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372 A meeting of the Federal Reserve Board. was held in the office of the Federa.1 Reserve Board. on Friday, november 26, 1926, at 11:30 a.m. PIESMT: Governor Crissinger Mr. Platt Hamlin Mr. Cunningham Eddy, Secretary Mr. LIcClelland, Assistant Secretary. The Governor stated. that the sicial order of business for this r.prninVs meeting would be cons iderat ion of the matters set forth in the letter addressed to the Board under date of november 23rd. by the Secretary of the Governors' Conference, being those -,thich the recent conference subnitted to the Board for its azivice or a.00roval or those upon which the Board hEd asked for the opinion and recommendation of the conference. The matters were then taken up separately in the order in which they were set forth in the letter above referred to, as follows: Report of Federal Reserve Agents' Committee on Member Bank Reserves, submitted to the Federal Reserve Board under date of :7.ay 12, 1925. The conference considered virether this is the opportune time to seek 1is1ation concerning those features of the report which the Governors have heretofore approved in principle. It was voted to be the sense of the conference that this is not an appropriate time to seek legislation concerning any of the matters referred to in the report of the Agents' Committee. After discussion, upon motion by Mr. Hamlin, it was voted, to concur in the action of the Governors' Conference. Amendment to _iegulat ion A to make eligible lo r redis count or purchaSC by Federal reserve banks a bankers acceptance drawn by an elevator or war ehous.e company and secured by terminal warehouse receipts of the elevator '.7arehouse company that draws the draft. (Boarti.'s letter X-4693, dated °ctober 13, 1926). After discussing the conditions under which registered warehouse receipts are issued by terminal elevator or warehouse 373 11/26/26 -2- companies oimrating in ::innesota under the supervision of the liailroad and '„arehouse Commission of the State of :linnesota, it was votea to be the sense of the conference that registered terminal elevator or warehouse receipts which are issued under conditions and practices similar to those prevailing in the case of such receipts issued under the supervision of the _),ailroad and. Warehouse Commission of the State of ::innesota, are within the spirit of the Board's ..iegulations requiring that warehouse receipts to be eligible as collateral for acceptances must be issued_ by a warehouse independent of the customer and that, therefore, the Federal eserve Board should rule that acceptances secured by such warehouse receipts are eligible provided, of course, that such acceptances comply with all of the relevant requirements of the Federal eserve ,lfter discussion, it was voted_ that action on the above matter be deferred for the time being. Regulations covering rediscount of notes secured by adjusted service certificates under the provisions of Section 502 of the -;orld 2',.djusted Conrcensation Act. (See Boars letter X-4688, dated October 12, 1926). It was voted that the chairman of the conference should appoint a committee of three operating men from the Federal reserve banks to confer and cooperate with :,:r. ',7yatt, the Board's Counsel, if desired, in the preparation of regulations and forms, including a draft of circular letter to be issued by the several Federal reserve banks concerning the discount of notes secured by adjusted service certificates. The Governor reported that the Committee referred to had already been appointed and that arrangements had been made for a conference between the Board's Counsel and. the committee some time next week. Inasmuch as the Board has already formally referred this matter to its Law Committee, he stated that no further action was required. at this time. advisability of the Board adopting for all national banks a lainimum capital requirement and. imposing other requirements in connection with its granting authority to such banks to exemise trust Powers. (Board's letter H-4686, dated October 12, 1926.) 374 -0- 11/26/26 It was voted to be the sense of the conference (A) that it is inexpedient for the Federal .:Leserve Board to place a capital limit on national banks applying for trust powers in view of the provisions of the law and the fu.rther fact that the exercise of trust powers by state banks is governed, by different laws in different states. (B) that some limit should be placed by the Federal Reserve Board upon the time taken by national banks to qualify as trustee under the state law after having received a -permit to exercise trust 130-,7ers from the Federal Reserve Board. (C) that it would be appropriate for the Federal Lieserve Board, in considering applications for trust powers, to take into consideration the relation of capital and surplus to deposit liability• The Jecretarj called attention to the fact that the subject