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A meeting of the Federal .ies.-_:rve Board was held in the office of the Pederal lieserve Board on Friday, May 13, 1927 at 11:00 a.m. Pli.SE:fT: Governor Crissinger Yr. Platt Mr. Hamlin Mr. Miller Mr. James Mr. Cunningham Mr. Eddy, Seoretary Mr. McClellsad, Asst. Secretary Letter dated May 12th from the Assistant Secretary of the Federal a"erve Bank of New York, advising that the board of directors at their teating on that day made no change in the bank's existing schedule of rates of at sc cunt and purchase. Noted. Telegram dated May 12th from the nairm3n of the Federal Reserve 11441"f :dichmond, . advising that the board of directors at their meeting on 414t clay made no charge in the bank's existing schedule of rates of disocunt aria purchase, Noted. q10..1 --4,egram dated May 12th from the Chairman of the Federal Reserve 118211c Of lAnsas City, advising that the board of directors at their meeting th at daY made no change in the bank's existin schedule of rates of ' 41 "and purchase. Noted. °11(1 of Mr. Gates J. McGarrah, Federal Reserve Agent at the Federal erve Baalc of New York, dated May 9, 1927, in the amount of .100,000. Approved. 399 Bond of Mr. M. L. McClure, Federal Reserve Agent at the Federal Baserve Bank of Kansas City, dated May 6, 1927, in the amount of $100,000. Approved. Letter dated May 6th from the Assistant Federal Reserve Agent at Saa Francisco, advising that the American Trust Company of San Francisco 1)4 IllkY 4th closed their branch at Redwood City. Noted. Letter dated May 5th from the Federal Reserve Agent at San Francisco, aclvistag that On April 30th the consolidation of the French American Bank Of Sall Francisco with the United Bank and Trust Company of California was effected and on May 2nd the head office and three branches of the French 448tican Bank weie opened as branches of the United Bank and Trust Company. Noted. 4 Report of Committee on Examinations on letter dated May 5th fram he Federal Reserve Agent at San Francisco, transmitting and recommending 413111-1 of an application of The E. G. Young and Company Bank of Oakland, O reti,„, • 44$ for approval of its action of Larch 21st, 1927 in absorbi ng the Ce4ttlereial Bank of Oakland, a non-member; the Committee also recommending 4WM1vsl, Approved,• his 11 elegram dated May 12th from Mr. Harry H. Rogers, advising of acceptance of the Board's appointment as a director of the Branch of th4, xederal Resolve Bank of Dallas to be established at San Antonio, Texas, Noted. 400 5/13/27 -3- Report of Committee on Salaries and Expenditures on letter dated May 1°th from the Deputy Governor of the Federal Reserve Bank of New York, subMitting for the Board's approval proposed promotions of enployees from one gl'ade to another, effective May 1, 1927, the maximum salary of the nen grade each case being in excess of 4,2500 per annum, advising of the employment ef 24r. Harry H. Elliott as Secretary to the Chairman of the Board of Directors at a salary of 44,700 per annum, and recommending that the grade of Secretary te the Chairman of the Board of Directors be changed from Grade G 3 with an lltkual salary range of :A600 - $3,000 to Grade Ch. A. with a salary range ' c/f 44,000 to $5,000; the Committee recommending approval. Approved. Letter dated May 11th from the Federal Reserve Agent at Boston, referrillg to the recant surrender of stock in the Federal Reserve Bank of B°11tan by the Fitchburg Bank and Trust Company of Fitchburg, Mass., based 1113°4 a reduction In its surplus account of $200,000; the Federal Reserve 4tallt inquiring whether in view of the fact that the trust company was Ilet t echnically required as a matter of law to surrender the stock, the 4131311cation for surrender may not be cancelled or withdrawn and the stook l'eissuect to the trust company. lieferred to the Law Committee. Report of Executive Committee on letter dated May 12th from the Cor t of the Currency, recommending approval of the salary of 43,oco Per aim= for National Bank Examiner C. C. Francis, assigned to the Qr. ''eclid Federal Reserve District; the Committee also recommending Approved. 101 5/13/27 -ieport of Executive Committee on letter dated May 12th from the CerriPtroner of the Currency, recommending approval of a salary of .)3,000 per allnWli for rational. Bank Examiner L. A. Shea, assigned to the 2nd Federal Reserve District; the Committee also recommending approval. Approved. eport of Executive Committee on letter dated May 12th from the CoMptroller of the Currency, recommending approval of a salary of „3,000 Psr anrnun for National 3ank .ixaminer N. D. Strite, assigned to the 2nd : -Zeserve District; the Committee also recommending approval. Approved. iieport of Committee on District #7 on the matter referred to it at me . the eting on May 10th, namely, letter dated May 6th from the Federal. Reserve 4gellt at Chicago, with reference to an arplication for membership in the 44 ..teserve System filed by the Center Line State Savings Bank, Center " 1411°1 ::ichicaia, which the managem3nt of the bank has requested lay without Etctien until after an examination can be made at the end of several months, ss th.A. - condition of the bank at the present time does not warrant a favorable l'e°11-111enclation on the application; the Committee reporting that no action 34111a