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702 A meeting of the Federal Reserve Board was held in Washington on Thursday, Larch 8, 1934, at 3:00 P. m. PR2SENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Black, Governor Hamlin Miller James Thomas Szymczak O'Connor Morrill, Secretary Carpenter, Assistant Secretary Bethea, Assistant Secretary Martin, Assistant to the Governor Paulger, Chief of the Division of Examinations Mr. Smead, Chief of the Division of Bank Operations Mr. Wyatt, General Counsel Er. Vest, Assistant Counsel Mr. Mr. Mr. Mr. Mr. The minutes of the meetings of the Federal Reserve Board held on February 23, 24 and 26, and March 2, 1934, were approved. The minutes of the meetings of the Executive Committee of the Fed"41 Reserve Board held on February 21 and 28, and March 1, 1934, were apProved and the actions recorded therein were ratified,unanimously. The Secretary stated for the record that Mr. James had approved the minutes of the meeting of the Federal Reserve Board held .on January 22, 1934. , The Board then considered and acted upon the following matters: Telegrams dated March 7, 1934, from Yr. Paddock, Deputy Governor (3f the Federal Reserve Bank of Boston, Austin, Chairman of the Federal Reserve Bend of Philadelphia, and Er. Wood, Chairman of the Federal Reserve B44k of St. Louis, and March 8, 1934, from Mr. Hoxton, Chairman of the Ileaeral Reserve Bank of Richmond, and Mr. McClure, Chairman of the Federal Reserve Bank of Kansas City, all advising that, at meetings of the boards 703 3/8/34 -2- of directors on the dates stated, no changes were made in the banks' existing schedules of rates of discount and purchase. Without objection, noted with approval. Memorandum dated Larch 2, 1934, from Mr. Paulger, Chief of the Division of Examinations, recommending that he be authorized to negotiate with ntr. Laurence H. Tones for his employment by the Board as a Federal reserve examiner, with salary at a rate not to exceed ',4,800 per annum, effective as of the date upon which he enters upon the performance of his duties. The recommendation was approved by five members of the Board on March 7, 1934, Approved. In connection with the above there was presented a second memo1'19441411 dated March 8, 1934, from Mr. Paulger stating that Mr. Tones had eelleed to accept appointment by the Board, with salary at the rate of 4,800 per annum. Mr. Tones was appointed an examiner for all Purposes of the Federal Reserve Act, as amended, and of all other acts of Congress pertaining to examinations made by, for, or under the direction of the Federal Reserve Board, and was designated a Federal reserve examiner, with salary at the rate of $4,800 per annum, all effective as of the date upon which he enters upon the performance of his duties. Memorandum dated March 3, 1934, from Mr. Goldenweiser, Director Of the Division of Research and Statistics, recommending that Miss Helen R. DYert an employee in the division, be granted an additional thirty days lee. "of absence with pay on account of illness, beginning March 7, 1934. The „''';ommendation was approved by six members of the Board on March 7, 1934. Approved. • 3/8/34 Letter dated March 6, 1934, approved by five members of the Board, to LT. Sailer, Deputy Governor of the Federal Reserve Bank of New York, readins as follows: "Further reference is made to your letter of February 23, 1934, with rerlard to the leave of absence with pay granted to Mr. R. B. iltse, Assistant 1Janaj;er of your Buffalo Branch, and to the Board's reply of February 23. "It is understood from our telephone conversation of March 3 that because of the long and satisfactory service of Er. Wiltse as a member of the staff of the Federal Reserve Board and as an officer Of the Buffalo Branch and the purose for which the leave of absence is desired, your directors had intended that it should not be reCarded as Mr. Wiltse's regular annual vacation, which will be taken later in the year, but in addition thereto, and that it was for this reason that the mAtter was submitted to the Board in accordance with its letter of June 14, 1928 (X-6069). "In view of these circumstances, the Federal Reserve Board approves the salary Payment involved in the leave of absence of approxi1°atelY one month beginning Larch 1, 1934, granted by your directors to Lr. Approved. Letter dated March 7, 19, approved by five members of the Board, . to lir . • zt.ustin, Chairman of the Federal deserve Bank of 1- hiladelphia, readas follows: ."Receipt is acknowledged of your letter of February 27 transmattinc to the Federal Reserve Board a copy of the report of the ocial committee of the board of directors of the Federal Reserve ' tank of Philadelphia appointed to make a study of its executive Dersonel, together with memoranda used by the committee in preparine, the re-Dort. "In the Board's letLer to you of January 23, 1934, reference was made to a let,er to Governor Norris on December 13 in which the tatement was made that there was a feeling on the part of the memuers of the Board that in making recommendations for additions to the st?.ff of senior officers consideration Should be given to the desirabilitY of obtaining the services of an official who has had broad Practical experience in commercial banking. The Board has noted the report to the board of directors of the Federal Reserve Bank of P : clladelphia signed by Mr. Wayne but as it is not entirdy clear irom that report what the views of the committee were on the point referred to in the letter to Governor Norris of December 13 and your letter does not indicate the extent of the discussion by the board of f 3/8/34 -4- "directors of the report of its special committee or what consideration the board gave to this auestion it Will be appreciated if you Will advise the Board fully and transmit with your letter a copy of the minutes of the Board bearing on this question." Approved. Telegram dated March 7, 1934, approved by five members of the Board, to Mr. LicClure, Federal Ieserve 1, ent at the Federal Reserve Bank of icansas City, reading as follows: "Your letters February 28 and telegram March 3. Board approves ternporary appointment of Fred E. Allen and C. L. Bollinf:er as examiners in ,Federal Reserve Agent's department your bank at salary rate Of 2,700 each per annum, effective upon assuming duties, with understanding Mr. Bollinger will continue systematic reduction indebtedness to Springfield banks. Please advise effective dates." Approved. Letter dated March 7, 1034, approved by five members of the Board, to Case, Federal lieserve Agent at the Federal Reserve Bank of New York, l'ead inc6 as follows: ."Reference is made to Mr. Downs' letter of February 3, 1934, all1 3 attention to the adjustments made in the capital accounts c11 Of The Marine Trust Company of Buffalo, Buffalo, !Tow York. From the ,information available to the Board, it would appear that the bank adeauately provided for the depreciation in securities as shown in the analysis of the report of examination of the bank made as at the close of business July 21, 1933. "The analysis shows estimated losses of 17,395,000 in loans and discounts and 1.38,000 in miscellaneous assets, whereas the letstates that only .