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A meeting of the Federal Reserve Board was held in ';irashington on Saturday, March 4, 19253, at 12:05 a. in. PRIa.11TaTT: Mr. Mr. Mr. Mr. Mr. Mills, Chairman Meyer, Governor Hamlin Miller Rums Morrill, Secretary Harrison, Assistant to the Governor Wyatt, General Counsel Golienweiser, Director, Division of Research and Statistics Mr. Smead, Chief, Division of Bank Operations. Mr. Mr. Mr. Mr. The proposed letter to the President urging that a nationwide bank holiday be declared, referred to in Governor Meyer's telephone conversation with secretary Mills while the latter was at the 'Alit° House, and to which a Postscript referring to the resolution adopted by the Executive Committee the board of directors of the Federal Reserve Bank of Chicago, had been added, was considered, the letter reading as follows: "Referring to your letter of March 2, 1933, and subsequent conversations, the Federal Reserve Board has been in session again this evening reviewing the latest reports of developments. The situation as reported from Chicago has reached the point of extreme tension, with prospects that by the emi of banking hours tomorrow the gold reserves of the Federal Reserve Bank of Chicago will be dangerously depleted. Representative bankers are assembled there tonight and have requested that a national holiday be proclaimed as the only method they loam of dealing with the im-Ediate exigency with thich they are confronted. "There is the board New York, itself as enclosed a copy of a resolution adopted by of directors of the Federal Reserve Bank of now in session. This resolution speaks for to the New York sitlation. "Similar conditions are developing rapidly in other Federal reserve districts. "The Federal Reserve Board has considered two methods of dealing with this emergency, one by execut ive order and the other by joint resolution of Congress. The 3/4/33 -2"Senate having adjourned far the day, the issuance of an executive order seems to be the only alternative to meet the immediate situation. A form of executive order is enclosed for your consideration. "The Federal Reserve Board feels that it cannot too strongly urge that the situation has reached a point where ionediate action is necessary to prevent a banking collapse. "P. S. Since this letter was dictated, there has been communicated to us, by telephone, a resolution adopted by the Executive Committee of the Federal Reserve Bank of Chicago, now in session. A copy of this resolution also is enclosed." Mr. Hamlin moved that the proposed letter be sent to the White aouse. After some dismission, Er. Hills said that he would like to have the following statemsnt noted in the minutes: "The Attorney-General holds that the authority under the Trading with the Enemy Act is of the thinnest possible kind and at most there is the barest color of authority and that he does not believe the President can do it without the agreem3nt of the President-elect, to be followed by a validating Act by the Congress. I think it should be further noted that it was my understanding when. I left the President ten minutes ago that Governor Roosevelt felt that in view of the information he had from New York that he did not see the occasion for him to request a national holiday, or, indeed, to a.ssurazt joint responsibility for it. I think therefore that in view of the opinion given by the Attorney-Gereral that I do not see how the President can. act on the recommendation of the Board tonight unless the whole question is to be reopened. I don't differ with the other merbers of the Board on the practical situation as it exists now at midnight. There is no formal opinion from the Attorney-General." Mr. Eiller called attention to the contents of the letter of Larch 2 received from tie President, in which the President stated that "If it 18 the view of the Board that these powers (referring to the emergency " 1:)12 1"8 under Section 5 of the Trading with the Enemy Act as amended) should 3/4/33 -3- be exerted I would be glad to have your recommendation accompanied by a form Of proclamation, as it would seem to me it should be issued by MB before banking hours tomorrow morning;' and said that, while the President was familiar with the developments that had taken place, the Dpard had not answered the letter in writing and he felt that it should do so. /a'. Mills stated that "last night (Thursday) I informed you that the Attorney-General advised the President not to issue such a proclamation and on the basis of that report of mine you decided it was unnecessary to answer the letter. didn't answer the letter last night or this morning. V,re The Attorney-General didn't think it advisable to issue that proclamation under all the circumstances." la'. Wyatt then said that "earlier in the evening (Thursday) the Attorney-General asked MB to convey to the Secretary of the Treasury the mes- sage that he had considered the Trading with the Enemy Act last evening about 8:30 and that he considered it was sufficient to justify the President in actilrb' if he considered the emergency great enough." la'. Mills replied that "later that evening the Attorney-General advised me that in his opinion he was not justified in acting under the Trading with the Enemy Act and I so reported to the Board last night." Governor Meyer stated that "the question of legal authority is one thing and the question whether you will act aereement with the President-elect is another thing." or without Mr. Mier referred to the contents of the proposed letter to the President, and la'. Mills stated that he had not objected to the letter but that he wanted to call attention to what ha e happened Thursday. 