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434 A meeting of the Federal Reserve Board was held in the office of the Itederal Reserve Board on Monday, May 23, 1927 at 11:30 a.m. PitESENT: Governor Crissinger Mr. Platt Mr. Hamlin Mr. Miller Mr. James Mr. Cunningham Mr. Eddy, Secretary Mr. McClelland, Asst. Secretary The reading of the minutes of the meeting of the Federal Reserve Board 4°14 021 May 18th was dispensed with. The Governor presented application of the Wilkes-Barre Deposit and ' 4 1110 Bank, Wilkes-Barre, Pa. for membership in the Federal Reserve System 4114 for 600 shares of stock in the Federal Reserve Bank of Philadelphia; toWith recommendations of the Board's sub-committee (1) That the ap141°ation be approvedsubjact to the regular conditions of membership contained 14 the Board's Regulation 18 nOw H9 and (2) That the bank be advised that the Board considering the question of what changes should be made in conditions °t tenlbership in the light of the provisions of the McFadden Act, and if cirky "eages in the present conditions are found necessary the bank will be 84biect to such changes, and. acceptance by the bank of the conditions now itaPcsed will be deemed to be acceptance of any changes in those con(5118 which the Board finds to be necessary in view of the amendments 411tained in the McFadden Act. Upon motion, it was voted to approve the application in accordance with the recommendations of the sub-committee. t Telegram dated May lath from the Chairman of the Federal Reserve 411k of Boston, advising that the board of directors at their meeting on 4:35 5/23/27 z... that date made no change in the bank's existing schedule of rates of discount and Purchase. Noted. Letter dated May 19th from the Assistant Secretary of the Federal Reserve Batil Of New York, advising that the board of directors at their meeting on that date made no change in the bank's existing schedule of rates of discount ana Nrchase. Noted. Tel-egram dated May 18th from the Chairman of the Federal eserve Bank t Philadelphia, advising that the board of directors at their meeting on that date made no change in the bank's existing schedule of rates of discount Ettla Purchase. Noted. Telegram dated MAY 18th from the Jhairman of the Federal 2,eserve Bank Louis, advising that the board of directors at their meeting on that aatft 44i Liade no change in the bank's existing schedule of rates of discount purchase. Noted. Telegram dated May 19th from the Chairmun of the Federal °fun that eserve Bank Francisco, advising that the board of directors at their meeting on (late makle no change in the bank's existing schedule of rates of discount 411C1. N rChase. Noted. Memorandum dated May 19th from the Director of the DivisiOn of Research 436 6/23/27 -.3- elid Statistics, recommending that Mrs. Dorothy Brown Riefler, an employee " 'the Division, be granted leave of absence, without pay, for the period UV I9th to June 30th inclusive. Approved. Uemorandum dated May 19th from the Chief of the Division of Bank Operatiezs. transmitting statements of expenditures by the Federal Reserve banks lisr educational and welfare work, etc. during the month of April, and for the four mouths' period ending April 30th. Ordered circulated. he Secretary than presented an order of the Secretary of the Treasury 144ter date of May 12th, issued in accordance with the provisions of an 4"iltive Order dated May 9th, directing that all branches of the Treasury Der,, rw.ctment opening at 9:00 a.m. will be closed at 1:00 p.m. on all Saturdays 4141/1N , -5 tae period from June 4th to September 24th, inclusive. Upon motion, it was voted that similar working hours shall govern in the case of employees of the Board during tbe period mentioned. Letter dated May 16th from the Assistant Federal Reserve Agent at San 30. advising that under the authority granted by the Board on April 244°18 ' 47t4 the Security Trust and. Savings Bank of Los Angeles on May 14th opened brall61 at 5473 Angeles Mesa Drive. Noted. 17 IlePort of Committee on Salaries and Expenditures on letter dated May : 4 4 frolt the secretary of the Federal Reserve Bank of Atlanta, advising of e resignation of Mr. George J. White, Assistant Cashier of the Jacksonville 437 5/23/27 -4- Branch, effective June 7, 1927 and the action of the directors of the Federal Reserve Bank of Atlanta in approving a recommendation of the Jacksonville directors that Mr. White be given ommonth's leave of absence instead of the regular vacation period of three weeks allowed officers of the parent banks and branches; the Committee recommending approval. Approved. Letter dated Lay 18th from the Deputy Governor of the Federal Reserve Bank of New York, advising of the receipt of formal notice from the Bank of