-7 8,400,000 of the losses in loans and mort6ages IlTre been charged off. The Board feels tlIat a bank's published s'etement should reflect as nearly as possible the true condition of its assets and it will be appreciated if you will advise the B°ard as to what steps have been taken to effect the charge-off or eixmination of the remainin7 assets classified as losses. "It will be appreciated if you will advise also as to the progress the bank is making in the liquidation of loans secured by stock of the Marine Midland Corporation." Approved. Letter dated March 7, 1934, approved by live members of the Board, 7CP 3/8/34 -5- to /4r. Williams, Federal Reserve Agent at the Federal Reserve Bank of Cleveland, reading as follows: "Reference is made to your letter of September 23, 1933, recommending approval of the proposed plan of the 'Peoples-Pittsburgh Trust Company', Pittsburgh, Pennsylvania, for the dissolution of its wholly owned subsidiary, Century Securities Corporation of Delaware, which plan contemplates, among other things, the placing Of 11,446 shares of the bank's own stock now held by that corporation with three trustees to be sold for the benefit of the bank as and when a market can be found. "It is noted that the bank has held the 11,446 shares of its own stock through this subsidiary for more than six months, which constitutes a violation of the spirit and purpose of section 9 of the Federal Reserve Act, and under the proposed plan the bank will continue to own such stock through a trusteeship. The Board, of course, cannot approve the holding by a bank of its own stock but in view of your statement that the adoption of the plan for the dissolution of this subsidiary will result in substantial progress being made toward the adjustment of desired corrections in the condition of the bank, and that substantial compliance with requirements made by the Board in the recent past will be obtained, the Board will interpose no objection to the transaction providing the stock of the subject bank to be placed with the proposed trustees is disposed of within six months. "The analysis of the report of examination of the bank as of April 29, 1933, indicates that 4,407 shares of the bank's own stock were held as collateral to loans and, if you have not already done SO, it is requested that you ask the bank to eliminate such loans from its assets or obtain other security therefor as soon as possible. "You are requested to have the subject bank report to you every sixty days as to the progress made in disposing of the stock to be held by the trustees for the benefit of the bank and in eliminating the loans secured by the bank's own stock. It will be appreciated if You will keep the Board advised as to the progress made by the bank in this connection. "The information submitted with the analysis of the report of examination as of April 29, 1933, discloses that the bank has not charged off all of the losses required by the State banking authorities) and it is evident that further corrections in the condition of the bank should be made. In view of your recommendation that no further action be taken at this time, the Board will defer this Matter uutil after another examination has been made of the bank. It IS assumed that your examiners will participate in such examination, and the Board will be pleased to receive an analysis of such examination, together with your recormendations in the premises." Approved. Letter dated March 7, 1934, approved by five members of the Board, 707 3/8/34 -6- to Mr. Peyton, _Federal Reserve Agent at the l'ederal iIeserve Bank of Minneapolis, reading as follows: "Receipt is acknowledged of Mr. Swanson's letter of February 21, 1934, supplamenting his letter of February 5, 1934, reporting on the reserve deficiency record of The First National Bank of Rib Lake, Rib Lake, Wisconsin, since October, 1932, and stating that the bank has been deficient in its required reserves for ten consecutive periods from September, 1933, through Tanuary, 1934. It is noted that a letter has been sent to each of the directors of the bank calling attention to the reserve requirements and the penalties for continued reserve deficiencies. In view of this, the Board will take no action in the matter at this time, other than to forward copies of Mr. Swanson's letter to the Comptroller of the Currency for his information. It is understood from Mr. Swanson's letter that if this deficiency continues through the month of Febrtary, 1934, the bank will be reported to the Board as one which may rewire corrective action." Approved. Letter dated March 7, 1934, approved by four members of the Board, to 1:fi,. Walsh, Federal Reserve Agent at the Federal Reserve Bank of Dallas, reading as follows: "Reference is made to your letter of Tanuary 16, 1934, regarding the transaction whereby on December 18, 1933, the Central State Bank Of McKinney, Texas, a member bank, assumed the deposit liabilities of the Security State Bank, Blue Ridge, Texas, a nonmember bank. "The Board has noted the information submitted with your letter from which it appears that the deposit liabilities assumed by the Central State Bank were offset by cash deposited with the Central State Bank by the Security State Bank, and that the transaction has resulted in no material change in the general character of the assets ! (fs or broadening in the scope of the functions exercised by, the member institution within the meaning of the general condition under which It was admitted to membership in the Federal Reserve System. The Board, therefore, will interpose no objection to the transaction, Provided that no branches were acquired by the Central State Bank in the transaction and that your Counsel is satisfied as to the legal aspects of the matter. "Please advise the Board definitely in these respects." Approved. Letter dated March 7, 1934, approved by five members of the Board, to 14r. Newton, Federal Reserve Agent at the Federal Reserve Bank of San 708 3/8/34 Francisco, reading as follows: "Receipt is acknowledged of Mr. Sargent's letter of February 15, 1934, inclosing analysis of report of a credit investigation of the Bank of Orofino, Orofino, Idaho, conducted by one of your examiners as of the close of business October 23, 1933. In this letter the Board's opinion is asked as to whether or not the holding by the bank of certain shares of stock constitutes a violation of the conditions of membership. "The conditions of membership under which the bank was admitted to the system contain no reference to the purchase or holding of stocks, and it would not appear that the purchase of the stock in question would cause such a change in the general character of the bank's assets as would tend to affect materially the standard maintained and reauired as a condition of membership, thereby constituting a violation of condition of membership numbered two. As you know, however, the Board feels that stocks are not suitable for the investment of funds of coatiercial banking institutions, and the regular conditions of membership now prescribed prohibit the purchase of stocks by member banks except with the permission of the Federal Reserve Board. "In this connection, it appears from a response to an inquiry from your office that the Idaho Banking Department insists that State banks should not make this type of investment. The Board expects State member banks to 0o-induct their operations in accordance With the laws of the States in which they are operating and the regulations and requirement of the appropriate state authorities. s It is suggested that you advise the bank accordingly and request the bank to dispose of the stock. "Please advise the Board as to the developments in the matter." Approved. Letter dated March 7, 1934, approved by five members of the Board, to H. R. Stone, President of The First National Bank of Belfast, L:aine reading as follows: "This refers to your undated letter requesting advice as to Whether The First National Bank of Belfast, under the permission anted to it by the Federal Reserve Board in its letter of November r: 1933, authorizing the bank to act as trustee and in certain other 1.41ciarY capacities 'only in the specific trusts in which the City aul°nal Bank, Belfast, Maine, had been appointed and was acting on the date The First National Bank of Belfast was authorized to coramence business by the Comptroller of the Currency', may act in two trusteeships as to which the City National Bank haa been appointed by the court but as to which it was not acting on the date The First National r 709 3/8/34 -8-- "Bank of Belfast was authorized to commence business. "While it is apparent from the information you have submitted that the City National Bank had been appointed to the trusteeships referred to above prior to the time The First National Bank of Belfast was authorized to commence business, it does not appear from such information that the City National Bank had at that time qualified to act under such appointments or was acting in aay way in the administration of such trusts. In the circumstances, The First National Bank of Belfast is not authorized under the permission granted by the Board on November 9, 1933, to act in those trusteeships. I regret that the pressure of other patters of urgent importance arising under the Banking Act of 1933 has prevented an earlier reply to your letter." Approved. Letter dated Larch 7, 1934, approved by five members of the Board, to "The Merchants National Bank of Terre Haute", Terre Haute, Indiana, reaAi '"ag as follows: "Reference is made to your application for permission to exercise fiduciary powers under the provisions of Section 11(k) of the Federal Reserve Act. "The Federal Reserve Board has considered