1,:r. Hamlin pointed out that the meMbers of the Board had been advised that on Thursday evening in Secretary Mills' office the ,.ttorney-General had dictated a form of proclamation for the President to sign, and that it was after infornation was received that the PresidentWould not assume joint responsibility that the Attorney-General ex- 3/4/33 Pressed the opinion that the President would not be justified in acting Under the Trading with t'nf3 1.:nemy moved to strike out the words "referring- to your letter Mr. ot ::arch 2 and subseeuent conversations" in the proposed letter because he felt that the letter was not in response to the President's letter o-r! _ --lrch 2. 1.7r.lin stated that he did not object to the anendment and moved that the letter as amended be sent to the President imrediately. Thereupon, without objection, the change was agreed to and the proposed letter, as • aznended, was unanthously approved. .Zeference was then made to the ra-o--)osed draft of a ratifying resoilltion to be adopted by the Congress which was not expressly referred to in tile letter. Mr. Mills thought it would be of no use to send the ratifying lesolution, and the Board decided not to transmit it. ' Thereupon Governor Meyer signed the letter, and at 12:30 a. in. sent it by his secretary (Lir. "fahy) to the ;:ihite House. The letter in its final farm read as follms: "The federal Reserve 13eard has been in session again this evening reviewing the latest reports of developments. The situation as re.eorted from Chicago has reached the point of extreme tension, with prospects that by the end of banking hours tomorrow the gold reserves of the Federal Reserve Bank of Chicago will be dangerously depleted. Representative bankers are assembled there tonight arfl have requested that a national holiday be proclaim d as the only method they lam of dealing with the imilvdiate exigency with which they are confronted. "There is the Board New York, itself as enclosed a copy of a resolution adopted by of Directors of the Federal Reserve Bank of now in session. This resolution speaks for to the New York situation. ''Similar conditions are developing rapidly in other Federal reserve districts. 3/V,53 di -5"The Aderal. Reserve Board has considered two methods of dealing with this emergency, one by executive order and the other by joint resolution of Con-,ress. The Senate having adjourned for the day, the issuance of an executive order seems to be the only alternative to meet the immediate situation. A form of executive order is enclosed fel. your consideration. "The Federal Reserve Board feels that it cannot too strongly urge that the situation has reached a point where trimdiate action is necessary to prevent a banking collapse. "P. S. Since this letter was dictated, there has been cormunicated to us, by telephone, a resolution adopted by the Executive Committee of the :Tederal Reserve Bunk of Chicago, now in session. A copy of this resolution also is enclosed." The -:)roposed form of executive order enclosed for the consideration Of the President was as follows: "WITE.ItAS the nation's banking institutions are being subjected to heavy viithdra.wals of currency far hoardinL,-; and "WHEREAS there is increasing speculative activity in foreign exchanges; and "WIEREAS these conditions have created a national emergency in which it is in the best interest of all bank depositors that a period of respite be provided with a view to preventing farther hoarding of coin, bullion or currency or speculation in foreign exchange, and permitting the application of appropriate measures for dealing with the emergency in order to protect the interests of all the pe °pie; and. "IIILREAS it is provided in Section 5(b) of the Act of October 0, 1917, as iended, that 'The President may investigate, regulate, or prohibit, under such rules and. re,sulations as he may prescribe, by means of licenses or otherwise, any transactions in faceign exchange and. the export, hoarding, melting, or ea.rmarkings of gyld or silver coin or bullion or currency * *t; and "IiMIIE.AS it is provided in Section 16 of the said Act that 'Ilhoever shall willfully violate any of the provisions of this Act or of any license, iule, or regulation issued thereunder, and whoever shall willfully violate, neglect, or refuse to comply with