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719 A meeting of the Board of Governors of the Federal Reserve SYstara with the Federal Advisory Council was held in Washington on Tue8daY, May 18, 1937, at 10:15 a.m. PRESENT: Mr. Mr. Mr. Mr. Eccles, Chairman Broderick McKee Davis 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. Paulger, Chief of the Division of Examinations Ur. Goldenweiser, Director of the Division of Research and Statistics Mr. Smead, Chief of the Division of Bank Operations Mr. Parry, Chief of the Division of Security Loans Messrs. Steele, Loeb, Williams, Gohen, Ball, Brown, Smith, Kemper, Harding and Dick, Members of the Federal Advisory Council representing the First, Third, Fourth, Fifth, Sixth, Seventh, Eighth, Tenth, Eleventh and Twelfth Federal Reserve Districts Mr. A. A. Tilney, Chairman of the Bankers Trust Company, New York, New York, representing the Second Federal Reserve District in the absence of Mr. Winthrop W. Aldrich Mr. Walter Lichtenstein, Secretary of the Federal Advisory Council Mr. Lichtenstein read the following statement with respect to S. ctibit4 2344 which relates to corporate trusteeships and which was re- Introduced in the Senate at the instance of the Securities and 41.4ge Commission: 720 S/18/37 -2- "The Federal Advisory Council wishes to call the attention of the Board of Governors of the Federal Reserve System to S. 2344 dealing with corporate trusteeships. "The Council feels strongly that the imposition of some Of the liabilities as provided in the bill would create a situation where banks of deposit could not with safety to themselves or to the banking system as a whole accept corporate trusteeships. "The 6ouncil believes that if banks of deposit declined corporate trusteeships the resulting loss of revenue, particularly at the present time, would weaken the banking system and would not be in the public interest. Broadly speaking, no corporations other than banks of deposit have either the financial responsibility or the experience which qualify them to act as corporate trustees." Upon inquiry from Mr. McKee as to what action the Council would expect the Board to take in connection with the statement, Mr. Brown 884d it was felt that the Board might consider the advisability of taking th e matter up with the Securities and Exchange Commission and the 4141°Priate committees of Congress for the purpose of stating the Board's attitude toward the bill, as it would affect banks throughout the countI7 which are exercising trust powers. The suggestion was then made by McKee that in these circumstances the Council should file a more dete'lled statement of the reasons for its position as set forth in the s tatement. Chairman Eccles outlined briefly the discussions which were had mr. 44d. Ransom and members of the Board's staff with Commissioner Douglas ineinbers of the staff of the Securities and Exchange Commission in eollnection with preliminary drafts of the bill and stated that in such cilacussions Mr. Ransom and members of the Board's staff had raised vari()lie gllestions and offered a number of suggestions, some of which were 721 6/18/37 • not ed _,0 optea and that it was understood by Commissioner Douglas that the Board as such had not considered the bill and that the Board would 4E11 free to express its views and to make suggestions with respect thereto if requested by any committee of Congress. At the conclusion Ora . dlecussion Mr. Smith said the Council would prepare and send to ti4)Bc)ard a brief in support of the position taken in the statement sub"ed by the Council. Mr. Smith stated that the Council would be interested in knowite the Present status in the House of Representatives of the so-called %ell Bill. Chairman Eccles said that Representative Patman had disoilseed the matter with him, that he understood that the group associated With R 0Presentative Patman had done considerable work on the bill, but thet'it was considered that the work that had been done was in the nature 0t be gr"ndw°rk only, and that it was not expected that such a bill would acted Upon at the present session of Congress. q Mr. Smith inquired as to the progress of the movement on the part certain State and municipal authorities to bring about an amendment to Section 19 of the Federal Reserve Act which would permit the payment qiriterest on Public funds deposited in member banks. It was stated t til 80 far as the Board knew there were no definite developments in the 41414r, a lthough it was understood that the problem had been met in some 4qes bY r evision of State laws. It was pointed out that the attempt to 811eh an amendment might result in raising the broader question of 722 5/18/37 -4llePeal of the prohibition of the payment of interest on demand deof all kinds. Mr. Smith advised that, in order to meet the convenience of 41ezbers of the Council attending the annual convention of the American Ballkars Association beginning on October 11, 1937, and with the exPoetation that some members of the Board may be absent from Washington c11111.11g S eptember, the Council, in the absence of objection by the 11"I ' d, would postpone its next meeting from September 20 and 21 to (3et°13er 7 and 8, 1957. The Council was advised that the postponement 17" agreeable to the Board. Chairman Eccles referred to a discussion with the members of the c °Ilneil yesterday of the desirability of developing a more general on the part of banks throughout the country in the Treasury btia ct,a ilarket and a further discussion of this matter ensued, with spe- reference to the factors of yield rates and maturities. There followed a discussion of the recent decline in prices Of G tIvernment securities and the treatment of depreciation on Govern4101.4 securities held by banks. Statements were made by the individual members of the Council esPect to business conditions in their respective districts which ilklicated that, while there had been some recession in business activit 14 some districts, the volume of business in all districts was being r441-11tained at a satisfactory level and the recession was apparently 723 _5talipor— ' 17 in character. I' troubles. vvrable Some districts were feeling the effects of The outlook for agriculture was reported as being in all districts with the possible exception of the Tenth ral Reserve District in certain portions of which there was a hOrta 8 ge Of moisture. Some of the members reported an improvement it the real estate situation but. that the shortage and high cost of 1341-1 4-ed labor was having an adverse effect on the volume of new conGenerally speaking, there was an increased demand for reclit in the various districts, particularly Florida, but the inin demand was not in proportion to the larger volume of busiaCtiVit5r e Thereupon the meeting adjourned.
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