ilngland to the effect that there will be no need to ask for a renewal of the credit granted that institution by the Federal Reserve banks which expired on May 14th last. Noted. . Report of Conmittee on Examinations on letter dated May 19th from the Federal Reserve Agent at Richmond, commenting on and recommending approval Of the recent action of the Putnam County Bank, Hurricane, W. Va. in purchasing the assets and assuming the liabilities of the Hurricane National Bank, which is in liquidation; the Committee also recommending approval. Approved. Memorandum from the Secretary dated May 20th, approved by the Comrittoe on Examinations, with reference to letter dated May 11th from the Assistant Federal Reserve Agent at San Francisco, advising of the inability 'the Superintendent of Banks of Arizona to make simultaneous examinations, 01 48 he previously advised he would do, of the head office and branches of the Valley Bank of Phoenix, Arizona, which bank's application for permission to 438 5. 1/ 5/23/27 establish a branch at Prescott, Ariz. was approved by the Board on April 6, 1926 ela the strict understanding that inasmuch as the State Banking Departwas not prepared to MAGIB simultaneous examinations, the Federal Reserve b44k would undertake to conduct at least one such examination each year, the (1°8t Of which must be borne by the Valley Bank; the Secretary suggesting that th° Federal Reserve Bank at San Francisco be advised that the Board expects at "est one annual simultaneous examination of the Valley Bank and its 1)114101es to be made by the Federal Reserve Bank of San Francisco. Upon motion, the suggestion of the Secretary was approved. Report of Executive Committee on memorandum dated May 19th from the 4"111g Comptroller of the Currency, recommending approval of an application Ge The Citizens National Bank of Ft. Gibson, Okla. for permission to reduce ita capital from .50,000 to 425,000, on condition that the entire amount of t110 reduction be applied to removing estimated losses and doubtful assets Ot 413 ;541.52 and y18,311.62, respectively, and that no part of the reduction b6 4istributed to stockholders or added to the surplus or profits accounts; tkEs 00mmittee also recommending approval. Upon motion, the application was approved subject to the conditions recommended by the Acting Comptroller. Letter dated May 17th from the Governor of the Federal Reserve Bank Of 4tlenta, referring to the Board's letter of May 14th, and enclosing copy Of 4 emilmunication addressed by him to The Farmers National Bank, Geneva, 'The First National Bank, Hartford, Ala., and the First National Bank, 4146 Saks 04, Ala, which institutions have recently adopted the practice of stamping 439 it 5/23/27 -6- c/11 their cashiers' checks the words "Not Payable Through Federal Reserve Bank, 4tlanta, Ga". Noted. Letter dated May 21st from the Federal Reserve Agent at Chicago, advisillg that under charter and. statutory authority the First State Bank of Mount "1 ' ' 10119 Lount Carroll, Ill, has qualified for the exercise of trust powers, a function not employed. by the bank at the time of its admission to the FedReserve System. Referred to the Jommittee on Examinations. RePort of Committee on Salaries and Expenditures on letter dated May leth 13 from the Chairman of the Federal Reserve Bank of Boston, advising of the ILeti°11 of the directors of that bank in voting, subject to the approval of the 134111 to continue for another two weeks leaves of absence with pay, on account of illness, previously granted. Mr. Joseph Buckley, Hiss Olive Glover and Liss 1441rY qUealy; the Committee recommending approval. Approved. At this point, Mr. McIntosh entered. the meting. He reported a telephone ersation with Mr. Henry B. Wilcox, Director of the Baltimore Branch, dur111€ which Mr. Wilcox advised of an offer made to him of appointment as Regist 4r °f the City of Baltimore, which position is comparable to that of City Nasurer. Mr. McIntosh stated that Mr. Wilcox requested advice today as to 1113t her acceptance of this. appointment would. make him ineligible to continue to se I've as a director of the Baltimore Branch. After discussion, the Secretary was directed to advise by telephone that in the opinion of the Board the Wilcox Mr. him comes within the provisions of the Board's tendered. position 440 5/23/27 ruling with respect to directors of Federal Reserve banks and branches holding political office and that his resignation as a branch director would be necessary should he accept the appointment. Memorandum from Counsel dated April 29th on the matter referred to the Law aeloMittee at the meeting on May 26th, namely, proposal of the Federal Reserve 4111c of Atlanta to carry a reserve stock of ;40,000,000 of unissued Federal 