any order of the President issued in compliance \ 3/4/33 -6"i.ijth the provisions of this Act shall, upon conviction, be fined not more than :,;10,000, or, if a natural "Person, imprisoned for not more than tan years, or both * * **; "NO, TEEREFORE, pursuant to the authority granted by said Act, I hereby order, direct and declare that: "1. from Saturday, the fourth day of Ihrch, to Tuesday, the Seventh day of I:arch, 1:ineteen Hundred and Thirty Three, both dates inclusive, there shall be mintained and observed throu ,hout the United. States of America a bank holiday far all of the purposes hereinafter set forth; "2. During said holiday, no banking institution as hereinafter defined shall pay out, export, earrark, or permit the withdrawal or transfer in aay manner or by any device whatsoever of any gold or silver coin or bullion or currency or take any other action which might facilitate the hoarding thereof; nor shall any such banking institution pay out deposits, make loam or discounts, deal in foreign exchange, or transact any other banking business whatsoever. 93. Upon the expiration of said holiday and. until otherwise ordered by the President of the United Litates, such banking ins ti tut ions may pay out, export, earmark or permit the withdrawal or transfer of :old or silver coin or bullion or airrency, or deal in foreign exchange to such extent as may be permitted by license or otherwise under regulations issued by the Secretary of the Treasury with the approval of the President. "4. The Secretary of the Treasury, with the approval of the President, is authorized and empowered to prescribe such reallations as he may find necessary to carry out the purposes of this order. "5. The term *banking institution, as herein used shall include all federal reserve banks, national banking associations, banks, trust companies, savings banks, building and loan associations, credit unions, or other Corporations, partnerships, assoc iati oils or persons engaged in the business of receiving deposits, raking loans, discounting business paper, or transacting any Other farm of banking business. The ',alite House March , 1933." -7- Jr ills stated that the Senate would not neet until 10:30 a.m. 1:a1ch 4; that the Senate majority leader, Senator itob ins on, would not be there, and that it would be practically useless to attempt to get les:;islation Saturday morning. Goveinor Leyer's secretary (Hr. Fahy) returned to the office shortly after one a. m. and reported that, when he arrived at the „lite 11°11se, he was informed that the President had retired at 12:06 a. ra., and that the attendants there hesitated to disturb him. telephoned to :a-. ..?inally, however, they Richey, one of the President's secretaries, who author- ized them to deliver the letter to the President at once. Mr. reported that at 1:00 a. Ia. Mairrran Stevens of the Pedera.1 iieserve Sank of Chicago, talking over the Ion: distance telephone, "The banks have already made a demand on. us .. the big banks will be here at 8:30 to take cold for the amount of the Federal reserve notes that they have. One bank has rade a demand for ;73,000,000 and the other banks all say that they are going to do the same thing with their 2ederal reserve notes. shat I meant in my previous conversation was that it will take all the :pld that we have above our recuired reserves of 40,'). Vie have in gold coin and in :old certificates somewhere around •:;225,000,000. "Jo have a little less than .::50,000,000 of -:old coins and we have about :220,000,000 including what the Agent has of gold certificates and we would have to figure just what we have to put up in governments to release the gold to get down to our 40;') basis or whatever basis the Board agrees upon. Vie haven't got all these figures now. I think the primary reason they want the :old is that they are very much incensed about the :. (old going to Hew York. They want to keel) the opld in this district instead of letting it (2,-o (3.ecIn there. I take it they feel that this gold should be here instead of being sent darn to Hew York. I think that is their main reason. It is not because of calls to any such extent for gold, I think, that they are doing this. You have -0"probably heard something about a 40,000,000 transaction at New York." 14r. Morrill added that, at this point, 'Mr. licIrgT entered the conversation and said: "Here is what I understand about redeening Tederal reserve notes. They are redeemable in gold coin at the Treasury and in gold or lawful money at the Federal reserve banks. ',/e would not have enough lawful money to redeem what tlia.y are talking about. Instead of the gold coin being Paid out I llink the gold certificates would meet the recuirement if that would maim any particular difference. Vie have about )220,000,000 gold certificates here and we would have about 200,000,000 of free gold including these certificates. The 1st National wants the %373,000,000." tried to reach Governor ?inc hot of Pennsylvania by telephone at his