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588 A meeting of the Board of Governors of the Federal Reserve 8Ystera was held in Washington on Monday, March 30, 1942, at 11:30 a. PRESENT: Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak Draper 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 herein8''er r eferred to was taken by the Board: The minutes of the meeting of the Board of Governors of the Pecie„, "al Reserve System held on March 28, 1942, were approved unaniraoklskf. Memorandum dated March 26, 1942, from Mr. Wyatt, General Coun- sel, r ec°111111ending that Miss Nancy Duvall Kengla be appointed as a law clerk ln the Office of General Counsel, with salary at the rate of $2,000 the Pe Per annum, effective as of the date upon which she enters upon "°rmance of her duties after having passed satisfactorily the PhYsical examination. Approved unanimously. Memorandum dated March 27, 1942, from Mr. Nelson, Assistant 8eeret a u, recommending that James F. Hamilton be appointed as a jun°Pe t Secretary's Office on a tellorara-°r (duplicating devices) in the rY basis for an indefinite period, with salary at the rate of 589 34XV42 -2- Iti-)140 per annum., effective as of the date upon which he enters upon the Performance of his duties after having passed satisfactorily the Us ual physical examination. Approved unanimously. Letter to the board of directors of "The Manufacturer's Bank (11* Cohoesn, Cohoes, New York, stating that, subject to conditions of niembereiliP numbered 1 to 3 contained in the Board's Regulation H, the Board approves the bank's application for membership in the Federal Reserve s Yatem and for the appropriate amount of stock in the Federal ReServe 1, 40ank of New York. Approved unanimously, together with a letter to Mr. Sproul, President of the Federal Reserve Bank of New York, reading as follows: t_ "The Board of Governors of the Federal Reserve Sys0;ra approves the application of 'The Manufacturer's Bank e_ Cohoes?, Cohoes, New York, for membership in the Fedi: ztIal Reserve System, subject to the conditions prescribed t_ the enclosed letter which you are requested to forward the Board of Directors of the institution. Two copies fi,such letter are also enclosed, one of which is for your t_4 "" and the other of which you are requested to forward ru the Superintendent of Banks for the State of New York his information. ti "As recognized in the report of membership examinase°r1 and the presentation memorandum submitted by the Re1:,,ve Bank, the applicant has some serious management prob. The application has been approved with the under' at-8 clanding that the Reserve Bank will follow the situation c)selY to see that the operating methods of the bank are iiiv, ved and the objectionable practices corrected." 4 Letter to the board of directors of "The Bank of Westchester", 590 3/30/42 -3- Y°rikers, New York, stating that, subject to conditions of membership 1114111bered 1 to 6 contained in the Board's Regulation H and the following 8Pscial condition, the Board approves the bank's application for member- fl the Federal Reserve System and for the appropriate amount of t°ck in the Federal Reserve Bank of New York: 07. Prior to admission to membership, such bank, if it h's not already done so, shall charge off or otherwise. eliminate estimated losses of g14,273 as shown ln the report of examination of such bank as of December 20, 19/11, made by an examiner for the Federal Reserve Bank of New York." Approved unanimously, together with a letter to Mr. Sproul, President of the Federal Reserve Bank of New York, reading as follows: te "The Board of Governors of the Federal Reserve Sysy M approves the application of 'The Bank of Westchester', 80 17.,rs, New York, for membership in the Federal Reserve 14::enl, subject to the conditions prescribed in the enclosed Di 'er Which you are requested to forward to the Board of eetors of the institution. Two copies of such letter ar : otil also enclosed, one of which is for your files and the of which you are requested to forward to the Superin4."'-lent of Banks for the State of New York for his informa.1on. me b "As was brought out in the report of examination for Oral ershiP and in the presentation memorandum, the policies th r the aPplicant bank are still in a formative stage and e is a real need for an operating executive. Recognizhe fact that the active management should be strengthened, thg! :!;,ecisral Deposit Insurance Corporation in cooperation with th in .lisconstruction Finance Corporation made it a condition theellent to the recent consolidation that the directors of Vie:Rplicant bank would create the position of Executive po:- rresident to be filled by a qualified person whose apnielnrcptment was to be made within 90 days from the date of the which became effective December 20, 1941. The appli1°n 18 approved with the understanding that prior to 591 3/30/42 —4— umission to membership the services of an Executive Vice President satisfactory to the Federal Deposit Insurance Cor— poration and the Reconstruction Finance Corporation shall have been obtained. , "Enclosed is a letter approving the retention and oper— ' 1i°11 of branches at Mt. Kisco, New York and Larchmont, New ! :York, which you are requested to forward to the board of di— I:ectors of the applicant bank. Enclosed also is a copy of the letter for your files. "Standard condition numbered 6 has been prescribed in orde r r that its provisions may be invoked at any time