be taken on the application until the bank has been put in proper °11(lition and its new management has proven itself capable. Upon motion, the report of the Committee was approved and the Secretary was directed to advise the Federal ..ieserve Agent at Chicago accordingly. - rom the Secretary of the 1?ederal Advisory Letter dated May 9th f (444`;11. advising of topics to be discussed at trio forthcoming meetirc 402 5/13/27 -5- 44d inquiring whether the Board has any other topics which it wishes to add to the program. The Secretary was directed to reply to the above letter stating that there are no other matters which the Board wishes to refer to the Council. The Governor then referred to the action taken by the Board at the "eting on lay 10th in voting to recommend' the employment of Honorable Newton D. Baker as snecial counsel, on behalf of the Federal Reserve banks, i4 the par clearance wait of the First State Bank of Hugo, Minnesota, against the Pederal Reserve Bank of Minneapolis. He stated that the Board's action 174a submitted to the Governors' Conference which was then in session here 4 44 that the Conference having concurred in the recommendation of the Board, the matter was taken up with Mr. Baker. He submitted a telegram addressed to tu_ 'le Board's Counsel by Mr. Baker advising of his willingness to serve ill the case. Noted. aeport of Committee on Salaries and Expenditures on letter dated 144 12th from the Deputy Governor of the Federal Reserve Bank of New York, 84blmitti1g list of employees for whom the directors of the bank have ap1)11eVed leaves of absence with pay on account of illness during the month 141 41/ril. where the total of such absences since Jamuary 1, 1927 has eleeeded thirty days; the Committee recommending approval. Approved. At this point, Mr. McIntosh entered the meeting. 121 accordance with the statement made by him at the meeting on 44Y :4r. James then submitted and moved adoption of the following 103 & 5/13/27 • re solutions relative to the establishment and temporary housing of the PrcPosed branch of the Federal Reserve Bank of Dallas at San Antonio: "WHEREAS, by a resolution adopted by the Federal Reserve 3oard under ,'"'s of April 18, 1927, the Federal Reserve Bank of Dallas was authorized sixbrait an offer of not to exceed .i?225,0e0 for the purchase of the San tIsnt01110 National Bank building in an Antonio, Texas, in which to house 118 branch of the Federal Reserve Bank of Dallas to be established in , Antonio, or in the event said. San Antonio National Bank building to yarchase the so-called '225,000, °ula not 'ue secured at a price of ; , 1 or,zr:ith 'Brothers property located in San Antonio at the corner of Villetta treet and. Garden Street (an extension of Navara), 100 feet square, at s.,,, 4'50 per front foot, and to proceed. with the erection thereon of a build9 for the proposed branch Federal deserve Dank, the total expenditure 37;Jring said building, vaults and permanent equipment not to exceed and final plans, specifications and. bids to be submitted to the —"eral Reserve Board for its ayrproval; IHEFAS, in said resolution of April 18, 1927, the Federal deserve r.a rci- expressed the opinion that it would not be advisable to house the stanch Federal deserve bank at San Antonio in temporary quarters necestatllig separation of the various functions at different locations; .71.2eAS, by said resolution of April 18, 1927, the Federal Reserve Bo rd, ruled that the branch of the Federal Reserve Bank of Dallas to be : .„8 4L-:.ulished at San Antonio should not be opened until permanent quarters : QII's available; WHZIEA' 3, in a letter dated :lay 3, 197, from the Chairman of the ra Reserve Bank of Dallas, the Federal Reserve Board has been adthat the offer of „;225,000 made by the Dallas bank for the San 4-atorl10 Yational Bank building has been declined; and the Governor of the Federal deserve Bank of Dallas has T L :i1E-U1S, fo , to--14 With the Federal Aeserve Board a telegram dated :lay 9th addressed whi lT11 by the Chairman of the Board of Directors of the Dallas bank, in advice is given of action taken by the Dallas directors at a meetL:ay 7th, in voting to accept, subject to the approval of the lay ?e°11 vr'sral Reserve Board, an offer made by the Frost iTational Bank to prosufficient space in the Frost National Bark building to house the re organization of the proposed branch at San Antonio for such to 1°`-i of time as may be necessary to enable the Federal Reserve bank erect on the so-called Smith Brothers property permanent quarters i ich to house the branch, and in which advice is also given of the t aet‘ space in the Of the Dallas directors in agreeing to pay for such ,i850; of '8t National Bank building a monthly rental 5/13/27 -7- that the Federal Reserve Board approve "THEREFORE, BE IT ..r,soLvm, action taken by the Board of Directors of the Federal Reserve Bank Of Dallas at its meeting on May 7th, in accepting the offer made by the 1a°st National Bank to provide sufficient space in its building to house P4, t̀'4e 11 entire organization of the proposed San Antonio branch, and to permit t e °coupancy of said space for such period of time as may be necessary o enable the Federal Reserve bank to erect on the so-called Smith Brothers „ Pr°PertY permanent quarters in which to house the branch, and. also the action said directors