1)Berve notes at the agency of the Federal Reserve Bank at Havana, Cuba, in eddition to ,r;20,000,000 of cash now carried, and the plan submitted by the 4deral Reserve Agent at Atlanta for the custody and issuance of these uni8611ed notes; Counsel stating that the legality of the proposal is fully covered bY two previous opinions, one dated April 25, 1927 holding that the Board may 151'1313844 permit unissued Federal Reserve notes to be held at the Cuban Agency illtbe joint custody of the Agency and an Assistant Federal Reserve Agent, and the other dated September 21, 1926, rendered in connection with a proposal made by 4,, ' 40 Federal Reserve Bank of Kansas City for a custody of unissued notes at he branches of that bank, which is in all essential particulars the same as tile Plan now proposed by the Federal Reserve Agent at Atlanta. In his mem- "exicturn Counsel called attention to the fact that the Kansas City plan was held, to be in compliance with the requirements of the Federal Reserve Act, 1)1'e.vided there was an agreement between the Federal Reserve Agent and the INcla Reserve bank that the dispatch of a wire giving the control combinatiOn to a particular vault chest containing unissued Federal Reserve notes Wo 1,4 ot be considered as a delivery to the Federal Reserve bank of the amount % 4°tee shown by the records of the Agent and of the other custodian to have 1)A ' 4 Placed in the chest at the time the control was established, and that j L. 5/23/27 -8- )4 this amount would be accepted by the bank as conclusive for all purposes. During the discussion which followed, lir. Wyatt, the Board's General Counsel was called into the meeting and discussed further with the members of the Board the question of the legality of the Atlanta baak's proposal Mr. James moved that the Federal eserve Board aoprove the proP°sal of the Federal ieserve Bank of Atlanta to carry at the Havana AgerCy suPPly of ,20,000,000 of cash and a reserve supply of ,10,000,000 of un_ ssued Federal deserve notes, together with the plan submitted by the Fed.al .Aeserve Agent at Atlanta for the custody and issuance of the unissued aotes, Durinrr, the discussion which followed, Mr. McIntosh stated that he had 110 objection to the arrangement on the understanding, verbal assurance Of which had. been given him by the Board's Counsel, that no liability atached to him as Comptroller of the Curremy in connection with the custody vf Unissued Federal Reserve notes at the Agency. Following the discussion, Mr. James' motion was put by the Chair carried, the members voting as follows: Mr. Platt, "we" Mr. Hamlin, "we" Mr. James, "Aye" Mr. McIntosh, "we" Governor Criss inaer, "no" :Ir. :liner, "no" Cunningham, "no" The Comptroller stated that he voted "aye" with the distinct under. Lag that he would receive from the Board's Counsel a written opinion t0 Lte effect that no liability attaches to him in connection with the at°'v of the uni ssued notes at Havana. Miller stated that he voted "no" on the ground that the second Pro.i en slon of the motion, with regard to carrying unissued notes at the of .̀•Y• in his opinion, implied an umarranted and dangerous assumption to authority by the Board in the perfornance of its function with regard the issuance of Federal reserve notes. )11 Mr. Cunningham stated that he voted. "no" because of the second Drovir,. 'Qlon, under vihich the Board assumes to permit the carrying of unissued "aeral reserve notes outside the limits of the Continental United 3tates. Mr. McIntosh then left the meeting. 442 5/23/27 deport of Committee on Examinations on letter dated May 12th from the DePutY Governor of the Federal Reserve Bank of Richmond, recommending apPrOval of an application of the Seaboard National Bank of Norfolk, Va. for authority under Section 13 of the Federal Reserve Act to accept drafts and bills of exchange drawn upon it up to 100;; of its paid-up and unimpaired capital and surplus; the Committee also recommending approval. Approved. Letter dated May 17th from the Federal Reserve Agent at Dallas, advising. that at the last meeting of the board of directors of that bank it was definitedecided to call a meeting of the stockholders of the bank to be held in pallas on Wednesday, June 15, 1927 and stating that the.officers of the bank 4re anxious to have some member of the Federal Reserve Board present to particiPate ta the moeting. Noted. Memorandum from 00unsel, dated Lu 2Dth, submitting for the Board's inrcrmation copy of an opinion rendered by the Supreme Court of the United States IleY 16th in the case of Westfall v. United States, wherein the Supremo Court 114eld the constitutionality of that provision of Section 9 of the Federal 1418a rva Act which subjects state banks and their