this application and authorizes your bank to act, when not in contravention of State or local law, as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates of lunatics, or in any other fiduciary capacity in which 'State banks, trust companies or other corporations which cane into competition with national banks are permitted to act under the laws of the State of Indiana, only in the specific trusts in which the Terre Haute Trust Company, Terre Haute, Indiana, had been appointed and was acting on the date The Merchants National Bank of Terre Haute was authorized by the Comptroller of the Currency to commence business, the exercise of all such rights to be subject to the provisions the Federal Reserve Act and the regulations of the Federal Reserve Board. f Action has been deferred upon your application for full „.,.11.1ciarY powers until an examination of your institution has been 'ucloe and a report thereof is available. "It is understood that you intend to take over only such trusts from the Terre Haute Trust Company as are desirable. In pursuance of this policy, the Board feels that you should carefully scrutinize the c ondition of any of the trusts now held by the Terre Haute Trust CamPanY which may be tendered you, and that you should not accept any of 811oh trusts which through their assumption may be detrimental to your ins titution." Approved. 3/8/34 -9Letter to Lir. Austin, 7edera1 Heserve ..zent at the Federal Re- serve Bank of Philadelphia, reading as follows: ."Receipt is ack,lowledged of your letter of February 21, 1934, ,libmittinp; for the consideration of the Board the plan of the 1-.Tinceton ilaTik and Trust Company, Princeton, New Jersey to adjust its capital structure by a reduction in common capital and the sale of preferred stock to the Reconstruction Finance Corporation. "It is understood that the Princeton Bank and Trust Company c,.s scheduled for an examination in the near future and that action y the Reconstruction Finance Corporation on the purchase of preferred stock in this institution will be deferred until such examination has been completed. "The Board, therefore, will defer consideration of the proposed capital reduction until such time as a current report of examination is available, at which time it will be appreciated if, in submitting the usual analysis thereof to the Board, you will again brinz, the matter of the proposed capital reduction to its attention." Approved. Letter dated March 6, 1934, approved by five members of the Board, tofr,Williams, Federal Reserve Agent at the Federal Reserve Bank of leveland, reading as follows: "Reference is made to Assistant Federal Reserve Agent Fletcher's letter of February 3, 1934, recouriending favorably the plan of re°Fanization of The Citizens Banking and Savings Company, Conneaut, ,u_1110, to resume operations as a member bank in the Federal Reserve stem. In connection with such plan it is noted that the bank has reduced its common capital stock from $125,000 to 062,500, and increased its coiaLlon capital stock to $100,000, proposing to sell local,500 par value new common stock at a premium of $7,500, the am ,t°111°A of the premium to be credited to surplus, and to sell at par the 1- econ3truction Finance Corporation .50,000 par value capital ebentures. The plan also provides for the use of the released capital funds, together with approximately a62,000 representing _LI? amount of waived deposits, in eliminating substandard assets 17" u securities depreciation of approximately $218,400, and augment-L-11g the surplus and undivided profits in the amount of approximately 6,100. "In connec-A.on with the proposed plan it appears that the bank has f.0 reduced its capital below the amount required for the organiza;,1 n of a national bank, contrary to the provisions of the Federal ;;eeerve Act. However, in view of the fact that the bank is in the l(is of a conservator and it is contemplated that its paid up capial , tal will be increased to the reauired amount before the conservator- 3/8/34 -10- "ship is terminated, the board, in accordance vdth your recormendation will raise no objection to the proposed reorganization and to the reduction of he bank's canital stock provided that before the conservatorship is terminated there is actually paid in to the bank an.amount of new camital sufficient to increase the paid 111) unimpired capital stock of the institution to at least .100,000, and With the further understanding that the reorganization be effected in accordace with the plan approved by the Superintendent of :- =3anks, bY your office, and by your counsel." Approved. Letter to :Va.. O'Connor, Comptroller of the Currency, readinrz, as follows: accordance with your recommendation, the Federal Reserve Board"In app..oves a reduction in the common capital stock of 'The ll( TI National Bank of Seymour', Seymour, Texas, from 50,000 to Pursuant to a plan which nrovides that the bank's capital shall be increased by .“25,000 of preferred stock to be sold to the Re construction Jiwmce Corporation and that the released capital, tecether with y17,500 from undivided profits, shall be used to !liminate approximately 35,000 of undesirable assets and to estab, ish a surplus account of :7500 all as set forth in your letter of February 27, 1934.'1 lE Approved. Letter dated T:arch 7, 1934, approved by five members of the hoard, to Connor, Comptroller of the Currency, reading as follows: "Receipt is acknowledged of your letter of February 28, 1934, egard to the proposed reduction and increase in capital of the t kational Trust and savings Bank of San Diego, aii Dieo, Caliirfnia, which was approved by the hoard December 9, 1933 in accordance with Your recommendation and subject to certain conditions as set 2rth in your letter of November 27, 1933, condition numbered two ' eadin,: as follows: 'That the shareholders or others will make a voluntary con- ribution of .-?500,000 in addition to the write-down of i 500,000 in common capital, and that no part of it shall come from the sale or liquidation of unacceptable assets.' "On December 30, 1933 and in accordance with recommendation c 4tained in your letter of Lecamber 27, 1033 the board consented the amen.dment of the foregoin,; condition to read as follows: -hat the shareholders and/or others will purchase for cash assets aggregating .:300,000, such assets to be selected by a national bank examiner and an examiner of the Reconstruction Finance Corporation, and that earnings from September to y J 712 3/8/34 -11- "'December 31, 1933 in amount of ,-;200,000 will be used to charge off a like amount of undesirable assets, but to remain the property of the bank.' "In accordance with your recommendation the Board now approves a further amendment of condition numbered two to read as follows: 'Certificates by the President or a Vice rresident and Cashier of the bank under oath and in form satisfactory to Agency Counsel stating that common stockholders of the bank have purchased for cash 300,000 face value of loss assets selected by Agency Manager and have purchased additional items of 200,000 face value classified as doubtful or loss, likewise selected by him. Said certificate shall also state that the payment to the bank for said last mentioned assets has been made in cash or by good paper, approved by Agency Manager less credits as follows: (1) Net earnings, of the bank from September 27, 1933 to December 31, 1933, and/or (2) collections from items classified either as doubtful or loss, and/or (3) doubtful or loss items secured satisfactorily to Agency Manager and so identified by him.' "It is understood from informAl discussions with your office that the last sentence of the =ended condition quoted above is intended to mean that the assets classified as doubtful and loss aggregating c,200,000, which are to be purchased by the common stockholders of the bank, will be reduced by the amounts of the credits described in clauses 1, 2 and 3 of that sentence." Approved. Telegrans dated March 7, 1934, approved by five members of the Board, to mx. Newton, Federal Reserve Agent at the Federal Reserve Bank Of San Francisco, stating that the Board has considered the applications Of the "Old National Corporation" and the "Investment and Securities both of Spokane, Washington, for voting permits under the authority Of section 5144 of the Revised Statutes of the United States, as arllended entitling such organizations to vote the stock which they own o c°11tr°1 in "The First National Trust and Savings Bank of Spokane", Spokane, W ashington, and has authorized the issuance of a limited permit to each of the applicants for the following purpose: "To act upon a proposal to change the name of such bank to " 1'st National Bank in Spokane, provided that such change of name shall be approved by the Comptroller of the Currency." 