above mentioned was also referred to the Federal deserve Agents' Conference which submitted extensive recommendations on the general subject of the granting of fiduciary powers. After discussion, it was voted that the recomendations of both the Governors' and Federal eserve Agents' Conferenceson this subject be referred to the Board's Law Committee for report. Mr. Hamlin, Chairman of the Law Committee, called attention to the fact that Mr. McIntosh, the other member of the Cormittee, would be absent from the city for a considerable time, and at his request the Governor designated Mr. Platt to serve on the Committee during the absence of 1:cInto sh. ies Authority of a Federal reserve bank to receive deposits of securit Federal and Banks Land (31% safe-keeping from Farm Loan ,,iegistrars, Federal 1926.) ritermediate Credit Banks. (Board's letter X-4690, dated October 12, 1 After consideration of the opinion of the Board's Counsel that submitted under date of June 4, 1926, stating the opinion of s deposit receive to ed Federal reserve banks are authoriz securities for safe-lmeping from Federal Intermediate Credit s from Banks, but are without authority to receive such deposit s opinion and ars, Federal Land Banks or from Farm Loan Registr voted was it of Counsel of individual Federal reserve banks, to be the sense of the conference that Federal reserve banks ies for have no legal authority to receive deposits of securit rs. iegistra Loan Farm or Banks Land safe-keeping from Federal 375 11/26/26 -4- After discussion, I:Ir. Hamlin moved adoption of the opinion of the Board's Counsel above referred to. Hamlin's motion, being put by the Chair, was unanimously carried. ,),uestion of Federal reserve bank representation at Bankers Conventions to 'hat extent should Federal reserve banks be represented by officers and eMPloyees. (Board's letter X-4691, dated October 12, 1926.) It was voted to be the sense of the conference that representation of Federal reserve banks at conventions within their own district is of the utmost importance, that such attendance at conventions outside of their district is sometimes advisable, and that the determination of such Questions is one which must necessarily be left to the judgment of the officers and directors of each Federal reserve bank, since it is imrossible to la, do:rn any uniform practice. The Secretary read to the Board the action of the Federal 2eserve &gents' Conference to which the same question was referred as follows: "It was thought desirable that Federal reserve banks at their discretion be represented at conventions of the American Bankers Association; that the number of and the officers who should attend should be decIded by the board of directors of each of the Federal reserve banks; that it is important that the present policy of the Federal roserve banks in being represented at state bankers conventions and group meetings be continued." .A.fter discussion, Li.. Hamlin moved approval of the recommendations of the conferences. IIr. Hamlin's motion being put by the Chair, was carried, 7.r. L:iller voting "no". o Advisability of seeking an anenaent to the 1 aw to restore to Federal -"s jurisdiction over suits by and against Federal reserve banks. (Board's etter 7:-4694, dated October 13, 1926.) It was voted to be the sense of the conference that it is advisable to seek to procure an anendment to the law to restore to Federal Courts jurisdiction over suits by and against Federal reserve banks in the form suggested in oaragraph 3 on page 3 of a memorandum submitted to the Board by its General Counsel under 376 11/26/26 -5- date of March 9, 1926. It was also voted that the conferere deems it desirable to seek the enactment of legislation to exempt Federal reserve banks from the process of attachment or garnishment before final judgment in any case, as national banks are now exempt under the terms of the United States Revised Statutes. After discussion, it was voted that the above recommeniations be referred to the Law Committee for report. be 731 igibility of notes of parent corporations representing borrowings to advanced to subsidiaries. (Board's letter X-4692, dated October 13, 1926.) It was voted to recommend to the Federal iieserve I3oa/x1 that the ruling contained in its letter of December 30, 1925 (X-4484) be abrogated and, that in lieu thereof the Board rule substantially as follows: V/here the borrower is a parent corporation having a number of subsidiaries and the parent corporation and. its subsidiaries are in practical effect one single organization and. may with propriety be considered a single borrower, the -ea.rer of such parent corporation, the proceeds of which have been used or are to be used. by the parent corooration or by the subsidiary corporations for an industrial, commercial or agricultural purpose, within the meaning of the Federal :Zeserve and the Board's regalations, may be considered eligible for rediscount