in voting to pay to the Frost National Bank a rental for clici space at the rate of ;:i;850 per month; and. the 1"?.. IT FUSCH-221 RESOLVED, that the Federal Reserve Board rescind the order contained in its resolution of April 18, 1927, that the branch of the p ederal Reserve Bank of Dallas at San Antonio shall not be opened until : t 1111allent quarters are available, and that the Board. interpose no objection thvethe directors of the Dallas bank proceeding with the establishment of b ProPosad branch and housing same temporarily in the Frost National Bank 1112.' After discussion, Mr. Jxnes' motion was put by the Chair and, carried. lir. Platt, Chairman of the Conmaittee on Examinations, then submitted 411 4131icatio1 for membership in tixt Federal Reserve System and for 66 allarlee of stock in the Federal Reserve Bank of Richmond, filed by the 134111t Of Darlington, Inc., Darlington, S. O., which is being organized for the ,„ .---Pose of taking over the assets and, assuming the liabilities of elmsed Bank of Darlington, a former member of the System, with the °e1)tion of stockholders' liabilities and with the understanding that 3v•25 of paper classed as WOrthless be eliminated; together with " 4 l'ec oizzlendat ion of the Board's sub-committee (1) That the application be 413'111'°ved subject to the nine conditions of membership contained in the B°411'13 Relation H and. the further condition that prior to the payment c't a d ividend the bank shall carry to surplus account not less than onetenth Part of its net profits for the preceding dividend period until its 405 -81/ ( 5/13/27 811r1olus fund shall amount to 25,0 of its capital stock; ad (2) That the baw4 be advised that the Board is now considering the question of what changes should be made in conditions of membership in the lidit of the Provisions of the McFadden Act, and if any changes in the present conare found. necessary the bank will be subject to such changes, and acceptance by the bank of conditions now being imposed will be deemed to be acceptance of any changes in those conditions which the Board finds to 135 necessary in view of the amendments contained in the McFadden Act. Mr. Platt then r4ferred to the unsatisfactory condition of the aloPlicant bank and stated that the Committee on Examinations was not Prepared, after preliminary consideration, to recommend aliproval of the a PPlication. Following a discussion, it isas voted that the file concerning the application should be circulated among all members of the Board for their information. At this point, the Secretary of the Treasury entered the meeting ana took the Chair. The Board then proceeded with further consideration of the recomIllenaations of the Open Market Investrrent Committee, submitted. at the meetialg Yesterday and. on which no action was taken at that meeting. Mr. Hamlin moved that the Board approve the recommendations of the Open 1.,:arke t Investment Committee contained in the report of the Committee dated Mw 11, 1927. Mr. Miller stated that he would prefer to have action on the reconunsndations of the Committee deferred until the Board has had, an opportunity to discuss the general question of open market policu with the Federal Advisory Council at their meeting on next Friday. He stated, however, that if the Board did not believe it desirable to defer action 406 5/13/27 -9- he wished. to present for the Board's consideration, as an alternative for Mr. Hamlin's motion, a memorandum prepared by him as the basis of a letter to the Open Market Investment Committee regarding its report. The Chairman pointed out the desirability of establishing a policy which he stated could, of course, be changed. by the Board at any time if developments warranted. He stated that he believed unless there was some particular reason for not doing so the Board should concur in the recommendations of the Open Market Investment Committee, and pointed out that if the Board did. so, and following the meeting of the Federal Advisory. Council, wished to change that policy there was no reason why an amendatory action should not be taken by the Board. He suggested that the Board might approve the recommendations of the Committee and in advising of such approval state to the Committee that the question of open market policy will be kept under consideration and, that the Board upon review might wish to take further action. Platt then moved that Mr. Haralin's motion be amended to read. as follows: "Resolved, that the Federal Reserve Board approve the report and. recommendations of the Open Market Investment Committee, with the feeling that the securities proposed to be purchased should be accumulated slowly and. with a view to the possibility that it may not be advisable to purchase the full ayrount authorized within the time limit mentioned." Mr. Hamlin accepted the amendment moved. by Mr. Platt and by unanimous consent withdrew his original motion. Mr. Miller then read. to the Board the following memorandum prepared by him and as a substitute for Mr. Platt's motion moved its adoption by the Board as the basis of a letter to the Open Market Investment Committee; "The Board has considered the recommendations of the Open Market Committee dated. May 11, 1927, for the period ending August 1: 4.07 (1) That no further sales of System securities be rade in order to offset arrivals of