officers, agents and employees to the Provisions of and the penalties prescribed by Section 5209 of the Revised 8tattltee; Counsel stating that the case is of unusual importance to the Fed"ea Reserve System because of the fact that if the Supreme Court had held the Provision in question to be unconstitutiona4, it would necessarily have 44)wed that other provisions of Section 9 relating to the membership of tate banks would also be unconstitutional. In his memorandum, Counsel 11 443 5/23/27 -10- r"ommended that the Supreme Court's decision in the case be published the next issue of the Federal Reserve Bulletin. Upon motion, Counsel's recommendation was approved. Ziatter ordered circulated at the meeting on May 17th, namely, memorandum fr°111 the Assistant Counsel dated May 11th, recommending the revision of the Ilcard's form of application of state banks for rembership in the System so as to require a statement by the Cashier of the bank applying for memberShip setting out what branches, if any, are operated by the bank, the loosOf such branches and. the date upon which each branch was established; C17448E11 stating that this infomation is necessary in view of the amendment t° Section 9 of the Federal Reserve Act contained in the McFadden Act and. fIll ' ther suggesting that pending the adoption of the amended. form of appli°aticna and. the printing thereof all Federal Reserve Agents be requested, °1 Mular letter, to, advise the Board when they forward. an application t°1 'membership whether the bank making application has any branches outside (1) the city, town or village in which such bank is situated that were established subsequent to February 25, 1927, the date of the passage of the 114adden Act. Upon motion, it was voted to approve the amended form of application submitted by Counsel, as well as a proposed circular letter to all Federal Reserve Agents requesting the furnishing of infoxmation regarding branches pending the printing of the amended form of application. Lieirtorandaim from Counsel dated May 6th, submitting draft of reply to lett dated march 29th from the Federal Reserve Agent at Cleveland, inquir- ilk "41 ether a national bank formed by the consolidation under the provisions of the licFadden Act of a state bank having trust business ars1 a national bank 444 5/23/27 without trust powers may proceed to exercise trast powers without applying for arla receiving the permission of the Federal Reserve Board to exercise such powers illader section 11 (k) of the Federal Reserve Act; the proposed letter stating that QQasaidated national bank, regardless of whether or not it had a fiduciary nit under Section 11 (k) of the Federal Reserve Act, succeeds to the specific tl'Ileteeshire, executorshire amd other fiduciary appointments under which the 8tate institution was acting prior to the consolidation or in which it had been inted or designated to act under wills or other instruments which had not become or effective at the time of consolidation through the death of the testator probate of a will, or otherwise, but that the McFadden Act does not confer 111?°11 the consolidated national bank the right to act generally in fiduciary EIP.4101tie5 or to undertake any new trust business, and further, that before 1111(41v4. -valting to act generally in fiduciary capacities or before accepting any 4e17tru5t business the consolidated national bank should have a permit from the Board under Section 11 (k) of the Federal Reserve Act. The proposed lett "also stated that while it is not legally necessary in the Board's a consolidated national bank to have a permit under Section 11 (k) 14 (10..., 4.kter to execute the fiduciary business already on the books of the conet it11811t state institution, it would seem advisable for the consolidated irist itation to secure such a permit in order that its right to execute such tlite.rmay not be questioned. After discussion, upon motion, the proposed letter to the Federal Reserve Agent at Cleveland was approved. The Governor then presented memorandum from Counsel, approved by two kerAbe r8 Of the Law committee, commenting on and submitting draft of reply to 445 5A3/27 -12- letter dated April 9th from the Federal :Reserve Agent at Cleveland, with reference to the desire of the Provident Savings Bank and Trust Company of Cincinnati, °Ilio to establish a branch in Norwood, Ohio, which is a town a part of the corpo4te limits of which coincide with a part of the corporate limits of Cincinnati, 441 juquiring whether or not under the provisions of the McFadden Act a state bk* may lawfully retain or acquire stock in a Federal Reserve bank while oper- Ming a branch established after February 25, 1927 in territory not within the "'I'Porate limits of the city, town or villag?, in