713 3/8/34 -12- The telegrams also authorized the agent to have prepared by counsel for the Federal reserve bnnk, and to issue to the Old National Corporation and the Investment and Securities Co., limited voting permits in accordance with the telegrams. Approved. Letter to Er. F. V. Grayson, Auditor of the Federal Reserve Bank Of Cleveland, reading as follows: "Receipt is acknowledged of your letter of January 31, 1934, containing suggestions and recommendations with regard to certain procedure and records in the offices of the Fiscal Agent and the Assistant Secretary of the Federal Reserve Board, which have been considered carefully and the following comments are made with reference to the paragraphs of your letter that require action: ACCOUNT CURRENT: "Instructions will be given to discontinue this report after the preparation of such report for the period ending December 31, 1933. .Pa lajlEEKEELL "A letter has been prepared requesting the Federal Reserve Bank of Richmond to furnish the Fiscal Agent with a daily statement of the account 'Federal Reserve Board - Fiscal Agent'. CITECIC ENDORSEMENTS: "The Fiscal Agent will be authorized to endorse checks deposited by him in the form he suggested. SALLRY PAM.MITS: of "It is our purpose to adopt as soon as convenient a method salarY payments to conform as nearly as practicable with the present Government practice. ASSESSNENT NOTICES: "Instructions will be given to make available to you all as3.esament notices, contracts, leases, etc., at the time of each audit. 2212gET. "A further study will be budgetu books and reports with made of the present set up of the the view to making the changes !uggested by you. 4111.11aaaj1212iL trY°ur suggestion that the 'Voucher Book' in the office of the Assistant Secretary be discontinued will be followed. The Instr the card record in that office will be given further with the view to making such modifications as will require the nlintmum number of entries. We also propose to have the entries 714 3/8/34 -13"made fram the duplicate vouchers, so that the original vouchers Will not be delayed in reaching the Fiscal Agent's office for payment. CARBON COPIES OF CHECKS: . Your suggestion that the carbon copies of checks be continued to be made for the present is concurred in. DUPLICATE CHECK: The 'Duplicate Check Agreaaent' enclosed with your letter With the necessary changes in wording appears to cover all requirements, and the Fiscal Agent will be authorized to use this form of agreement when checks are destroyed or lost. APPROVAL OF EXPENSE VOUCHERS: "A separate letter is being sent you, giving the names of those authorized to approve expense vouchers, and a copy will be furnished the Fiscal Agent for his guidance. "We wish to thank you for your suggestions and recommendations, which have been a great help to us." Approved. In connection with the statement contained in the above letter that instructions will be given to discontinue the quarterly account current after the preparation of such report for the period ending December 31, 1933, here Presented presented a memorandum from Mr. Morrill, which had been circulated_ amou.g the members of the Board, under date of February 28, 1934, Stating that it would seam advisable to amend Article VIII of the by-laws the Board, which prescribes the duties of the Fiscal Agent, by elm therefrom Section 5 of the article, which provides for the prep""i°n of the quarterly account current, and renumbering the present sections 6 and 7 as Sections 5 and 6, respectively. The suggested amendment was approved. There was presented a memorandum dated February 23, 1934, from 14011ri1 141'. l, which had been prepared in accordance with the action taken at the meeting on February 7, 1934, presenting for consideration an alliendment to Article IX of the by-laws of the Federal Reserve Board which would Provide for the countersigning of checks on the Gold Settlement 7_15 3/8/34 -14- Fund and the Federal Reserve Agents' Fund by the Secretary or an Assistant Secretary in the absence or disability of the Governor or Vice-Governor. Consideration was also given to a memorandum dated February 24, 1934, from Yr. Thames suggesting that Article IX be amended so as to provide for the countersigning of such checks by the Secretary or an Assistant Secretary In the absence or disability of the Governor, the Vice-Governor, or active executive officer of the Board. After discussion, it was decided to make no change in Article IX of the by-laws. Letter dated March 7, 1934, signed by Governor Black, to Mrs HeMan Oliphant, General Counsel to the Secretary of the Treasury, reading as follows: "Referring to your letter of Larch 1, the Board has noted with aPProval the textual changes in the plates from which bank notes ai:e printed recommended in the report dated February 16 inclosed with Your letter. The Board has some doubt as to the desirability Of retaining the words 'redeemable in lawful money' in the legend on the currency but understands that the Treasury Department desires to retain these words in order to comply with existing law. "The Board would prefer not to print any more Federal Reserve Bank notes from plates designed for the printing of National bank notes and, therefore, hopes that the report relating to the design tnd text of the new plates for Federal Reserve Bank notes, referred to the second paragraph of your letter, will be submitted at an !ar1Y date so that any future printings of Federal Reserve Bank uotes may be made from the new plates." I Approved. Letter dated March 7, 1934, approved by five members of the Board, to !Ix. O'Connor, Comptroller of the Currency, reading as follows: whi "This is in reply to your memorandum of January 17, 1934, Nn412h has specific reference to the conservator of The Garden City 0nal Bank, Garden City, Kansas, but in which you ask the Board Ildvise the various Federal reserve banks generally that if they s;81rs to do so they may continue to carry the accounts of a con; -7ator even after the redemption of the Federal reserve bank stock held bY the bank with respect to which he is acting as conservator. t;; 71_6 3/8/34 "Your letter states that the conservator of The Garden City National Bank has recent ly redeemed the bank's stock in the Federal Reserve Bank of f;ansas City and that it is contemplated that the conservatorship will soon be terminated in order that the old bank may be returned to its Board of Directors for the sole purpose of entering into a contra ct under which the remaining liabilities of the old bank Will be assumed by a newly organized bank pursuant to a plan of reorganiz ation. It is understood that your lette refer to the 'General s r cceunts' carried by conservators pursuant to the instructions issued Y your office under date of Auril 4, 1933. "Although Federal reserve bank stock may not under the law be transferred or hypothecat ed, the proceeds thereof upon surrender and cancellation in a case such as you describe may be applied by the Federal reserve bank in payment for stock issued to the new bank, if this is properly authorized; and it is usually possible to arrange to obtain the proce eds of the stock of the old bank at or about the time sock is issued to the new bank. It is not entirely clear therefore, wAY it is necessary in cases such as you describe to surre nder the stock standing in the name of the old bank prior to the organization ?I 'the new bank. Howev er, in cases in which the Federal reserve bank .is satisfied that it is necessary in the furtherance of the organizatic)n , s of a new member bank to succe ed to the business of a national ;ank in the hands of a conservato under a plan which has been activer, ly instituted prior to cancellation of the Federal reserve bank stock the old bank, the Federal Reserve Board will interpose no Objection ; 1 he continued maintenanc e of the conservator's general account_ with the Feder al reserve bank and acceptance of deposits therein for such period of time as may reasonably be reouired for the consunumtion of Plan and in no event after the completion of the organization of new bank or after the date upon