in the -a„ture, if necessary, but as in other cases and in accord4.1,'" with the general authorization previously granted by re Board you are authorized to waive compliance with the until further notice insofar as the condition ap— I:L lee to funds which are given statutory preference in the 6ate of New York." In connection with the above matter, the following letter to the board of direc— tors of "The Bank of Westchester", Yonkers, New York, was also approved unanimously: th "In connection with the application for membership in pers1 Federal Reserve System, the Board of Governors of the al Reserve System approves the retention and operation b he Bank of Westchester', Yonkers, New York, after ad— y:Isplon to membership, of the branches at Mt. Kisco, New , and Larchmont, New York, the establishment of such br'' „anches having been approved by the Superintendent of Banks '!lr a , the State of New York effective as of February 29, 1940, uc[ December 20, 1941, respectively." T Letter to Mr. Clark, Vice President of the Federal Reserve Bank "Atl nt. a--a, prepared following action taken at the meeting of the Board 0114a. rell 10, 1942, reading as follows: clo "This refers to your letter of January 29, 1942, en— closing a copy of an opinion of your Counsel, regarding the rie!eification as savings deposits of certain accounts car— Ge4 bY the Georgia Railroad Bank & Trust Company, Augusta, of irgia,•in the name of the University of Georgia School edielne. 592 3/30/42 -5- "It is understood that one of the accounts in queslon consists of funds received by the University of Georgia ?hool of Medicine as donations, gifts, and bequests and that the other accounts consist of funds derived from the 1?roceeds of the sale of medical equipment and from certain fees and deposits assessed against students. It appears that under State law the Board of Regents the University of Georgia is declared to be a governmental cfsneY of the State and that all property held by it is deared to be the property of the State, except that donations, lftT, or bequests made to the University or to any branch Vision thereof are not affected by this provision of the law In view of this statute, Counsel for your bank has ex41 ' .2 1. es SeU the opinion that funds in the first account, consist11g, of donations, bequests or gifts, are not the property of 4.,I n State and may therefore properly be classified as savings cis ' 8113(3slts, but that funds in the other accounts in question, ee they constitute State funds, cannot properly be so dlas sified. 4_ "The Board of Governors concurs in your Counsel's opinwith respect to the classification of the funds contained „11 the first mentioned account. It is believed that the ille8tlon whether the other accounts involved, consisting of f_nds derived from the proceeds of sales of equipment and might also be t;°111 fees and deposits assessed on students, doubt, considerable to open is deposits savings as cia ane '"-Ls question has been the subject of correspondence besr-enYour Counsel and members of the Board's staff. Howsr-en e: ", in view of the uncertainty of the status of these funds Th. various provisions of State law and in view of our unexianding that the member bank, at the suggestion of your to-"Lmers, has transferred these funds from savings accounts now at issue, thechecking accounts so that the matter is not Board is not disposed at this time to raise any question • " respect to the action which has been taken by your bank in this matter." g 17 Approved unanimously. Letter to the Comptroller of the Currency, reading as follows: Ikbil"The American National Bank & Trust Company of Mobile, l Alabama, has applied for permission, under the provi s of Section 13 of the Federal Reserve Act, to accept ''s and bills of exchange to an amount not exceeding 593 3/30/42 -6- "at anY time in the aggregate 100 per centum of its paid uP and unimpaired capital and surplus. The Federal Re”rve Bank of Atlanta has recommended that such authoriza'talon be granted. Before acting upon the application, however, the Board will appreciate an expression of your views as to whether the condition of the bank and the character °f its management are such as to justify the grant of such aut horization "Enclosed for your information are copies of letters ciliated February 25, March 6, and March 16, from the presi4.T .nt of the national bank to Mr. Clark, Vice President of e Federal Reserve Bank of Atlanta. The letter of March t refers to copies of financial statements of certain cus, 1 ners. These are rather voluminous and for that reason :7-1/e not been enclosed. However, if they are of any interest or would be of any help we would be glad to make them avail- r Approved unanimously. Letter to Mr. Day, Chairman of the Conference of Presidents, Federals Reserve Bank of San Francisco, reading as follows: "During the joint meeting of the Presidents' Confere_ce with the Board of Governors on Monday, March 2, 1942, f‘n advised the Board that the Conference of Presidents "'ilu passed the following resolution: 'That the joint report of the Insurance Plan Committee and Standing Committee on Insurance be accepted, that the Conference of Presidents recommend the plan proposed by the joint committee to the Board of Directors of each Bank, and that the Conference of Presidents arrange a int discussion with the Board of Governors.' The Board of Governors concurs in the action taken if ztie Presidents' Conference on the joint report of