Washington residence with the view of discussing with htm the question of a bank holiday in Pennsylvania, but was unsuccessful. In the meantime, Counsel for the federal Reserve 1.3an:,: of Philadelphia had been in touch with the Attorney-General of Pennsylvania, who, in turn, had tel:en the matter up with other Jtate of endeavorinc; to reach Governor Pinchot. tele Phone and they, too, were Governor I:eyer talked over the with Governor ..Thite of Ohio at the Layflower Hotel, and with Gelrernor Herring of 1417a at the Willard Hotel regarding the banking aituation and the possibility of declaring bank holidays in their respective States if the Governors of New York and Illinois decided to act. At 2:22 a. m. La*. Fills reported that he had received information 1414 'Len. indicated that, in all probability, the Governozof Illinois and 1\re-7 , fork would declare bank holidays in their respective States. At 2:45 a. in. Pr. Stevens of Chicago advised over the long distance tel that a proclanaidon was being drafted which it was e:,:pected that 3/4/33 -9- the Governor of Illinois would sign, providing far a R - ill legal holiday on Saturday with the possibility as to Monday, Tuesday and Wednesday, that the amount of withdrawals would be restricted to not exceeding 10;1). At 3:00 a. in. Mr. Hamlin moved that the Chicago bank be instructed to close if the Governor declared a holiday. Mr. I:iller suggested that the Federal Reserve Bank be advised that the Board assums that the bank will close iln1 ess it has assurance that there is no need for closing by the clearing house banks of Chicago. J'ames thought it would be better for each bank to work out its cvn decision. Mr. Miller then suggested that each bank be advised that, if in ita iudent it is advisable to close, the Board will interpose no objec- tion. At 3:10 a. in. Governer Harrison advised over the long distance telePhone that a legal holiday lasting through Monday Trill be declared by the Governor of New York, and that, in the ircums c tune es, the Federal Reserve 84111c of New York will close today. At 3:20 a. ra. Chairman Stevens advised that a legal holiday will be d•eolared, by proelaration of the Governor of Lllinois, at least for 84.411‘claY with the possibility of a restriction as to withdrawals of deposits OA 1:011daY and Tuesday, and that in the elb eIns tam es, the 2ederal Reserve aalik of Chicago will close today. Thereupon the Board adjourned, with the understanding that rembers c`r its staff would communicate the developments in the situation to the 4°IreraQrs of all the Federal reserve banks (other than Chicago and New York), 3/4/33 -10- and would point out to them the advisability of considering what action they Should take in order to protect their situation in view of the declarations of bank holidays in New York and Illinois and the consequent closinc, of the 2ederal Reserve Banks of New York and Chicago. APPr Oiled: Gay • Memorandum of the Secretary for the Minutes of the Federal Reserve Board. On March 4 and also on March 5 and 6 the members of the Federal Reserve Board were in their offices and participated in frequent conferences, including an informal conference arranged by Secretary Woodin for March 5 at which Treasury officials and others were present, regarding the developments in the banking situation and various methods of coping with it, but held no formal Board meetings. During the morning of March 4 the Governor received the following letter from President Hoover which he brought to the attention of the other Board members informally: "Hon. Eugene Meyer Federal Reserve Board Washington, D. C. My dear Governor Meyer: I received at half past one this morning dated March 3rd. I must assume that letter your was written on the basis of informaletter this by you prior to 11.30 o'clock last received tion night for the reason that before your letter was sent you had certain information as follows: a. At 11 o'clock lest night the Presidentelect had informed me he did not wish such a proclamation issued. b. The Attorney General had renewed the which he had already given to the opinion same Board that the authorities on which you were relying were inadequate unless supported by the incoming Administration. c. That groups of representative bankers In both Chicago and New York, embracing members of the Board of Directors of the Federal Reserve Banks 61,r)ri 1 4 1P.:10,̀ -2 in those cities, were then in conference with the governors of the states of Illinois and New York, and that the governors of these two states were prepared to act if these representative groups so recommended. It appears that the governors did take action under their authorities, declaring a temporary holiday in these two critical states, and thus accomplishing the major purposes which the Board apparently had in mind. In view of the above I am at a loss to understand why such a communication should have been sent to me in the last few hours of this Administration, which I believe the Board must now admit