which it becomes evident that the Plan will not be consummated. "Copies of this correspondence are bein,7, furnished to all Federal reserve banks for their information." t y Zr Approved. Letter dated Larch 7, 1934, approved by five members of the Board, to vnesecret arY of the 1reasury reading as follows: 7Mi3 refers to the letter dated February 6, 1934, from your flistr ative 'A lliam H. McReynolds, inviting an expression Of qu,:n of the Feder edera l lieserve Board on S. 1931, which was introal wh7';' by Senator Costigan on June 6 (calendar day, June 12), 1933, and erli i would amend Sections , 3, 4, 5, 6, 7, 8, 9, and 10 of the Act j 'An Act to establish Foetal EavirJzs depositories for depositsavings at interest with the security of the Government for repayment thereof, and for other purposes', approved June 25, 1910, as araended and supplemented. '71.7 3/8/34 -16- "The proposed bill is designed, among other things, to effect a change in the personnel of the board having supervision and control of Postal Savins depository offices End to transfer to such board certain powers now delegated to the Postmaster General. The bill would establish checking facilities under certain conditions, would increase the size of accounts which may be carried in the Postal savings System, and would authorize the governing board to fix the rate of interest which may be paid on funds deposited in the System. One of its primary nurnoses is to authorize and to reeuire Postal Savings depository offices to accept subscriptions to, and to effect Purchases and sales of, bonds issued or unconditionally guaranteed as to principal and interest by the United States. :Inasmuch as the subject is one which has not fallen within its province, the Board has not adecuate information to enable it to 1,etermine whether it is desirable to authorize and reauire Postal -evings depository offices to accept subscriptions to, and to effect purchases and sales of, Sovernment bonds. Accordingly, it does not feel prepared to express an opinion on that subject, and will confine its comment to certain provisions of the bill which it believes may adversely affect the banking, system of the United States. "It is believed that the bill, if enacted, would tend to bring the Postal Savings System into destructive competition with State and national banking institutions, and, accordingly, it is the view 01 the Federal Reserve Board that its enactment would not be in the public interest. The provision which would grant to the Governing 'c'rd authority to fix the rate of interest which might be allowed ?1 ,1 accounts in Postal Savins depository offices, and particularly e provision which would increase from .2500 to5000 the size of ec?unts which might be carried in the Postal Savings System and authorize the President, if he should find it in the public interest, to , increase from time to time the maximum balances that might be held ri Postal Savings accounts, would constitute an unwise encroachment ,Yon the field of private banking enterprise and represent a departure aal the primary purpose of the System to provide facilities for the ass of patrons who are unable to secure adequate accormodations e lsewhere. "Althow:h flexibility in the matter of fixim:, the interest rate y be desirable, the possibility of abuse of the authority to fix such rate and of consequent injury to state and national banking _It/Istitutions from resultant competition is an important objection , c) proposal to vest in the governing board the authority to prescribe the interest rate. In regard to the provision which would the size of accounts which may be carried in the System and which -cu would empower f, the President to authorize additional increases time to time, it is the view of the Board that the present 1.1. ' ation is entirely adequate to accommodate substantially all oTl the persons whom the System is intended to benefit, and that an, :increase in such limitation is unnecessary and unwise. Although the : Ystera Is to aid persons in the low income group, designed pr' 11 increase in the limitation in respect to the size of accounts r j 718 3/8/34 -1'7-- "would be of materi al benefit only to persons of the wealthier Classes and would enable them to use the System for hoarding during times of uncert ainty to the detriment of banking institutions throughout the country. The harmfu conseq uence of any such use l is clearly reveal ed by the history of the past few years, and the tendency of future legislation should be to eradicate, and not to encourage, that evil. "It is assumed that the provision of the bill which would empower the governing board, under certain conditions, to authorize Postal Savings depository offices to receive non-interest bearing checking accounts is intended to restrict the establishment of checking facilities to localities in which bankin facili g ties for checking accounts may be inadea uate, but it is not clear that this is the proper construction of the provision under discussion. On this point doubt may arise, since the bill in its present form provides that the board, if it finds the banking facilities for checking accounts inadeq uate in any locality, may authorize any Postal Savin-s deDository to receive non-interest bearing checking accounts, subject tea reason able service charge, and does not expressly limit the authority of the board to establish checking facilities in lofalities in which banking facilities for checking accounts are found to be inadequate. Theoretically, of course, the establishment by i tile Postal Savings System of checking facilities in localities lack. ng adequate bankin g facilities for checking accounts would appear to be in the public interest, but the latent danger of misuse of this Privilege, the harm which might result from an inability to require e relinquishment by Postal Savings depository offices, once the Privilege is granted, of author ity to accept checking accounts in 1 13ne event of the establishment in the same locality of adequate anking facilities by private enterprise, and the obstacles which o would confront private capital in any attempt to enter a locality ccuPied by the Government, lead to the conclusion that it would be extremely unwise to grant author ity to establish checking facilities 3-n the absence of proper safeguards and restrictions which are not contained in the proposed bill. "For the reasons stated, the Board does not believe that the Scope of operation of the Postal Savings System should be extended iii the manner proposed and, accordingly, the Board does not favor ,Ltc enactment of the bill S.1931. In this connection, the Board has been advised that in a letter to the Honorable Duncan U. Fletcher, s4airman of the Committee on Banking and Currency of the United States 2114te, under date of January 15, 1934, the Postmaster General advised the Chairman of the Committee that he believed the enactment of S.1931 ie advisable, 'as it would involve the Postal Savings System in the baakinc business and would greatly increase the cost of adminisvrationt.tt Approved. Letter to the Chairman of the Banking and Currency Committee of 719 3/8/34 -18- the Senate, prepared for the signature of the Secretary of the Treasury in response to the request contained in a letter dated February 261 1934, fran Mr. dilliam H. McReynolds, Administrative Assistant to the Secretary. The letter, approved by five members of the Board on March 7, 1934, read as follows: "This refers to the letter of February 22, 1934, from the Acting Clerk of the Senate Committee on Banking and Currency, in which a report is requested on 3.2850, entitled 'A Bill to amend section 13 of the Federal Reserve Act'. This bill would amend the third paragraph of said Section 13 so as to authorize any Federal reserve bank to discount for individuals, partnerships, or corporations, notes, drafts, or bills of exchange which are indorsed and/or secured to the satisfaction of the Federal reserve bank, in lieu Of the existing requirement that paper so discounted be both indorsed and secured. "'Under Section 13 of the Federal Reserve Act, as arended by the Act of Tuly 21, 1932, the Federal Reserve Board, in unusual aad exigent circumstances and by the affirmative vote of not less than five members, may authorize any Federal reserve bank during such periods as the Board may determine to discount for any individual, partnership, or corporation, notes, drafts, and bills of exchange of the kinds and maturities made eligible for discount for xne131ber banks, when indorsed and otherwise secured to the satisfaction of the Federal reserve bank and when such individual, partnership, or corporation has been unable to secure adequate credit acc°flimodations from other banking institutions. Pursuant to the authority of this amendment to the law, the Federal Reserve Board such discounts by any Federal reserve bank for a six months, period beginning August 1, 1932, and has renewed such authorization from time to time so that it has been in effect coni tinuouslynuously and is still in effect. Tinder this authority Federal reserve banks have discounted for individuals, partnerships, and Imporations, notes, drafts and bills of exchange in the amount of 91071,000, of which .339,000 was outstanding on February 28, 1934. 