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355 A meeting of the Board of Governors of the Federal Reserve 81/11/tem was held in Washington on Friday, March 8, 1940, at 10:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Szymczak McKee Davis Draper Mr. Morrill, Secretary Mr. Bethea, Assistant Secretary Mr. Carpenter, Assistant Secretary Mr. Clayton, Assistant to the Chairman Mr. Thurston, Special Assistant to the Chairman Mr. Wyatt, General Counsel Mr. Goldenweiser, Director of the Division of Research and Statistics Mr. Dreibelbis, Assistant General Counsel Mr. Morse, Senior Economist in the Division of Research and Statistics The Secretary stated that his office received from the DepartState on Tuesday, March 5, 1940, the commissions of Chairman too. es and Mr. Davis as members of the Board of Governors of the Federal Nee 1*Ire SYstem for the unexpired portion of the eight-year term from 4.' 411171, 1936, and the fourteen-year term from February 1, 1940, re61/ect 1Y. keels l'8* The formal oaths of office were duly administered and Eccles and Davis qualified as members of the Board under their 4PPOilltment S. The Secretary also stated that there was received this morning The National Archives a photostat copy of an executive order isby the President of the United States on March 5, 1940, designating Ileelee as Chairman of the Board of Governors to serve as such for k telt of four years, effective February 1, 1940, and that a copy of 356 3/6/40 the -2- order appeared in the Federal Register today. Telegrams to Mr. Kimball, Secretary of the Federal Reserve 134111c Of New York, Mr. Leach, President of the Federal Reserve Bank "11 • .cirmond, Mr. McLarin, First Vice President of the Federal Reserve kmOf Atlanta, Messrs. Dillard, Stewart and Powell, Secretaries of the ceders" Reserve Banks of Chicago, St. Louis and Minneapolis, re814ctilrea3r, Mr. Gilbert, President of the Federal Reserve Bank of 411 , and Mr. Hale, Secretary of the Federal Reserve Bank of San l'rem 4.clse0, stating that the Board approves the establishment without ehtit 86 by the Federal Reserve Bank of San Francisco on March 5, by the 1, ederal Reserve Bank of Richmond on March 6, by the Federal Re8ellre Banks of New York, Atlanta, Chicago, Minneapolis, Dallas and 8Ett D 'Ilancisco on March 7, 1940, and by the Federal Reserve Bank of 4. -(31-11a today, of the rates of discount and purchase in their extatit SchedUles. Approved unanimously. Mr. Davis stated that the Personnel Committee would like to kitir "with Nh.. Coffey, Chairman of the Federal Reserve Bank of Min- 144Poli -s, with respect to the appointment of R. B. Shepard, a Class e f ireetor of the Minneapolis bank, as Deputy Chairman of the bank, it agreeable to Mr. Coffey, to recommend the appointment of Mr. el4tIlt as Deputy Chairman for the remainder of the current year. The other members of the Board agreed, when recommended by the Personnel Committee, to approve the appointment of Mr. 357 3/e/40 ew• Shepard as Deputy Chairman of the Minneapolis bank for the remainder of the current year. Mr. Davis then submitted the recommendation of the Personnel C°4011ittee that Raymond C. Force, Chairman of the Executive Committee "the Caterpillar Tractor Company, Oakland, California, be appointed 48 a Class C director of the Federal Reserve Bank of San Francisco to rill the existing vacancy. Mr. Davis said that Mr. Force had indicated that he would be willing to accept the appointment if tendered. Upon motion by Mr. Davis, Mr. Force was appointed a Class C director of the Federal Reserve Bank of San Francisco for the unexpired portion of the three-year term ending December 31, 1941. There was presented a draft of letter to Mr. Berle, Assistant teere tarY of State, which was amended during the ensuing discussion to 1'44 as follows' "Reference is made to your letter of February 20 „Taclosing drafts of the documents relating to the Proposed Inter-American Bank and asking to be informed of the Board's r eaction. "The Board believes that such an institution, if prop1Y conceived and soundly managed, might contribute to the 7 7el0p1ent of economic and cultural unity throughout the larices, but that certain restrictions which are embodied .1.11 the documents will, unless modified, seriously impair 'he Bank's chances of successful operation. "For reasons more fully set forth in the accompanying IteMorandum, the Board is convinced (1) that the by-laws of the Bank should be amended so as to permit it to accept Without restriction the direct obligations, guaranties, 44d endorsements of central banks; and (2) that the by-laws 8hould expressly recognize the possibility of designating Central banking authorities to appoint the director and ceroise the continuing functions of government in relabion to the Bank. f r 3/e/40 -4- "Both of the foregoing points can be met most conveniently at this stave by adding the following paragraph to Article 6 of the by-laws: D. The term 'Government' shall include any agency which has been designated by a country to represent the government in its relations with the Bank, and such agency may be a central bank or central banking authority, and authority under these by-laws for the Bank to engage in operations when the Bank has the direct obligation or guaranty of a participating government shall be deemed to authorize the Bank to engage in such operations whenever the Bank has the direct obligation, guaranty, or endorsement of a central bank of the country. "The proposed amendment would greatly facilitate the conduct of short-term credit operations by the Bank. It w°111d also have important significance from the point of ' 91-aw of management, upon which the Bank's success as an °Perating institution will largely depend. In few countries 18 any agency better qualified than the central banking auth°rity to appoint and advise with the director and act as RUerdian of the interests of both the Bank and the country. The Board understands that this view has been expressed by e of the Latin American members of the Inter-American nancial and Economic Advisory Committee. "A memorandum accompanying this letter discusses both 301.nt5 more fully. A second memorandum, which will be sent a few days, suggests certain technical modifications to 1_ 11a convention, charter, and by-laws which we believe Should Da given thorough consideration. "The Board may wish to make additional suggestions When the necessary enabling legislation to be presented 0 Congress receives detailed consideration." r At the conclusion of the discussion amended letter was approved unanithe mously,with the understanding that it would be sent to Mr. Berle by messenger as soon as possible and that a copy of the letter and inclosure would be sent to the Secretary of the Treasury for his information. At this point Messrs. Thurston, Tyatt, Goldenwaiser, Dreibelbis 359 z/8/40 814 liforse left the meeting and the action stated with respect to " I of the matters hereinafter referred to was then taken by the toard: The minutes of the meeting of the Board of Governors of the Federal Reserve System held on March 7, 1940, were approved 114n1rfl0Usly. Letter to Mr. Hitt, First Vice President of the Federal le8erve Bank of St. Louis, reading as follows: "Reference is made to your letter of March 1, 1940, ! ,11 regard to the exercise of trust powers by the 'Chippewa 'rust Company', St. Louis, Missouri, without first having obtained the permission of the Board, in accordance with its so-called general condition of membership, which requires that except with the permission of the Board there shall be no change in the general character of the ,seets, or broadening in the functions exercised, at the 'lime of admission to membership. "It is understood that the bank is acting as exeTItor of two small estates, consisting entirely of cash lunds, which were accepted without realizing the applirility of the condition of membership in mestion; that existence of the accounts will probably be of short ,p*ation, and that the bank does not desire to extend :fle scope of its fiduciary activities. In the circumces, the Board will raise no objection to the bank's : uministering the two executorships it now holds, with ' rhe understanding that it will not acquire any other gldUciary business without first obtaining the permis' Ion of the Board. Please advise the bank accord- r Approved unanimously. Thereupon the meeting adjourned.
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