe the best course of action is to retire immediately from membership the -20(lera1 Reserve System. • Xames moved that, in view of the violation by the bank of the On 02 the executive order of 1:arch 10, 19`,Y0, it be cited to gam villY its rwriaershin in the federal 1Zeserv-e Jystem should not be l'(*Zeited. ▪ 1.Tyatt called attention to the fact that, because of the unauth- oz.c, ,40a (TheninL-, the responsible officer of the bank is liable to the provided in section 4 of the LI- r,- eney r)ankinc Act of :Tarch 9, 1955 , and Or le it was suested that the question of the action to be taken is determination of the Secretary of the Treasury under the itY conferred, u)on him. The suestiori was also rude that attention or „I '4-1 State banizin institutions in Texas mih.t well be called to the .1)ellitios Provided in the Act of I:arch 9, 1936, for violations of the ..•ct 01' 91 1935, the President's prcelanations, and the executive orders 3/22/33 -9- and regulations issued thereunder, and that, in any event, it might be well to explain the situation over the telephone to the Commissioner of Banking of the State of Texas, if that has not already been done. The Secretary of the Treasury indicated that he would at once consider takinC action along the line of the latter suggestion. Attention was called to the cases which have recently come before the Board of State member banks which have been unable to meet the requirements of the Secretary of the Treasury for a license to reopen and have requested permission to withdraw immediately from membership in the Federal Reserve System, and, also, to the fact that it is apparent that the banking aut horities in some States are authorizing all State institutions to reopen their doors. It was suggested that the Federal Reserve Board in determin- g in its policy with respect to permitting the immediate voluntary withdrawal Of State member banks not licensed by the Secretary of the Treasury should take into consideration the policy which might be adopted by the Secretary the Treasury, under the authority of the proclamations of the President, in co nnection with such banks. At this point the Chairman left the meeting which continued as a fleet. of the Executive Committee. The Secretary stated that the Federal Reserve Agent at New York called htai oniC telephone this morning and advised that he had received an application for membership from the County Trust Company of New York City; that 4., 'Ile question has been raised whether it would be satisfactory to the BoEirta , lf the bank (which has losses and depreciation, other than depreciation III ecurities of the four highest grades, in the amount of 2,106,000) ehEq.Led which off such losses and depreciation to the extent of its reserves k 3/22133 •• —10- 841°1111t to •1,056,000; and that Lir. Case desired to know, before ad-visinc, te eP.Olicant of the Board's Present policy, whether the Board had rela:zed to ealY e:ctent its requirument that all banks admitted to rrEmbershiD shall of2 all :mom losses and all depreciation other than on securities ill the four hicihest grades. lir. 1:orrill stated that he had advised I:r. °else tlkat - he Board's Policy in this ratter had been discussed on several c'ee4sions and that it feels that it is important to maintain the standard t 2°1* admission and the requirements which have been applied uniformly (141'inC; recent months; also, that in transmitting this informa ti on to the -)licant bunk r. Case should stress tl.• 11'47° been u.liforLay applied. fact that these requirements The me:bers of the Board indicated their c).11ci-L'a.sence in the views expressed to 1r. Case by 1:r. I:orrill. La*. Harrison then raised the question whether in a case where a terte bank1niastit Ut ion applying for mmberahip has depreciation in ecUl‘lt ier3 in the four highest grades in such amount as to result in an 11143e'llllett of its capital, the bank should be recuired, prior to admission, t l'°:a°ve such capital impairmnt. A discussion of this cuestion developed tQe eAin.ion of the nieLbers present that any bank admitteci to rdemberzhip should 11111's 411 Wainapaired capital, and that althou:h depreciation in securities ei.Q81210(1 in the four highest grades is not reittirecl to be charged off, e:Li°1111t of such depreciation should be covered by sur-olus, undivided Q) reserves, etc., so that the capital of the bank will not be 114D4tred.. neference was then r'ade to the Board's telegram of March 14, 1933, :Zeserve Arent at Chicago advising of approval by the Board ication of the Amalgamated Trust ard Savings Ban.1-:, Chicago, '`.12 I ) 1 3/22/3 -11for membership in the 7i'edera1 Reserve System subject to 16 con- cliti°11-49 referred to in the telegram and stating that before the bank is e' ' d Ilised of the Board's approval the acen.t should obtain definite advice i‘r°111 counsel regarding the authority for subordination of the deposit of 000 made by the Analr,anated 0lothin ,Torkers of 2;.meric a, which oms 84)Proximintely ?5',L of the stock of the applicant bank. La.. Harrison referred telegrams dated Larch 16, 1.03:.:)", from the loederal reserve agent and I:Arch 21 '1033, from. Tit. Dunn of counsel for the leederal reserve bank referring to the in-l'ermation considered by counsel in connection with the opinion submitted by hill that while he has been unable to find any legal authority for the althordination aLweer.ment, it is cite possible that no objection would ever be raised to the action of the joint board of the Ilmalgamated Olothinz V0 rl'ora or Ane ice. in this respect. Iir. Harrison also read a teler;ram (late ' ( J---arch 21, 193'3, from the -2ederal Reserve ...I.L;ent at Chicago stating that, e't rleetinc), of the 2ederal reserve bank's committee on admissions with the coUnsel, consideration was Given to the authority for the subordinati0 4 ' illeludinC: the fact that, while the payers of the Chicago Toint Board Of the lizaj. camated Clothing ',Torimrs of ,Vaerica as to the control and custody 0-e Aulds are not clearly defined, it has been accustorBd for many years to ex:er el "Practically complete control of such funds, havin; subscribed to the applicant ban.:, Purchased from the bank x.desirable assets, etc.; t44t)"the author it y of the joint beard to organize the applicant b ank and to e.:'ze'rcise control over the funds of the union has not been Questioned, it Quite unlikely that any Question will be raised with respect to the ity 0, the deposit to support the investrrnt made in the stock of the bkwz. , -4"I that the cortnittoe on admissions is of the opinion that there is 529 3/22/33 -12- 4 . clanger of the authority of the joint board being disputed, and as a Practi "-ca-i- 'proposition the Federal Reserve 7,ank of ihicago would be reasonably sa:eL, -Ln admattiik; the --oolicant bank to menbership; and that approval of such action by the federal Reserve Board is recomnded. Various aspects of the Problem presented were discussed and the Secretary was requested to advise the Pecieral Reserve Agent at Chicago that upon consideration of his reconIttendation and that of the comraittee of the Federal Reserve Bank of Chicago e.°11te'lllea in the agent's teleL;rem of I:arch 21, 193:), the Federal Reserve ilaa decided to admit the .1ma1garaated Trust and Savings Bank to illetel‘811i.1.) in the -,'ederal Reserve Systen subject to the 18 conditions of inelitiez ' siliP prescribed in the Board's wire of Larch li,and that accordingly, 1113(:111 4e0ePtance of such conditions by the bank in the usual manner and corace by the bank prior to the admission to menbership with the Dart of Qoilaition ntuaber 18 which is required therein to be complied with prior to a —4'°11, the Federal Reserve Bank. of Chicago is authorized to follow the 11311„1 Drocedure and admit the bank to membership. Appr oved. Thereupon the meeting adjourne a. Cr 5-ot-6-tory. Appztvea: Gave or.
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