70n account of the requirement that paper so discounted be both re, - indorsed and secured it has been necessary for the Federal m.''erve banks to decline to make such discounts in cases where it eht otherwise have been possible to do so. It sometimes happens art an individual, partnership, or corporation which may be dee l ' °us of discounting paper directly with a Federal reserve bpnk : 11 furnish satisfactory indorsement of the parer to be discounted, : m satlsfactory security, but is unable to furnish both the indorseIs _nt and security; and in such cases the discount may not lawfully The Treasury Department believes that if the law should be ch—ged so as to authorize a Federal reserve bank to require V 720 3/8/34 -19"either satisfactory indorsement or satisfactory security, or both, the Federal reserve banks would be able to extend credit to individuals, partnerships, or corporations in cases where they now have no such authority; and such a liberalization of this method of affording credit to industry would seam to be desirable under existing conditions. Inasmuch as it would still be necessary after such amendment to the law for the borrowers to furnish either satisfactory indorsement or satisfactory security, it is believed that the Federal reserve banks would be adequately protected in making such advances. "For the reasons stated, the Treasury Department would favor the enactment of the bill S.2850." Approved. Letter dated March 7, 1934, to Mr. Philip Lehman, New York, New Yorks prepared in accordance with the action taken at the meeting of the Board 0n Tt rch 2, 1934, and approved by five members of the Board, reading as follows: "The Federal Reserve Board has given further consideration to Your application under Section 32 of the Ranking Act of 1933 for a permit to serve at the same time as a director of the Corn Exchange Bank Trust Company, New York, New York, a member bank, and as a Partner in the firm of Lehman Brothers, a dealer in securities, in the light of advice received through the Federal Reserve Agent at the Federal Reserve Bank of New York that the arrangement under w_hich the bank participated with the firm in accounts formed to bid ror State, county and municipal securities, has been terminated. "After the most careful study, the Federal Reserve Board has reached the conclusion that it was the intent of the Congress in lenZeting Section 32 to terminate all relationships of certain types .ae ween lt felt member banks and dealers in securities, apparently because that such relationships might tend to influence the banks' bedit and investment policies and their advice to their correspondent 2.1tke and other customers respecting investments in a manner which the Congress deemed to be incompatible with the public interest. rli.e t Board accordingly feels that it may not properly grant permits olii:nships which are actually of the kind referred ctflt 1;50 trttItIgs:e and that its authority to issue permits should exercised only in exceptional cases; for example, those which are included within the literal terms of the statute but which are actually of kind different from those at which its provisions were . directun "It appears that Lehman Brothers is engaged primarily in the ing, flotation and distribution of securities, and that thereforee the relationship covered by your application is within the L 721 3/8/34 -20"class which that sectio n was desi.zned to terminate. Accordingly, the Board is unable to find that it would not be incompatible with the public interest as declared by the Congress to grant your application, even though nothing has been called to its attention Which would reflect in any degree upon your desirability as a director of the bank, except that the relationship covered by your application is within the prohibitions of Section 32. "Copies of this letter are being sent to Lehman Brothers and Corn Exchange Bank Trust Company for their information and records." Approved. Letter dated March 7, 1934, approved by five members of the Board, to Mr. McClure, Federal Reserve Agent at the Federal Reserve Bank of Xansas City, reading as follows: "Receipt is acknowledged of Er. McAdams' letter of February 24, 1934, inclosing a copy of a letter addressed to Mr. M. D. Thatcher by Lir. Robert S. Gast, counsel for the First National Bank, Pueblo, Colorado, and a copy of Mr. NoAdams' letter to Mr. C. C. Parks, regarding Mr. Thatcher's service of the First National Bank of Pueblo, the Pueblo Savings and Trust Company, the First National Bank of Denver, and the Internationa Trust Company l of Denver. The Board understands that all of the stock of the International Trust Company is owned by stockholders of the First National Bank of Denver, and therefore, as Mr. Cast points out, the service of Er. Thatcher as a director of the International Trust Company would not came within the provisions of Sectio n 8 of the Clayton Act because of the second Proviso in that sectio n, which reads as follows: "'Provided further, That a director or other officer or employee of such bank, banking association, or trust company may be a director or other officer or employee of not more than one Other bank or trust company organized under the laws of the United States or any State where the entire capital stock of one is owned by stockholders in the other.' "It is noted, however, that LT. Gast concludes that, because Of this proviso, Mr. Thatcher's service to the International Trust j C impanY of Denver also does not fall within the provisions of Sec;on 8A of the Clayton Act. After careful consideration, the Federal Reserve Board has already come to the conclusion that this pro.v„leo in Section 8 is not applicable to the provisions of Section 8A. In this connection, see Section IV of the Board's Regulation L. "Accordingly, Mr. Thatcher's service to these four institutions would - appear to fall within the prohibitions of Section 8A, unless , Permit therefor were issued by the Federal Reserve Board. Since Board is not authorized to issue a permit covering more than three banking institutions, it would be necessary for Mr. Thatcher ° sever his connection with one of the four institutions named in ! 722 3/8/34 -21- "order to bring his service within the requirements of the Act. In short, it appears that the position taken in Mr. McAdams, letter to Mr. Parks is correct." Approved. Memorandum dated February 27, 1934, from Mr. amid, Chief of the Division of Bank Operations, recommendin7., for the reasons stated in the memorandum, that State member banks be required to furnish, at an early date, for the confidential use of the Federal reserve banks and the Board, a report showing the market or appraised values, as well as book values, of their loans and investments and of bank premises and other real estate, together with a =unary showing the effect of probable losses on their caPital accounts, and that the form attached to the memorandum be sent to State member banks as promptly as practicable and the member banks advised to make out and submit a report thereon as of March 31, 1934. The memoalso stated that, while it is not felt that any instructions should be given to member banks at this time relative to the publication of rePorts reflecting their true condition, it is believed that, beginning with some call date this year, market or appraised values should be shown in Published reports, and that directors should be required, in connection with each published report, to sign a certification similar to that recommended in the form attached to the memorandum. Approved. Governor Black referred to the action taken at the meeting on Feb'Y 23, 1934, in deferring action in