Full text of Minutes of the Board of Governors of the Federal Reserve System : Meeting Minutes, May 19, 1930, Volume 17, Part 2

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I

A meeting of the Federal Reserve Board was held in the office of the
Federal Reserve Board on Monday, May 19, 1930 at 11:30 a.m.
Governor Young
Mr. Platt
Yr. Hamlin
*Mr. Miller
Mr. James
Cunningham
Mr. McClelland, Asst. Secretary
PRESENT ALSO: Mr. Smead, Chief, Division of
Bank Operations.
Dr. Parry, Assistant Director, Division
of Research and Statistics.
PAESENT:

The Assistant Secretary advised the Board that since arrangements
have been made with the Treasury Department for an allotment of 11,000
Square feet of space in the annex building to the Divisions of Bank Operations and Research and Statistics, which space is to be located on the third
and fourth floors of the building, it has been found that the type of ouilding
is not exactly fitted to the organization of the Division of Research and
Statistics,,particularly, and that to house the two Divisions will require
some 13,500 square feet of space which it may not be possible to secure.
Smead and Dr. Parry supplemented the statement made by the Assistant
Secretary and also discussed with the members of the Board the question
Of leasing space for their two Divisions in the Washington Building and
possible terms upon which space in that building mipht be leased, stating
that while rentals in the building are fairly high the management would be
Willing to make some concessions to get the Board's Divisions in the building.




At the conclusion of the discussion, upon motion,
the Committee on Salaries and Expenditures, with the
assistance of the Chief of the Division of Bank Operations and the Director of the Division of Research and
Statistics, was requested to investigate fully the question of space for the Divisions and report with recommendations to the Board.

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(i
. Smead then discussed with the members of the Board a memorandum
dated May 16th, submitting a revision of data filed with the Board on January 16, 1930, recommending certain changes in the form of the text statement accampanying the weekly condition statement of the Federal deserve banks,
as well as certain changes in the statement itself; the memorandum also recommending that the changes be made effective beginning with the statement

or

Lay 26th and that at that time the Baird also publish an eyplanation of the
Changes and of the new items ahich will be referred to in the text.

The

changes in the statement referred to are the inclusion of the item "Federal
Reserve Notes of Other Banks" in the resource statement and a revision of
the federal Reserve Note Statement on the liability page, while the changes
in the text are such as to bring out clearly not only the amount of reserve
bank credit outstanding but the changes in the factors accountable therefor.
Upon motion by Mr. Hamlin, it was voted that the
statement in the revised form be made effective as
of May 28, 1930.
2he minutes of the meeting of the Federal Reserve Board held on May
15th were read and approved, as amended.
Letter dated May 15th fram the Secretary of the Federal Reserve Bank
Of New York, advising that the board of directors at a meeting on that date
made no change in the bank's existirg schedule

of rates of discount and

purchase.
dithout objection, noted with approval.
The Assistant Secretary called attention to the fact that the letter
from the New York bank points out that no action has as yet been taken by

the 3oard on the request of the New York directors that the Board reduce




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to 27
0 the minimum buying rate established by it for the purchase of bankers
acceptances by the bank.
He stated that at the meeting on May 9th action on
this rate was deferred for a full meeting of the Board.
Telegram dated May 15th from the Chairman of the Federal Reserve Bank
Of San Francisco, advising that due to lack of a quorum no meeting of the
Board of Directors was held on that date and no change was made in the Bank's
existing schedule of rates of discount and purchase.
Noted.
Report of Executive Committee on letters dated May 17th from the Comptroller of the Currency, recommending approval of a salary of '6,000 per annum
for National Bank Examiner Verne J. Wilson and a salary of c;3,000 per annum
for National Bank Examiner Wendell C. Laycock, both assigned to the Fourth
Federal Reserve District; the Board's Committee also recommending approval.
Approved.
Memorandum dated May 16th from the Assistant Secretary, requesting
authority to employ temporarily two painters, at the per diem rate paid
by the Government for this class of help, for the purpose of painting rooms
occupied by the Board in the Treasury building.
Approved.
Letter dated May 15th from the Chairman of the Federal Reserve Bank
Of New York, advising of the resignation of Mr. W. Randolph Burgess, as

Assistant Federal Reserve Agent, effective April 30, 1930 and his election
as Deputy Governor of the New York bank as of May 1, 1930; the letter stettag that there has been no change in Mr. Burgess' salary at the present time,