if it complies in al 1 ot her res e c ts with the provisions of the law and. the regulations of the Federal Heserve Board. After discussion, it was voted to request the Board's Counsel to prepare for submission to the Board for its consideration and action a fo rma.1 ruling along the lines of the recommendation of the conforeme. non-cash col ., - 1-11-ing of the Federal ileserve Board relative to the handling of dated H-4677, s letter (Board' es. street address "1-4-oction items payable at ter.lber 24, 1926.) It was voted to adopt and. slbmit to the Federal Reserve committee Board as representing the views of the conference a uniformthat report setting fo rth "that in order to preserve interests best ity which is believed to be so essential to the public, the and. of the Federal _Ieserve System, its member banks Septemof letter the Federal 3seserve Beard should. reconsider its of view of point ber 24, 1926, and determine \hether, from the deserve .Cederal all the Federal _ieserve System as a whole, 377 11/26/26 -6-- Banks shall or whether all Federal Reserve. Banks shall not continue to handle for collection items which are payable at street addresses." The Governor called attention to the fact that at the nk:eting on l'Iovember 22nd, the board. voted to reconsider its action of September 23rd in adopting the rulinr: referred to, and that the matter be made special order of business for a meeting of the Board on a date to be fixed by him. He stated that he expected to set the date for the meeting upon the return of 1:r. Janes, and that no ,further action was required at the present time. 2axes on income earned from bankers acceptances purchased for account of I oreL-sn banks It was voted to be the sense of the conference that the :Federal deserve Board should be urged to take appropriate steps to procure an amendment to the law so as to exempt from taxation discount earned on bankers acceptances purchased by foreign corporations, just as interest earned by foreign corporations on deposits in American banks is now exempt. The Secretary called attention to the fact that in accordance with a request of the Federal Advisory Council at its meeting on September 17, 1926, the above matter was taken up by the Board with the Secretary of the Treasury, who advised that the matter had already come to the attention of that De9artment, vtaich would be disposed to recommend that no tax be collected on such income, but that it was not sure there would be any changes in the tax lay at the coming sassion of Congress, but that if there are the matter referred to will have the attention of the Treasury. Upon motion, the Secretary was directed to advise the Secretary of the Governors' Conference of the previous action of the Board. :eport of Sub-Committee of General Committee on Bankers Acceptances. It was voted to renew to the :Federal lIeserve Board the recommendations of the Llarch, 1926, Governors' Conference to the effect that the report submitted at that conference be approved and that the Federal ,ieserve Board be requested 378 11/26/26 -7- to adopt the recommendations contained therein. The Secretary stated that the report referred to was made the subject of a memorandum fmm the Board's General Counsel, dated October 23, 1926, and. that at the meeting on November 19, 1926, the Board had voted to request the views of the Federal Advisory Council, then in session, on the two primary recommendations cont a ined therein. After discussion, it was voted that the memorandum of the Board's Counsel,mentioned by the Secretary, be referred to the Law Committee for report. ..leport of Pension Committee. It was voted by the conference to a-oprove the report of the Committee, dated October 27, 1926, with the understanding that the action recommended therein should be taken in so far as it is practicable. After discussion, action on the above matter was deferred. Correspondence between the Postmaster General and. the Federal _leserve dated October 15th, 22nd and 23rd, on the subject of mail robberies. In accordance with the request of the Board, this corres-pondence was presented to the conference. The Secretary stated that no action by the Board was necessary, as this presentation had been made with the understanding that the 2ostraaster General would be advised of any discussion which took place following the presentation. 2ligibility of directors of ::utual Savings ;3anks to serve as Class B azia 01_ C directors of Federal ::_eserve Banks. It was voted that the conferenee request the Federal Reserve Board to use its influence at the first available opportunity to procure an amendmont to Section IV of the Federal Aeserve Let defining the qualifications of directors of Class B and Class C, by adding to each clause the words "other than a purely mutual savings bank." 379 11/26/26 After discussion, it was voted to refer the above recommendation to the Law Committee. The meeting adjourned. at 12:30 p.m. %