connection with the salaries of certain officers of the Federal Reserve Banks of New York, Chicago, and St. Lo"4 481 4 ' and he reviewed, for the information of Yr. James, Chairman I the, °' Cozmattee on Salaries and Expenditures, the consideration which had 3/8/34 -22been Elven by the members of the Board to these matters during Lir. Tames' absence. James stated that since his return to .:iashington he had made a careful comparison of the salaries at the Federal leserve Baak of New York and other Federal reserve banks and was still of the opinion that the position taken by the Board at the meetin[: on January 22, 1934, with regard to the salaries of officers of the Federal _:ieserve Bank of New York is the pror)er one. He also stated that, in view of the Board's resp onsibility of approvin salaries under the provisions of the Federal ve-ict, it was obliged to consider the salaries at all Federal reserve banks and that, in his opinion, further increases in the salaries of ofOf the Federal '-eserve Bank of New York are unwarranted on the sis of the services rendered. discussion ensued, during which Mr. Szymczak stated that he felt it Would be well for the Board to give consideration to the possibility of devisin some satisfactory procedure whereby prospective changes in salaries of officers may be considered and views exchanged between the Federal reserve banks and the Board before the Board is called upon to take r°rrflal action. He suggested that the matter be taken up again con3iderabl_ 4'Y in advance of the end of the year. All of the members present el-Preszed ar-reement with Lr. Szymczak's suggestion. At the conclusion of the discussion, Lir. Tames moved that the Secretary be requested to prepare, in the light of the discussion at this meeting, a letter to the Chairman of the Federal Reserve Bank of New York, advising that the Board feels that no departure should be taken from its Previous action with regard to salaries of officers of the Federal Reserve Bank of New York, as set forth in the Board's letter of January 23, 1934. Carried. 724 3/8/34 -23- Mr. Szymczak stated that while Governor Schaller was in Washington recently in connection with the Governors' Conference he had discussed the recommendation of the board of directors of the Federal Reserve Bank of Chicago as set forth in Mr. Stevens' letter of January 26, 1934, that the Board reconsider its action with regard to the salaries recommended for 114 sers. C. R. McKay, H. P. Preston, I.II.Dillard, and A. L. Olson, and that Governor Schaller had stated that, while he felt the increased salaries recom mended were justified, he would not want to recommend anything incons istent with the Board's general policy regarding salaries. Mr. Szymczak moved that the Secretary be requested to prepare a letter to the Chairman of the Federal Reserve Bank of Chicago advising that the Board feels that no departure should ue taken from its previous action with regard to salaries of the four officers referred to. Carried. Consideration was then given to the letter dated February ?, 1934, signed by the directors of the Federal Reserve Bank of St. Louis stati , ng the feel. " - -ng or the directors that the adjustment to the rate of 412,000 Per annum in the salary of Mr. J. G. McConkey, Deputy Governor and General C(5114861, should be made, and the opinion was expressed that, in the light Of the -nLomation contai ned in the letter, the increase in hr. MoConkey's 81114117' was justified. IL". Hamlin moved that the salary at the rate or 412,000 per annum, recommended by the directors for Mr. McConkey for the year 1934, be approved. Carried. There were presented memoranda dated February 24, 1934, prepared bY 14r, uuad in accordance with the action taken at the meeting on February " 73e; 3/8/34 -24- 23, 1934, and circulated among the members of the Board, giving a comparison of the Federal reserve retirement plan with 'the plans adopted by the United States Government and containing information with regard to the probable cost to the Board of participation in the retirement system. Mr. Jas Chairman of the Committee on Salaries and Ex- Penditures, stated that he had reviewed carefully the memoranda submitted by Mr. amead and that, as the Federal government had provided a ret*iMment system for its employees, he felt that the Board should make the benefits of the Federal reserve retirement plan available to its emPloYees. Mr. James then moved that the Board adopt, as of March 1, 1934, the rules and regulations of the retirement system of the Federal reserve banks and agree to make the contributions called for by the plan to be nade by the Board as an "employing bank" within the meaning of the rules and regulations. Carried, Messrs. Miller and Thames voting "no" and Li.. O'Connor not voting. posed ,j11'. Miller stated in explanation of his vote that he was not opfeatures the retirement system as such, but that there were certain smeller .:f the plan which he felt were objectionable, particularly the beaer, , nefits for the lower salaried employees as compared with the ra„ :L 4s for such employees under the classified civil service and the *that disability benefits are provided after one year's service such benefits " are not available under civil service plan until utter wi five Years' service. gr. Thomas stated that he was in agreement tht'e views expressed by Mr. Miller. Further consideration was then given to the memorandum dated FebrIkary 20, 1934, prepared by gr. Wyatt in accordance with the action taken "the tneeting of the Board on February 1, 1934, following the considerstioa of the application of the Tradesmens National Bank of New Haven, Contor trust power" The memorandum referred to the Board's previous 3/8/34 -25rulings to the effect that, for the purpose of granting trust powers to national banks, the aggregate of the capital and surplus of the applicant may not be considered, but that the capital and surplus separately must equal the amounts of capital and surplus respectively required of competing State institutions exercising trust powers, and stated that it is not believed that the provision of Section 11(k), upon which the Board's ruling was based, must necessarily be so construed, but that such provision of law properly maY be construed as authorizing the Board to grant permission to a national bnnk to exercise trust powers which has an aggregate capital and surplus equal to the aggregate capital and surplus required of State institutions exercising trust powers. The Memorandum stated further that, if the Board should decide not to adhere to its previous ruling, it would seem desirable, as a practical matter, not to grant trust powers to a national bank unless it has at least the silloUnt of capital stock required of State institutions, together with an aggregate capital stock and surplus equal to the aggregate capital stock and surplus required of such State institutions, and only to permit the aggregation of capital and surplus in those cases where the surplus of the national bank is less than the surplus required of State institutions, pi-ovided, of course, that in any case the national bank should have an adequate surplus. In connection with 1,:r. ;,;yatt's memorandum, there was 4180 Presented a memorandum dated Larch 3, 1934, fram the Comptroller of the Currency r ecammendinE; that the Board take the position that the words "capital" and "surplus" as used in Section 11(k) with respect to national banks shall mean the aggregate capital and surplus, and that if such ag'regate meets the total requirements of the State law with regard to i-01 / 40 6 3/8/34 -26- capital and surplus, the Board will grant the permit subject, of course, to any other conditions which might be present. After a brief discussion, the position referred to in Mr. 4att's memorandum was adopted as the policy Of the Board, and Counsel was requested to prepare a letter to the Federal Reserve Agent at Boston advising Of the new policy and stating that, inasmuch as the applicant bank has not been examined, the Board will defer action on its application, pendim: receipt from the Federal reserve agent of a further recommendation following an examination of the bank. The Governor presented a letter dated March 7, 1934, from Mr. Burgess, Secretary of the Federal Open Market Committee, inclosin_; a copy of the minutes of the meeting of the committee held in Washington on March 5, 1934. The minutes read in part as follows: "There ensued a discussion