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580 A meeting of the Board of Governors of the Federal Reserve 83r t ern was held in Washington on Tuesday, May 24, 1938, at 11:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Davis Draper Mr. Morrill, Secretary 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 Mr. Goldenweiser, Director of the Division of Research and Statistics Mr. Smead, Chief of the Division of Bank Operations Mr. Dreibelbis, Assistant General Counsel Mr. Leonard, Assistant Chief of the Division of Examinations Mr. Piser, Senior Economist in the Division of Research and Statistics Mr. Ransom referred to the draft of statement that had been PrePared by Counsel's office with respect to Bill S. 3874, introduced 111 tha Senate under date of April 20, 1938, by Senator Bulkley, "to alend the Federal Home Loan Bank Act, the Home Owners' Loan Act of 1933, the Federal Reserve Act, and the National Housing Act, and for othe , Purposes, and suggested that consideration be given to the l'aP1Y to be made by the Board to the request received from the Chair11N1 0 r the Senate Banking and Currency Committee for a report on the Durilur, the discussion of the draft of statement Chaiman Eccles 5/24/38 ne.id that it was uncertain whether hearings on the bill would be conti lled but that, if they were continued, Senator Bulkley had requested th "he (Chairman Eccles) appear at the hearings and, if not, that he file a statement on the bill. Reference was also made to the report °II the bill which was filed by the Treasury Department under date of MaY 12) 1938, a copy of which had been furnished to the Board. At the conclusion of the discussion, Counsel was requested to prepare, for consideration by the Board, a draft of letter to the Chairman of the Banking and Currency Committee along the lines suggested during the discussion. Prior to this meeting there had been circulated among the membel'8 Of the Board a memorandum dated May 3, 1938, from Mr. amead sumn ilzing the information contained in the report of Mr. Millard, Federal . ReeeTh"e Examiner, of his meeting with bankers who had petitioned the 8(3ardfor the transfer of thirteen counties in western Missouri from the ,,, ' 4..ghth to the Tenth Federal Reserve District and in the reports 1111-31itt -ed by certain bankers in the thirteen counties on the subject or eu rreneY and coin and check collection operations of the banks. The Memorandum also stated that in a letter dated April 6, 1938, Sam 4, -at") spokesman for the petitioning banks, stated that, if the Board felt it was not desirable to transfer all of the counties, he °Illd appreciate it if the Board would let him know how many of the eolurt "it the area it would be willing to have transferred. Mr. amead was requested to prepare, for consideration by the Board, a draft 582 5/24/38 -3of letter to Mr. Hoefer advising that the Board had given the matter careful consideration on the basis of the information submitted and did not feel that the circumstances justified a transfer of the counties in question at this time. At 12:50 p.m. the meeting recessed and reconvened at 3:00 p.m. 111th the same attendance as at the morning session except that Messrs. GW-denweiser and Piser were not present and Messrs. Vest, Assistant General Counsel, and Thomas, Assistant Director of the Division of Research and Statistics, were in attendance. Mr. Ransom stated that the Secretary of the Treasury had several 4,Ys previous to the last meeting of the Federal Advisory Council suggested toMr. Eccles and him that it might be helpful to get the views °f t e Council on the questions of bank examinations that were being ec"Isidered by representatives of the Treasury, the Comptroller's Office, the Board, and the Federal Deposit Insurance Corporation; that it had been the intention of the Chairman and Mr. Ransom to raise the matter t01 'diecussion with the Council at its meeting with the Board on May 17; that at that meeting it developed that the Council had already considered the, -s questions at its meeting on the previous afternoon and had the ciz'sft Of a proposed resolution on the subject, which was submitted to the 130ard for discussion; that, following this discussion, the Council ihro rimed the Board that it would take the matter under farther advise''which it did that afternoon, later submitting a resolution on the 8"Ject matter of the discussion; that at the luncheon meeting with the Bet'atlirY of the Treasury today the latter had inquired what action the rzE . 5/24/38 -4Advisory Council had taken during its meetings the previous week, 8ad, after some general discussion, the Chairman had mentioned the C°11"Ws consideration of these problems of examination, and that the Secretary had expressed the wish that Mr. Upham, Special Assistant to the Secretary, be furnished with a copy of the resolution adopted by the Council, so that the Treasury might have this before it in consider14 the questions under discussion. It further developed that Mr. Upham 44 made a previous request of Mr. Paulger that there be furnished to the Treasury, for its information, a copy of the resolution adopted by the Council at its meeting on May 17, 1938. Mr. Ransom moved that the Secretary be requested to communicate with Mr. Smith, President of the Federal Advisory Council, for the purpose of ascertaining whether there would be any objection on the part of the Council to the Board's complying with the Treasury's request. Carried unanimously. Mr. Morrill left the room and upon his return stated that he had advised Mr. Smith over the telephone of the Treasury's request and that Mr. Smith had stated that he was familiar with the views of the other members of the Council and was confident that they had no objection to the Treasury being furnished with a copy of the resolution for its confidential information. Thereupon, the following letter to Mr. Upham, Special Assistant to the Secretary, was