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but the directors of the bank will probably take some action regarding it
in the near future.
Upon motion, Mr. Burgess' resignation as Assistant Federal Reserve Agent was accepted effective as
of April 30th.
Upon motion, a salary of 422,000 per annum was
approved for him as Deputy Governor, effective
May 1, 1930.
Matter approved on initials on May 16th, namely, telegram dated May
15th from the Federal Reserve Agent at Minneapolis, requesting permission
to make credit investigations, without charge, of three State member banks
named, at the time they are under examination by the State authorities.
Formally approved.
Report of Committee on District if6 on letter dated May 12th from the
Chairman of the Federal Reserve Bank of Atlanta, requesting approval of the
payment to Mr. J. S. Adams of attorneys' fees amounting to „i1,329.66, in
connection with the receivership of the First National Bank of Dublin, Ga.;
the Committee recommending approval.
Approved.
Draft of reply, approved by the Committee on Salaries and Expenditures,
to letter dated may 8th fram the Chairman of the Federal Reserve Bank of
Dallas, submitting a change in the salary classification plan of the bank,
namely, the classification of the position of Assistant Manager of the Accounting Function under Grade LI-3, with an annual salary range from ,2100
to „p3600; the letter stating that the Board approves the classification
With the understanding that one of the positions of Division chief with a
salary range of „,2100 to y3000, is discontinued.




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458

Upon motion, the proposed letter was approved.
The Governor then reported that nine or possibly ten of the Federal
Aeserve banks will be represented at the meeting of the Open Market Policy
Conference called for May 21st, Boston and Kansas City having board meetings
on that date.
Noted.
Letter dated .May 15th from the Chairman of the Federal aeserve Bank
Of New York, advising that the directors of that bank have
voted to accept
participation in the Open Market Policy Conference under the plan approved
by the Board on March 25th, subject to their
interpretation of that plan
as not establishing any different procedure with respect to bill operation
s
than has existed heretofore.
Ordered circulated.
Letter dated May 14th from Deputy Governor Burgess of the Federal
Reserve Bank of New York, reviewing operations and conditions in the bill
and Government securities markets during the week ending on that date.
Noted.
Letter dated May 16th from Deputy Governor Crane of the Federal Aeserve Bank of New York, transmitting the regular monthly compilation of
the amount of short term funds hell in New York for foreign account, aggrep;ating *2,450,271,000 as of April 30th.
Noted.
Memorandum from Counsel dated May 16th, advising that under authority
granted by the Board arrangements have been made for a meeting of the Counsel
Of all Federal aeserve banks in Washington on :_onlay, ;June 9th, and for a
conference between the Counsel and representatives of the Comptroller of the




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Currency on June 10th.
Noted.
Memorandum dated Lay 15th from Counsel, with reference to a letter received from

the Department of Justice regarding delay in reporting certain

embezzlements 11c, employees of the Security Trust and Savings Bank, Los
Angeles, California; Counsel submitting drafts of a circular letter to
all Federal Reserve Agents pointing out the importance of prompt reports
Of violations of the criminal provisions of the banking laws, a letter
to the Attorney General of the United States advising of this action and
a letter to the Federal Reserve Agent at San Francisco regarding the particular case referred to.
After discussion, upon motion, the proposed
letters were referred to the Governor with power.
Memorandum from Counsel dated Ilay 15th, submitting draft of letter
to all Federal Reserve Agents with further regard to the uniform plan for
designation of officers of member banks to vote in elections of Class A
and B directors, which was approved by the Board on April 23rd.
Approved.
Matters approved on initials on May 16th, namely, application filed
by the Central National Bank of the City of New York, N. Y. for the surrender of stock in the Federal Reserve Bank of New York (1,675 shares) effective if and when the bank has been placed in voluntary liquidation, and
application on behalf of the Central Bank of the City of New York for membership in the Federal Reserve System and for 1,875 shares of stock in the
Federal Reserve Bank of New York, effective if and when organized and au-




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thorized to commence business, subject to the regular conditionsof membership set out in Regulation H and the following special conditions:
"1. That The Central Bank of the City of New York,
N. Y., shall at the first meeting of its board of directors, ratify the action taken in its behalf by The
Central National Bank of the City of New York in applying for stock in the Federal Reserve Bank of New York
and in accepting the conditions of membership imposed
by the Federal Reserve Board, and the board of directors
of The Central Bank of the City of New Yolk shall pass
a resolution accepting such conditions of membership.
"2. That at the time The Central Bank of the City
of New York is authorized to commence business its proposed capital of „i2,500,000 and surplus of ,625,000
shall be fully paid in."
Upon motion, the applications were formally
approved.
The Governor then stated that the Federal Advisory Council is holding
its preliminary meetiag today and if convenient to the members of the Board
he will arrange for a

meeti.ig with the Council tomorrow morning at 9:30

o'clock.
No objection was expressed.
Reference was then made to the motions submitted by Mr. James and
Mr. Hamlin at the meeting on May 15th, on which action was deferred, and
Mr. Miller submitted the following proposed letter to the Federal Reserve
Bank of New York as an amendment to the motion made by Mr. Hamlin:
"The following observations are made by the Federal Reserve
Board to explain its position in reply to the matter submitted to
it by the Governor of the Federal Reserve Bank of New York with regard to contemplated offering of Reparation bonds in the American
market:"The American capital-loan market is a free market: An exception is the informal surveillance exercised over offerings of securities of foreign origin by the State Department since 1922. The assumption of this responsibility by the State Department appears to
have been motivated purely by considerations of national and international policy.