of the maturities of securities held in the System Account. It was pointed out that approximately 150 1000,000 of the holdings would mature on March 15, and that at that time the Treasury would probably issue in exchange a Treasury rte of several years' maturity. The question was raised whether the System should be prepared to reduce its holdings of nearby m aturities by exchanging the maturing issue for notes. It was noted 'Ii this connection that nearby holdings were unusually large in new of the uncertainties of the recent period. In the course of "lis discussion the opinion was expressed by a number of those Present that the exchange suggested should not be considered a Precedent to be followed so far as to reduce below a round amount the n -earbY maturities in the account. It was agreed that it would be desirable to continue to maintain a large amount of very short sue, 80 as to be prepared to dispose of securities rapidly if the occasion should arise. It was then. "VOTED to convert the whole or any part, as might be determined by the executive committee, of the ?150,000,000 of March maturto any new note offering which might be offered by the teis sutl5ir. Tre "It was then pointed out that the System held ,-69,000,000 of Fourth 4 1/4 Liberty bonds which had been called for redemption on ! 1Rril lb next, and in view of the possibility that a bond issue Illght be offered by the Treasury in replacement of these maturing bonds the System's policy with respect to maintaining its bond 3/8/34 -27"holdings might be consid ered. After discussion it was "VOTED that the executive committee be given authority to replace the whole or any part of the Fourth 6 1/4s called for redemption on April 15 with securities of such maturities as the committee may determine. "The secretary reported that, in view of considerable difficultY that was being experi enced in replacing current maturities Treasury bills with short obl:a i tions, the executive committee i!Lad agreed when necessary to replace a small portion of the maturities with longer term issues. "In view of the fact that the nmount of holdings in the System 1Lccount had not beanchanged for some weeks and in view of the very lae and increasing excess of reserves of member banks ouestion was raised as to continuation of authority for purchases ramaining the hands of the executive committee, and after consideration it was "VOTED that the authorization to the executive committee for the purchase of government securities, renewed last on October 10, be reduced to .00,000,000." In this connection, Governor hiach stated that Yr. Burgess had ad1m that the Executive Committee of the Federal Open Market Committee had be C)r the canvassed and that the suggestion had been made that c100,000,000 7, -arch 15 maturities be converted into the securities which will be issued bY the Treasury Department on that date and the balance of gSO,000,000 reinvested in short term issues. Governor Black also stated that, so far as he had been advised, no action had been taken with regard to the second l'ssolution adopted by the Federal Open i!.arket Committee. the Consideration was then given by the Board to the action taken by Peda, Open Market Committee in reducing the authorization to the e''ecutive ca[amittee for the purchase of Government securities to v100,000,000. The Secretary was requested to advise Mr. Burgess that the Federal Reserve Board approves the authorization to the execut ive committee in the reduaed amount, and that the other actions of the Federal Open Market Committee had been noted with approval. 3/8/34 -28In connection with the above, Governor Black stated that Governor Schaller of the Federal Reserve Bank of Chicago had advised that the bank holds in its own investment account 0_0,000,000 of Government securities , niatIlrin the on March 15; that the suggestion had been made at the bank that securities should not be replaced; and that he had stated to Mr. Schaller, as his personal opinion, that he felt the bank's investment account should not be reduced just at this time and that the March 15 maturities should be replaced with short term issues. Governor Black then reviewed, for the information of Kr. Tames, the consideration which had been given by the Board to the application MX. Phillip Lehman under the provisions of section 32 of the Banking Act c)f 19331 and to the policy which had been adopted by the Board with eeard to the granting of permits under that section. At the conclusion of the Governor's statement, Mr. O'Connor left the Meeting. There was presented again the memorandum dated Februiry 15, 1934, from Mr. Chase, Assistant Counsel, and Mr. Tyler, Special Assistant eclullsel, which was considered at the meeting of the Board on March 2, With ..egard to the seven applications of officers and directors of EMUber "in New York for permission under the provisions of section 32 °f the Banking Act of 1933 to serve at the same time as directors of the Dia"Unt Co rPoration of New York. Further consideration was given to the acti7ities of the Discount Corporation in purchasing and selling ()(leral reserve funds and the opinion was expressed that the activities should be regarded by the Board as obstructing the performance of the .4401in 3/8/34 -29- functions of the Federal reserve banks and that, for that reason, the present applications should not be approved and the Board should not permit the New York member banks involved to act as correspondent banks for the Discount Corporation or the corporation to act as a correspondent dealer for the member banks. At the conclusion of the discussion, upon motion by Mr. Miller, Counsel was requested to prepare a letter to the Federal Reserve Agent at New York in accordance with the above opinion. At this point Mr. Miller left the meeting. Governor Black referred to the bill now under consideration which provides for the creation of credit banks for industry and he stated that 4 Study is being made of suggestions, for incorporation in the bill, which w°111d authorize the credit banks to service corporations and business con- 1 attempt to restore them to a satisfactory operating basis, 81°4 wbich would authorize the Federal Reserve Board to levy assessments °A the credit banks to defray expenses incurred by the Board in connection with the credit banks. Governor Black also stated that consideration is being given to the -t)estions as to changes in the bill which were made by the governors ofFederal reserve banks at their recent conference with the Board. After a reference by Governor Black to certain objectionable fea'a of the stock-exch e bill, now under consideration by Congress, Mr, WYatt stated that in a conversation yesterday with Mr. Thomas G. Carcor 44 'one of the drafters of the bill, Mr. Corcoran had advised that the bill 'would be withdrawn and a new bill drafted which would eliminate Matters , which were severely criticized during hearings on the bill, and 3/8/34 -30a substitute bill would be ready within the next few days. After a brief discussion, it was understood that for the present the staff would continue with the preparation of its report to the Board on the basis of the bill in the form now before Congress. Letter dated Larch 7, 1934, approved by five members of the Board, to an — applicant for a permit under the Clayton Act, advising of aPproval of his application as follows: Mr. Henry Neuschke, for permission to serve at the some time as a director and officer of the Hill Top Savings and Trust Cc ' llpanY, Pittsburgh, Pennsylvania, as a director of The Iron and Glass Dollar Savings Bank of Birmingham, Pittsburgh, Penn8Ylvania, and as a director and officer of the First National Bank of Castle Shannon, Castle Shannon, Pennsylvania. Approved. There were then presented the following applications for original Stock, or for the surrender of stock, of Federal reserve banks: A lications for ORIGINAL Stock: District No. 4. ITa7;1-1Ta7Zia"-Bank in Greensburg, Greensburg, Pennsylvania Shares .P.1411aLalL_5. First Nat ionii-Bank in Philippi, Philippi, West Virginia IL1411.pt No 7 The 11171-31thtounty National Bank of Hillsdale, Hi llsdale, Michigan District No. 8. First National Bank in Newton, Newton, Illinois lication for SURRENDER of Stock: First National Bank of Haddon Heights, fladdon Heights, New Jersey Approved. 300 300 38 38 36 36 36 Total 36 410 90 90 3/8/34 -31- Thereupon the meeting adjourned. APprovem
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