approved by unanimous vote: "in connection with the discussion at the Treasury toay, there is inclosed for the confidential information of 5/24/38 -5- "the Treasury a copy of a letter addressed to the Board under date of May 18, 1938, by Mr. Thomas M. Steele, in which is contained a resolution adopted by the Federal Advisory Council at its meeting in Washington on the afternoon of May 17, 1938, on the subject of the classification of loans and the treatment of investment portfolios in reports of examination of banks." Mr. McKee made a report on the status of negotiations for the clevelopment of uniform bank examination policies. It was reported that, during the conferences between the chief eZaminers of the Board of Governors, the Federal Deposit Insurance C°I1Poration and the Comptroller of the Currency and Mr. Upham, Special Assi 8uant to the Secretary of the Treasury, Mr. Upham had requested that each representative submit suggestions as to desirable changes in the - regulation of the Comptroller of the Currency covering the pur°114se of investment securities by national and State member banks. M embwr. --8 of the Board's staff, after conference with members of the 130,arA 't had held several meetings for the purpose of preparing a statelent of desirable changes in the Comptroller's regulation as well as o drat, t of a revision of the regulation and copies thereof had been t t0 the members of the Board with an explanatory memorandum by Mr. 1)441ger under date of May 18, 1938. The suggested changes and revised l'elliation were discussed, together with the necessity for the liberal1Z' lltion of the present regulation. At the conclusion of the discussion, upon motion by Ma.. McKee, the statement of suggested changes and draft of revision of the regulation prepared by the staff were approved as expressing the views of 585 5/24/38 -6the Board, and Mr. Paulger was authorized to furnish copies to Messrs. Upham, Nichols and Folger, with the understanding that it would be made clear that these suggestions were being offered pursuant to the request that had been made by Mr. Upham. At this point Messrs. Thurston, Wyatt, Paulger, Smead, Dreibelbis, Vest, Leonard and Thomas left the meeting and. consideration was then gven to each of the matters hereinafter referred to and the action stated with respect thereto was taken by the Board: The minutes of the meeting of the Board of Governors of the Federal T., xleeerve System held on May 21, 1938, were approved unanimously. Letter dated May 23, 1938, to Kr. Nardin, Chairman of the Federe) . Reserve Bank of St. Louis, reading as follows: "In response to your letter of May 17, 1938, advising that on May 12, 1938, the board of directors of the Federal Reserve Bank of St. Louis had elected Mr. Lewis H. Carstarphen General Counsel of the bank at a salary of ,t05,000 per annum, subject to the approval of the Board Of Governors of the Federal Reserve System, you are advised that the Board has approved the appointment and tile salary," Approved unanimously. Memorandum dated May 18, 1938, from Mr. Smead, Chief of the DiViki --kon of Bank Operations, submitting a letter dated 1,if_ay 12 from Mr, Z1 i Mialg, President of the Federal Reserve Bank of Cleveland, which quested approval by the Board of changes in the personnel clessific"len Plans of the bank and its Cincinnati and Pittsburgh branches to "°vide for the creation Of the new position of "Manager" in the 58e 5/24/38 -7- Accounting, Check Collection and Currency and Coin Departments at the head office, and in the Check Collection and Currency and Coin DepartIllents at the Cincinnati and Pittsburgh branches. The memorandum stated that the proposed changes had been reviewed and recommended that they be approved, with the suggestion, however, that the Federal Reserve Ilank of Cleveland be requested to advise the Board why the position Of "Head of Department" should not be abolished in the departments in which the new position of "Manager" has been provided. Approved unanimously. Letter to Mr. Gidney, Vice President of the Federal Reserve 441( of New York, reading as follows: "In view of the circumstances as outlined in your letter of May 18, and in accordance with your recommendati°a, the Board extends to July 1, 1939, the time within which 'The Summit Trust Company', Summit, New Jersey, may c°mPlY with the conditions of membership requiring disposal °f its holdings, consisting of 1,132 shares, of the stock of the Summit Title and Mortgage Guaranty Company. The 3.0erd also grants the bank permission to continue until July 1, 1939, to act as trustee in connection with the Outstanding bonds or other obligations of the mortgage ?.?mPanY which had been issued by the company prior to the Of the bank's admission to membership, a prohibition against which activity is the subject of a condition of m embership. "These extensions are granted by the Board on the understanding that the mortgage company is in the process of li quidation and that no new business is being initiated." I Approved unanimously. Reference was made to the procedure folioed since February 4, 194 ' 411der which assignments of various subjects requiring consideration 587 5/24/38 -8- Or action by the Board were made to individual members for primary attentio_, u and there was presented a memorandum, copies of which had been ilrrdshed previously to the members of the Board, setting forth the tollO.wing suggested assignments of subjects to the respective members: Chairman Eccles 1. Monetary policy matters (open market operations, discount rates, reserve requirements, interest rates, Government finance). 2. Press relations of Board of Governors. 3. Supervision of Board's staff. Vice Chairman Ransom (Alternate, Chairman pro tern) 1. As the Vice Chairman is charged with the responsi,b_ility of acting as Chairman in the absence of the latter, aa will share with the Chairman the consideration of the matters specifically assigned to the latter, in such manner as they may decide from time to time. 2. Legislation affecting banking. 