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frt

"In these circumstances it would be a gratuitous assumption
of responsibility - certainly extra legal, if not actually illegal for a Federal Reserve Bank or the Federal Reserve Board to perform
the function of a Capital Issues Committee with regard to a special
class of securities, as it would if it undertook to pass upon the
admissibility of offerings of bonds made by or on behalf of the
Bank for International Settlements in the American market. The
statutes of the Bank for International Settlements can not alter
the authority or responsibilities of a Federal Reserve Bank or
the Federal Reserve Board - can not add to or subtract from them,
nor prescribe the manner of their exercise. To take cognizance
of the request made of the Federal Reserve Bank of New York by
the B.I.S.,and indirectly, therefore, of the Federal Reserve
Board, would involve the Bank and the Board In an extension of
their functions and the acceptance of a new order of responsibility at the instance of a foreign institution. if this could
legally and properly be done at the instance of the B.I.S., it
could also be done at the instance of any other institution or
any government. The Implications - political, economic and financial - of any such involvement are so far-reaching as to make
it objectionable from a reasonable public point of view.
"it appears to the Board that the existing arrangement under
which all questions of clearance in connection with the offering
of securities of foreign origin are determined by the State Department need q no supplementation at this time for the safeguarding
of our national interest. This is particularly true in connection
with offerings of Reparation bonds because from their very nature
these questions are political rather than economic and financial
in character. For the Federal Reserve Bank and the Board to undertake to pass upon offerings of these bonds upon political grounds
would carry them far beyond their legitimate functions. For them
to give such bands clearance an financial grounds would involve
them, from the public viewpoint, in an approval of the securities
so offered.
"The Board feels that it, itself, and Reserve Banks should
maintain freedom from commitments that might Interfere with the
unimpeded discharge of their duties in connection with the administration of the resources of the Federal Reserve System.
"After careful consideration of the questions raised by the
statutes and requests of the B.I.S., the Board has reached the
conclusion that it should be informed that the Federal Reserve
Bank of New York expresses and can express no dissent to the
proposed issue of Reparation bonds in the American market, for
the reason that under the Federal Reserve Act it has no power to
pass upon such securities as a condition precedent to their offering in our markets, and that its failure to dissent should not be
construed either as an approval or disapproval of the terms, conditions or worth of such securities, or as a waiver of any of its
lawful powers to take necessary action at any time to protect the
credit stability of the United States."




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The Governor instructed the Assistant Secretary
to furnish copies of Mr. Miller's amendment to the individual members of the Board as he has the motions by
Messrs.. Jamas and Hamlin, and stated that the three
motions will be brought up for consideration at a full
meeting of the Board within the next few days.
REPORTS OF STANDING COUMITTEES:
Dated, May 15th,
16th,
19th,
Dated, may 17th,

Dated, May 13th,
16th,

Dated, May 15th,

Dated, May 15th,

Dated, May loth,

Dated, may 17th,

Recommending changes In stock at Federal Reserve banks as
set forth in the Auxiliary Minute Book of this date.
Recommendations approved.
Recommending action on applications for fiduciary rowers
as set forth in the Auxiliary Minute Book of this date.
Recommendations approved.
action
on applications for admission of State
Recommending
subject
to
banks,
the conditions stated in the individual
reports attached to the applications, as set forth in the
Auxiliary Minute Book of this date.
Recommendations approved.
Recommending approval of the application of Mr. Ernest H.
Trickey for permission to serve at the same time as director and officer of the dolfeboro National Bank of Volfeboro, N. H., and as director and officer of the Rochester
Trust Company of Rochester, N. H.
Approved.
Recommending approval of the application of Mr. Charles E.
Hendrixson for permission to serve at the sane time as
director of the Corn Exchange National Bank & Trust Company of Philadelphia, Pa., and as director of the Chester
National Bank of Chester, Pa.
Approved.
Recommending approval of the application of 1,:r. Fred Klein
for permission to serve at the same time as director of
the First National Bank of Jersey City, N. J., and as officer of the North Arlington National Bank of North Arlington, N. J.
Approved.
Recommending approval of the application of Mr. VanVechten
Shaffer for permission to serve at the same time as director
officer of the Cedar Rapids National Bank of Cedar
pids, Iowa and as director of the Union National Bank of
es, Iowa.
Approved.
he meeting adjourned at 12:50 pan.

Approved:




Goiayeeeet

Assistant Secretary.