gold from abroad now ;mown or anticipated.. (2) That it shall be the policy of the coranittee between X01 and August 1 next, gradually to acquire, if possible to do so Without undue effect upon the money market, sufficient additional short-tin,e covernment obligations to bring the total of the coni-.1ittee's investment account up to .:260,000,000. f .11th respect to recomaindation :Jo. 1, it does not a -ripear to the Board that the next few months will show gold imports to the United States in any such volume as would indicate the necessity or desirability in existing circumstances of an offsetting operation by the sale of System securities. It has, therefore, nothing to suggest by way of modification of the course of action outlined by the Committee, unless there should be a marked change in the situation in Aaich case the matter should be reconsidered. The Cormittee's roc ormendat ion is, therefore, approved. Ath respect to recommendation No. 2, it is the opinion of the Board, that the System's Special Investront Account should, sooner Or later, in accordance with the .00licy which has governed the operation of the Account in the past, be replenished by the purchase of all amount of securities that would bring up the total holdings in the Account to not less than •,200,000,000. It is,however, the o-ninion of the Board that the present situation is not a favorable one for such an operation and that the resuraition of ourchases of securities for the Special Investment Account should be deferred until such time as it may arvear that such purchases will have a desirable stimulating effect upon trade, industry or agriculture. The country is now entering a period of interseasonal trade lull with the demand for credit for coramercial use slackening. The Only hiltily active market in the country is the securities market. There is accumulating evidence of speculative excesses, which in part has been reflected. in recent v.00kS in a great growth of brokers' deMand. loans. It is thought not to be desirable to stimulate these by a reduction of the cost of money in the New York market such as would result from the purchase during the next two months of from .u;100,000,000 to .450,000,000 of securities for the System account. It is the view of the Board that the movement of business, credit, gcld, money rates and other factors bearing upon the credit and. open Inarket policy of the Federal eserve System should be carefully and constantly watched, in order that when action is taken to replenish the Spacial Investmont Account it may be done with a minimum of undesirable stimulation. ( 408 5/13/27 -11- S For its part the 3oard will follow coming developmonts affecting open market policy with care and will keep in touch with the Conmittee in order that there may be a prompt exchange Of views and suitable action when ccndit ions warrant. For the present the Board does not think the situation favorable to a securities-Furchase operation and, therefore, withholds approval Of the recommendation that the Committee at this time be given authority to rurchase securities between now and August 1 to an anlount sufficient to bring up the System's account to .:250,000,000." After a detailed discussion, Mr. Miller's substitute motion was put by the Chair and. lost, the members voting as follows: The Chairman, "no" 1:r. Platt, "no" Mr. Hamlin, "no" 1.1r. James, "no" :Ir. McIntosh, "no" Governor Crissinger, "aye" :Ir. Miller, "aye" Mr. Cunningham, "aye" Mr. Platt's motion was then pit by the Chair and carried, the numbers voting as follows: The Chairman, "aye" Governor Crissinger, "aye" Mr. Platt, "aye" Mr. Hamlin, "aye" Mr. James, "aye" Mr. Cunningham, "aye" Mr. McIntosh, "we" Mr. Miller, "no" Mr. Cunninghan then made the following statement: " ,With the sincere hope that the view expressed in Mr. Platt's resolution that the securities which he open market investment conmittee recommends be purchased will be accumulated gradually up to August 1st next, I am voting in favor of the motion." The Secretarj of the Treasury then left the meeting and the Governor l'el1111°(1, the Chair. 409 11 5/13/27 -12- The Governor stated that he would bring up as special order of business the fleeting of the Board to be held on Monday, the matter of changes in the Position of Federal Reserve Agent at several of the Federal Reserve banks which the Bbard may wish to make, effective at the beginning of next year. The Secretary then presented draft of a letter to the Chairman of the °1341 Mart Investment Committee, just prepared for the signature of the el""ner, advising of the action taken by the Board at this meeting with tesPect to the recommendations submitted by the Committee yesterday. Upon motion, the letter submitted by the Secretary was approved and. ordered transmitted* The minutes of the meetings of the Federal Reserve Board held on May I.Oth end 12th were then read and approved. 3 OF pate TANI)ING c ITTEES: Recommending changes in stook at Federal Reserve Banks, as set forth in the Auxiliary Minute Book of this date. Recommendations approved. i)4t edt May 10th, Recommending action on applications for fiduciary powers 12th, as set forth in the Auxiliary Minut Book of this date. RecOlMrendations appro May 13th, The meeting adjourned. at 12:3 • Secretary. 41)13toyed:
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