was neither justified nor necessary. Yours faithfully, HERBERT HOOVER" In the evening of March 5, the President, after conrerring with Secretary Woodin, the 41ttorney General, and others, decided to issue a proclamation declaring a nation-wide bank holiday from March 6 to March 9, inclusive. The proclamation, the form of which was made available to the press about 11.30 p.m., is as follows: "WHEREAS there have been heavy and unwarranted withdrawals of gold and currency from our banking institutions for the purpose of hoarding; and "WHEREAS continuous and increasingly extensive speculative activity abroad in foreign exchange has resulted in severe drains on the Nation's stocks of gold; and "WHEREAS these conditions have created a national emergency; and "WHEREAS it is in the best interests of all bank depositors that a period of respite be provided with a view to preventing further hoarding of coin, bullion or currency or speculation in foreign exchange and permitting the application of appropriate measures to protect the interests of our people; and RA'0 - 3- "WHEREAS it is provided in Section 5(h) of the Act of Cctober 6, 1917 (40 Stat.L.411) as amended, 'That the President may investigate, regulate, or prohibit, under such rules and regulations as he may prescribe, by means of licenses or otherwise, any transactions in foreign exchange and the export, hoarding, melting, or earmarkings of gold or silver coin or bullion or currency ***'; and "WEEREAS it is provided in Section 16 Of the said Act 'that whoever shall willfully violate any of the provisions of this Act or of any license, rule, or regulation issued thereunder, and whoever shall willfully violate, neglect, or refuse to comply with any order of the President issued in compliance with the provisions of this Act, shall, upon conviction, be fined not more than 0_0,000, or, if a natural person, imprisoned for not more than ten years, or both;*'; "NOW, THEREFORE, I, FRANKLIN D. ROOSEVELT, President of the United States of America, in view of such national emergency and by virtue of the authority vested in me by said Act and in order to prevent the export, hoarding, or earmarking of gold or silver coin or bullion or currency, do hereby proclaim, order, direct and declare that from Monday, the sixth day of March, to Thursday, the ninth day of March, Nineteen Hundred and Thirty Three, both dates inclusive, there shall be maintained and observed by all banking institutions and all branches thereof located in the United States of America, including the territories and insular possessions, a bank holiday, and that during said period all banking transactions shall be suspended. During such holiday, excepting as hereinafter provided, no such banking institution or branch shall pay out, export, earmark, or permit the withdrawal or transfer in any manner or by any device whatsoever, of any gold or silver coin or bullion or currency or take any other action Which might facilitate the hoarding thereof; nor shall any such banking institution or branch pay out deposits, make loans or discounts, deal in foreign exchange, transfer credits from the United States to any place abroad, or transact any other banking business whatsoever. "During such holiday, the Secretary of the Treasury, with the approval of the President and under such regulations as he may prescribe, is authorized and npowered (a) to permit any or all of such banking institutions to Perform any or all of the usual banking functions, (b) to direct, require or permit the issuance of clearing house certificates or other evidences of claims apainst assets of banking institutions, and (c) to authorize and direct the creation in such banking institutions of special trust accounts for the receipt of mw deposits which shall be subject to withdrawal on demand without any restriction or limitation and shall be kept separately in cash or on deposit in Federal Reserve Banks or invested in obligations of the United States. d) A -4 re "As used in this order the term "banking institutions" shall include all Federal Reserve lx-2nks, national banking associations, banks, trust companies, savings banks, building and loan associations, credit unions, or other corporations, partnerships, associations or persons, engaged in the business of receiving deposits, making loans, discounting business paper, or transacting any other form of banking business. "IN 7,-ITNESS THEREOF, I have hereunto set my hand and caused the seal of the United States to be affixed. "Done in the City of Washington this 6th day of March 1 A.M. in the year of our Lord One Thousand Nine Hundred and Thirty-three, and of the Independence of the United (Seal) States the One Hundred and Fiftyseventh. FRANKLIN D. ROOSEVELT By the President: CORDELL HULL Secretary of State" It was also announced during the evening that the President had called a special session of the Congress to meet on Thursday, March 9, 1933. 0)(Z40,76/, Secretary.
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