3. Applications for trust powers for State member and national bsnks. Mr. Szymczak (Alternate, Mr. McKee) 1. Expenditures and services of Federal reserve banks reimbursements therefor; reserves for losses; chargeoffs ;1,1(1 dividends; Federal reserve bank salaries and classifies'on plans; retirement system; examinations of Federal reserve banks. 2. Clearance and collection systems, including "par -1- earance"; interdistrict set-gement funds; leased wire SYst era. 3 . Issuance and cancelation of Federal reserve bank stock. 4. Issuance and redemption of currency. brau 5. Establishment, regulation and discontinuance of eues and agencies; and determination of district and branCh territorial limits. 588 5/24/38 -9Mr. McKee (Alternate, Mr. Szymczak) 1. Admissions to, conditions of, and termination of membership of State banks. 2. Supervision and examination of State member banks; branches, mergers, consolidations, adjustments of capital structure, maintenance of required reserves, etc. of member banks; relations regarding these matters with Federal DePosit Insurance Corporation, Reconstruction Finance Corporation and Comptroller of the Currency. 3. Relations with holding company and other affiliates; examination of affiliates; issuance and revocation of voting Permits of holding company affiliates. 4. Foreign bank relations; institutions engaged in international and foreign banking subject to sections 25 and 25A of Federal Reserve Act. 5. Interlocking relations of directors, officers and employees of member banks serving other banks and security dealers; loans to executive officers of member banks; outside business and other relations of directors, officers and employees of Federal reserve banks; removal of directors, Officers and employees of Federal reserve banks and member usl*s; disposition of criminal charges. Mr. Davis (Alternate, Mr. Draper) 1. tem.. Educational activities of the Federal Reserve Sys- 2. Coordination and development of relations of Federal Reserve banks with member banks, nonmember banks, banking associations educational institutions, and the general . Compilation and interpretation of current monetary, 3 banking, financial, and business information; Federal Reserve Bulletin and Annual Reports. 4. Call reports of condition and other periodical reports of member banks. 5. Agricultural conditions, including prices, production exports and imports; and relations concerning these Subjects with Department of Agriculture, Farm Credit Adwlalistration and other agencies dealing with agricultural Problems. 6. Building operation and maintenance. Mr. Draper (Alternate, Mr. Davis) 1. Discounts and advances of Federal reserve banks, 5871 5/24/38 -10- including industrial loan activities; ourchases by Federal reserve banks of securities and bills other than through System investment account; questions of eligibility of Paper for discount or as security for advances. 2. Loans and investments of member banks, including acceptances; relations regarding these matters with Comptroller of the Currency, Securities and Exchange Commission, and other Governmental agencies. 3. Extension and maintenance of credit by brokers, dealers, banks and others for purchasing or carrying securities. 4. Lending activities of Government agencies. The memorandum also contained a restatement of the duties of the Per8°11nel Committee as follows: Recommendations to the Board relating to 1. Appointments of Class "C" directors of Federal reserve banks and the directors of branches appointed by the Board. 2. Designations of Chairmen and Federal Reserve Agents and appointments of Deputy Chairmen of Federal reserve banks. 3. Approval of appointments of Presidents and First Vice Presidents of Federal reserve banks, and approvals °I' other appointments in Federal reserve banks requiring action by the Board. 4. Classification of member banks and procedure for election of Class "A" and Class "B" directors of Federal zeserve banks. 5. Board's budgets and expenditures. The Personnel Committee is composed of the Chairman End two other members of the Board designated by the Board. The assignments to individual members and the statement of duties of the Personnel Committee were approved unanimously. Memorandum dated May 16, 1938, from :Mr. Smead, Chief of the i 1/11 of Bank Operations, stating that in reply to the Board's -8“ 590 5/24/38 -11- letter of May 3, Mr. Martin, President of the Federal Reserve Bank of 8t, Louis, had advised that the bank would have no objection to showing the territories assigned to the respective branches of the bank on the ?ecieral Reserve District Map published by the Board as suggested in the 8°4rd's letter. The memorandum recommended that the map hereafter show: (1) That part of the state of Kentucky included in the Eighth Federal Reserve District as being in the Louisville territory. (2) Those parts of the states of Tennessee and Mississippi in the Eighth Federal Reserve District as being in the Memphis branch territory. (3) Louisville branch territory in the state of Indiana and Little Rock and Memphis territory in the state of Arkansas as indicated on the maps of Arkansas and Indiana attached to the file copy of the Board's letter of May 3, 1938, to President Martin. (4) The new legend " boundaries of Federal Reserve branch territories (approximate in the St. Louis district)" in place of the present legend " boundaries of Federal Reserve branch territories". Ilts memorandum also recommended that the description of the branch tertitories in the Annual Report be revised to show the territory as4184ed to the branches of the St. Louis bank as is done in the case or branches of other Federal reserve banks. The recommendations were approved unanimously. Thereupon the meeting adjourned. tAAA-e hi ) S cretary. 44roved: Chairmen.
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