which the parent bank is situated. but within territory contiguous thereto; the proposed reply discussing the question in detail and stating that in the opinion of the Board the term "'traits of the city, town or village in which the parent bank is situated", 48 Ilsed in the McFadden Act, refers to the corporate limits of such city, t°141a or village and that inasmuch as the town of Norwood is not within the 4811)crate limits of Cincinnati, it is clear that a branch established in 11*1400d by the Provident Savings Bank and Trust Company of Cincinnati would beYOnd the corporate limits of the city in which the parent bank is situated, 441i the Board is, the of the opinion that the Provident Savings Bank 4141 Trust Company may not lawfully establish a branch at Norwood while remainlilt a tnetriber of the System. In this connection, Mr. Platt read to the Board a memorandum prepared by „ 1 4"-ril taking a contrary position to that expressed in the memorandum from Oottlatia, After a detailed discussion, Mr. Miller moved that the words "limits of the city, tom or village in which the parent bank is situated" be interpretated by the Board to mean the "corporate limits" of any incorporated city, tom or village and that the Federal Reserve Agent at Cleveland be advised that in accordance With such ruling a branch at Norwood can not be established by the Provident Savings Bank and Trust Company of Cincinnati while remaining a member of the System. 446 5/23/27 -13Mr. Miller's motion being put by the Chair was carried, Mr. Platt voting "no". The Governor then presented the recommendations of the Federal Advisory 41143i1 made to the Federal Reserve Board at the meeting of the Council on Ua Wth as follome: "TOPIC NO. 1. Cuba - The question of the Cuban Agency. RECOMIENDATION: The Federal Advisory Council recognizes that it is not advisable to discontinue the Cuban Agency at this time. The Council, homever, wishes to reiterate the view to which it has given expression on several occasions in the past, to wit: that it does not believe it to be good policy for the Federal Reserve Banks to establish agencies of the character of the Cuban Agency outside Of the Continental United States. The Council, therefore, suggests to the Federal Reserve Board that it study the whole problem to the end that, if possible, some plan be devised which may be an effective substitute for the present arrangement. TOPIC NO. 2. Open Larket Operations. liECOMMEKDA'2ION: The Federal Advisory Council approves of the present policy of the Federal Reserve Board and the Open Market Investment Committee in aiming to acquire from time to time, as occasion requires, an amount of securities sufficient to enable the System to exercise soma control over the market whenever this seams advisable. The Council further approves the present method of conducting operations through a committee of the Board of Governors." lir. Hamlin reported an inquiry received by the Committee on District r °M Vice President aurrell of the National City Bank of New York, for #6 f 1314114,,, vu advice as to the action of the Federal Advisory Council with reference to the Cuban Agency and stated that following the meeting of the Council 441 -, n Avised Mr. Durrell of the action taken. He then suggested that all 4M%er yanks having branches in Cuba be advised of the Council's recommenda- Following a discussion, Mr. Cunningham moved that the • report of the Federal Advisory Council be received and noted and that the Secretary'be directed to notify all Federal Iteserve banks and all meMber banlin having branches in Cuba Of the recommendation of the Council regarding the Cuban • 147 5/23/27 —14— Agency. :Ir. Cunningham's motion being put by the Chair was carried. ACR2ATS OF STANDII:G COIMITTEES: Recomrending changes in stock at Federal Reserve Banks, as set forth in the Auxiliary Iiinute Book of this date. _tecommendations approved. Dated, May 23rd, Recommenuing action on applications for fiduciary powers as set forth in the Auxiliar, Minute Book of this date. Recommendations approved. Dated, Liay 16th, Recommending approval of the amlication of :r. Peter C. Reilly for permission to serve at the same time as director of the Indiana National Bank, Indianapolis, Ind. and as director of the Union 2rust Company, Indianapolis, Ind. liecommeniation approved. Dated, 'lay 18th, -tecommending approval of the application of Mr. A. W. Robertson for permission to serve at the same time as director of the Farmers Deposit National Bank, Pittsburgh, Pa. and as director of the Potter Title & Trust Company, Pittsburgh, Pa. Recommendation approved. Dated, May 20th, At 12:45 p.m. the Board went into executive seas Secretary. Approv e d
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