the 81truslirance Plan Committee and the Standing Committee on Inaocallee, as set forth above, and it is understood that, in y,ollordance with recommendation No. 5 of the joint report, to will ask those committees to prepare a plan designed provisions of paragraph 4 of the joint rse:MrsKdceatUlsie. "It is also assumed that, in accordance with recomon "iNo. 6 in the joint report, if you have not already p 594 3/30/42 -7- SO you will promptly appoint an appropriate committo be charged with the duty of continuing the study of 6his problem, with a view to extending the operation of the self-insurance plan as far as practicable from time to time. , As pointed out in the Board's letter to you of November 31 1-941, the Insurance Plan Committee estimated that there uld be a saving of at least 250,000 a year if the Federal ve Banks were to carry their own fidelity and registered it insurance. In that letter the Board also stated that seemed to it that such a saving would be sufficient to the System's carrying its own insurance on these type 1 1. s of risks and that the Board agreed in principle with .ommittee, although it had not considered etalIC 1 ; dft a. :413 ots m_ "Since that time the Standing Committee on Insurance 7:"'Is able to obtain substantial reductions in rates from the t surance companies, both on the blanket bond and on the 147gistered mail policies. These reductions, while they are ternant and will result in considerable saving to the Sysnot, in the Board's judgment, sufficient to warrant SYsteml s continuing to purchase certain types of insurce. It understands that the insurance companies consider oitbusiness showing a loss ratio in excess of 50 per cent premium paid as unprofitable and undesirable, and that mi, he they cannot be expected to take on a contract which 50t reasonably be expected to show a loss ratio in excess Of Per cent of premium paid. It is apparent, therefore, that over a period of years the Federal Reserve Banks, if they ex15 : 7 insure risks with insurance companies, will have to It .7ct to Pay premiums amounting to twice their losses. pa, : -.s recognized that the services of the insurance comb4lee are worth something to the Federal Reserve Banks, tha4the Board does not believe they are worth the price that he to be paid for fidelity and particularly for regisedomail insurance. era]. RIn the opinion of the Board the resources of the Fed1Os esve Banks are sufficient in the light of their :lets experience during the twenty-seven years of their exma4Ince and the loss experience of the Treasury on registered ins shipments, to justify the System in carrying its own is Iriranoe on both fidelity and registered mail risks. It at ,?cognized that the exposure on currency shipments is ula e large. It should be pointed out, however, that r! Z 595 3/30/42 -8- 11.in the case of shipments of currency from Washington to the Federal Reserve Banks (which aggregated 3,830,400,000 1941, and on which the System paid insurance premiums agegating 876,608), there has never been a loss in the history ' of the System. It is true that these shipments at times .run Into many millions of dollars and that, -while the maxiamount of any one shipment to any one addressee is 1)4)000,000, shipments may converge at particular points Tid thus increase the exposure to somewhat larger amounts. Currency Shipped in large volume from Washington, where a record is kept of all serial numbers, is generally referred as 'hot' money, which criminals prefer to leave alone. r Other Shipments the exposure at any one time is of necesltY much smaller than that on shipments from Washington. "The Board feels, therefore, that the Committee api.nted to continue the study of this problem should give el!latter consideration without delay with a view to recommending an extension of the self-insurance principle to all Practicable risks at an early date. In this connection, '11e Board wishes ' to point out that since war risks are not covered by our present insurance policies, the fact that ws ad are in a war should not in any way mitigate against the f2Ptlon of a self-insurance plan. In fact, the necessity az cutting down expenses is now more imperative than ever e everY practical means should be adopted to see that the ,%el:Ises of the Federal Reserve Banks are kept at the lowest slble level consistent with the efficient operation of `Itte SYstem. to the Chairman of "I am the Board sending a copy of this letter and to the President of each Federal Reserve Bank, ta tt requesting the President to advise the Board of the action 33r his Board of Directors with respect to the recomen : mend 'ions e„,..?contained in the joint report of the insurance „ ituttees." j: i Approved unanimously, together with a letter to the Chairmen and Presidents of all Federal Reserve Banks, reading as follows: 10_, "There is enclosed for your information, a copy of a of'.rr to Mr. William A. Day, Chairman of the Conference of ;,-residents, advising him of the concurrence of the Board joi rvernors in the action taken by the Conference on the It report, dated February 20, 1942, of the Insurance ' 596 130/42 _9_ "Plan Committee and the Standing Committee on Insurance. "It will be appreciated if you will advise the Board of the action taken by your Directors on the recommendations !ontained in the joint report of the two insurance commitres, which recommendations have been approved by the Con.terence of Presidents." Thereupon the meeting adjourned. Chairman.