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358 A meeting of the Board of Governors of the Federal Reserve SYst"Ivias held in Washinpton on Friday, March 3, 1944, at 11:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Draper Evans Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairman The action stated with respect to each of the matters herein— after referred to was taken by the Board: The minutes of the meeting of the Board of Governors of the al Reserve System held on March 2, 1944, were approved unani— 111°1184. krat erg Telegrams to Mr. Paddock, President of the Federal Reserve Of Boston, Messrs. Treiber and McCreedy, Secretaries of the Fed— Reserve Banks of New York and Philadelphia, respectively, Mr. 1/441-11, P resident of the Federal Reserve Bank of Atlanta, and Messrs. klaard, S tewart, and Hale, Secretaries of the Federal Reserve Banks c>t Chicago, St. Louis, and San Francisco, respectively, stating that the 13°41'cl approves the establishment without change by the Federal 441 ' 1re Banks of St. Louis and San Francisco on February 29, by the Neral Reserve Bank of Atlanta on March 1, by the Federal Reserve 41[Ita of New York, Philadelphia, and San Francisco on March 2, 1944, kicl hi/ the Federal Reserve Banks of Boston and Chicago today, of the 359 313V44 rates -2-- of discoun t and purchase in their existing schedules. Approved unanimously. Memorandum dated February 28, 1944, from Mr. Paulger, Director or the • plvisio n of Examinations, recommending that the basic salary of Anclr( 414. Thompson, a Federal Reserve Examiner, be increased from $4,000 to '4,400 per annum, effective March 16, 1944. Approved unanimously. Letter to the board of directors of the "Miners and Merchants gs Bankti, Lead, South Dakota, stating that, subject to conditions or rtienth erehiP numbered 1 to 3 contained in the Board's Regulation H, the to ard approves the bank's application for membership in the FedOral a eserve System and for the appropriate amount of stock in the '41 Reserve Bank of Unneapolis. Approved unanimously, together with a letter to Mr. Peyton, President of the Federal Reserve Bank of Minneapolis, reeding as follows: te "The Board of Governors of the Federal Reserve SysSa i!PProves the application of the 'Miners and Merchants ?ed--“gs Bank', Lead, South Dakota, for membership in the seXal Reserve System, subject to the conditions preto red in the enclosed letter which you are requested '1''o °Mard to the Board of Directors of the institution. ia re0Aies of such letter are also enclose d, one of which to f°r Your files and the other of which you are requested of erWard to the Superintendent of Banks for the State c1!th Dakota, for his information. tra 'According to Mr. Swanson's letter of February 16 ttlrlg the application, a copy of the recent amendto the articles of incorporation with respect to the 360 3/3/44 "increase in common capital from P25,000 to ”0,000 had not at that time been received. Since an increase in capital was necessary in order to meet the eligibility lequirements for membership, it is assumed of course that be ore issuance of Federal Reserve Bank stock to the bank eenVur counsel will satisfy himself that the increase has legally effected. "Since the amount of estimated losses shovin in the rePort of examination for membership is relatively small, the ,„„ usual condition of membership requiring elimination ' ) 111 losses has not been prescribed. It has been noted, Isowever, that losses in loans were ordered charged off 'flavY.the board of directors and that provision is to be cte for the remaining amount classified." Letter to the board of directors of the "South Main State Bank", 411sto bered Texas, stating that, subject to conditions of membership numrto 3 contained in the Board's Regulation HI the Board approves the ePplication for membership in the Federal Reserve System and t°1% the belaas aPPropriate amount of stock in the Federal Reserve Bank of The letter also contained the following special comment: is it appears that the bank possesses the power to noZile and sell investment certificates, which power is nes necessarily required in the conduct of a banking busi! . It aPpears also that the bank possesses authority toga exercise fiduciary powers but does not expect to enth!e, ln fiduciary activities. Attention is called to :'ect that if the bank should desire to exercise the power ex.to issue and sell investment certificates or to corelii.;?lse fiduciary powers, it will be necessary under ; m1tion numbered 1 to obtain the permission of the 130 -rd of Governors before exercising them." . Approved unanimously, for transmission through the Federal Reserve Bank of Dallas. Letter ,o T, the Presidents of all the Federal Reserve Banks, 361 3/3/44 read; ..ug , as —4— follows: "There is enclosed for your information a copy ofa statement dated February 29, 1944, relating to the policy r04owed by the Navy Department in passing upon VT loans, Which Mr. Coolidge has asked be transmitted to all Federal Reserve Banks." Approved unanimously. Letter to Mr. F. J. Bailey, Assistant Director of Legislative Ilefere rIce, Bureau of the Budget, reading as follows. The letter was Prepare ' e ln this form after further informal consideration of the matter t 011"ing the meeting of the Board on February 22, 1944: "This refers to your letter of February 3, 1944, ;;questing an expression of views with regard to H.R. r„13, a bill 'To amend section 1313 of the Code of Law 'r the District of Columbia.' Enclosed with your letter was . a proposed report of the Treasury Department on "-Ls blii "It appears that the purpose of the bill is to avoid the .Q0 ,"'fcct of the recent case of Washington Loan and Trust V. 4 United United States (The Stitely case), decided by States Court of Appeals for the District of tuLibia, in 1 the 943, in which the United States recovered fra,roUnt of certain checks, drawn on the basis of vouchers whic"nlently prepared by a Government employee, from banks ellmo" cashed the checks on endorsements forged by such ore "The bill would amend the Code of Law of the District clumbia to make checks issued under circumstances ao t ar to those of the Stitely case payable to bearer, 1.1p0 , 1184.•Lt in similar cases in the future the loss would fall whi-1,6ne drawers of the checks rather than on the banks thaet" cash them. The opinion in the Stitely case indicates Of existing law the loss would fall upon the drawer illz the checks if the agent empowered to sign the checks, torr,'"eead of another employee of the drawer, commits the 'gerY. It seems to the Board that it is equitable, in 362 3/3/44 -5- rcumstances similar to those existing in the Stitely ease/ that the loss should fall upon the drawer of the ellecks even though it happens that the employee respon!lble for the fraud is not the agent empowere to sign d Tale checks. "The proposed amendment is identical with the amendlart the Negotiable Instruments Law which has been n,0,4pted in the States of Idaho, Illinois, and Montana, gmiit is noted that the Chief Justice of the United ' i a Lss Court of Appeals for the District of Columbia, 1; . 1 his opinion in the Stitely case, stated that, in the ght of present day conditions in the District of Cothere is much to be said for the passage of a t4tstl, . d ment to the Negotiable Instruments Law in lTrE:7, In the circumstances, the Board of Governors feel the change in the law proposed by H.R. 3513 is an NuttVole bill. one and therefore favors the enactment of the "u 'l, Approved unanimously, together with a letter to Honorable D. W. Bell, Under Secretary of the Treasury, transmitting a copy of the above letter. Thereupon the meeting adjourned. 44:!e_AArp,t) h;!4. Chairman.
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