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Aineetin of the Federal Reserve Board was held in the office of the Federal Reserve Board on Tuesday, November 26, 1929 at 11:15 a.m. PRE33NT: Governor Youn Mr. Platt Yr. Hamlin Mr. Miller Mr. Janes Yr. Cunningham Mr. :cOlelland, Asst. Secretary The minutes of the meetings or Federal Reserve Board held on i:ovember 22nd were read and approved. The minutes of the meeting of the Federal Reserve 3oard held on :ovember 25th were read and approved, as amended. Latter approved on initials on i:ovember 23rd, namely, application of the Baltimore Trust Company, Baltimore, on behalf of the Baltimore Trust Company (new organization),to be formed by consolidation of. the present '3altimore Trust Com:any and the Central Trust Comnany of Baltimore, a nonm.2mber, for membership in the Federal Reserve System and for 6300 shares of stock in the Federal Reserve Bank of :iichmond, effective if and when the new '.altimore Trust Company is authorized to commence business and subject to the reu1ar conditions of membership set out in Regulation H, series of 1926,and the following special conditions: "(1) That the new Baltimore Trust Company, Baltimore, LA., shall, at the first meeting of its board of directors, ratify the action taken in its behalf by the present Baltimore Trust Company in applying for stock in the Federal Reserve _Bank of _iichmond, and shall pass a resolution accepting the conditions of membership imposed by the Federal Reserve Board. "(2) That, at the time the new 'Ialtimore Trust Company is authorized to commence business, its proposed capital of .6,250,000 and surplus of ,4,250,000 shall be fully paid kn." Upon motion, the arroliction was formally approved. 835 .11/26/29 -2- Matter approved on initials on November 25th, namely, apnlication of the Security National Bank and Trust Company of Red Wing, :innes ta, for permission to e:-,ercise - eneral fiduciary powers, effective if and whela it is authorized. by the Comptroller of the Currency to co -mance business. Formally approved. Telegram dated 1.ovemoer ,2ud from the Jecretary of the Federal jeserve Bank of _inneapolis and letter dated November 22nd from the Chairman of the Federal deserve Bank of Dallas, both advisinr; 02 the establishment on that date of the following schedule of rates for purchases of bankers acceptances: 1 to 120 days 121 to 180 days Repurchase 4 1/2/0 4 Without objection, noted with approval. Letter dated November 22nd from the Secretary of the Federal Reserve Bank of Kansas City, advising of the establishment on that date of.the following schedule of rates for purchases of bankers acceptances: 1 to 120 days days 121 to Without objection, note..i with approval. Letter dated November 20th from the Chairman of the Federal Reserve Bank Of Boston, confirming previous advice of the action Of the ooard of directors of that bank on Norember 20th LI voting to establish a rediscount rate of 4 1/2,, and aavisinc7 of discussion which preceded the action of the directors. Noted. liemorandum dated November 23rd from the Chief of the Division of Bank r. 136 11/26/29 -, j- Operations, transmitting the resignation of Liss Felipa McKey as comptometer Operator in the Division, effective at the close of business Fovember 50th, and recommending the appointment of Miss Evelyn Bryan to succeed her at a salary of :,A440 per annum, effective on or about December 1st. Upon motion, the resimlation was accepted and the appointment was approved. The Assistant Secretary nresented an order issued by the Secretary of the Treasury under date of November 2.5rd that all employees of the Treasury Department, whose services can be spared, be excused from duty at 1:00 o'clock on Wednesday, November 27th. Upon motion, it was voted to anprove the same arrangement for the Board's staff. • Memorandum dated November 22nd from the atief of the Division of sank Operations, transmitting statement of e.,:nen.litures by the Federal Reserve banrs for educational and. welfare work, etc. the month of October and the ten months ending October 31st. OrJeped circulated. Letter dated November 25th from the iederal _eserve 2Yrent at Richmond, reporting,in acgordance with Section 17 of Regulation B,reserve deficiencies durinp; six conxecutive months by the ,Jarolina National Bank of Spartanburg, S. C.; the letter stating that the situation has been receiving the continuous attention of the -Federal Reserve bank and the Chief National Bank Examiner. and recommending that the Board tae no action beyond forwardin-: the renort to the Comptroller of the Jurrency. loted, with anproval. Memoranda dated November 26th from the OIilüf ]xaminer, submitting reports , —4— 11/26/29 of examinationsof the Federal Jeserve Bank of 3oston, mde as at the close of business ,Tanuary o, 1929 and the Federal deserve 3:.zik- of ichrioncl. and its branches as at the close of business January 17, 1929. Upon motion, the reports were ordered. referred to the Committee on Examinations and. the appropriate District Committees. .deport of Executive Committee on memorandum dated November 22nd from ti Oomptroller of the Currency, recommending approval of an application of the First National Bank of Clifton, Texas, for permission to reduce Its capital stock from 1140,000 to 30,000; the Board's Committee also recommending approval. Approved. Report of Executive Committee on memorandizi date,d1:ovember 13th from the Com-otronor of the Currency, recom:.andin7, approval of an application of the First National Bank of Killeen, Texas, for permission to reduce its capital : from •;ii50,000 to ,,;25,000 on condition: (1) That assets listed, aggregating stoc:, ,,?28,6u0.4-1, be taken out of the bank at the time of the reduction; (2) That any assets eliminated remain the Tyroperty of the bank; (3) That each parcel of re 1 estate be carried on the books as an asset of the bank at a reasonable valaation,which under the circumstances, might be very conserlative; and (4) That if any money is borrowed on "other real :,,state", removed f2om the bank, it be done in such a .:ay as not to involve the bank in liability. After discussion, upon recommendation of the Executive Committee, the 31)1)1 icat ion .was approved subject to the conditions suggested by the Comptroller. deport of Executive Committee on memorandum dated 1Tovember 13th from the Com troller of the Currency, recorenend.ine: reconsideration by the Board of its 11/26/29 action of June 10, 1929 in approvin National Bank, .lest Union, an anplication of the Fayette County for p3rnission to reduce its capital stock from y100,000 to y50,00 on coniition that no money be returned to the shareholders and that assets in the amount of .86,000 be eliminated from the bank; the Comptroller now recommending that the Board approve the bank's application on condition that assets amounting to •6,1,930.77, including the book value of all other real estate owned, all losses and doubtful assets and some slow loans, be removed from the bank. After discussion, upon recommendation of the Executive Committee, the Board's action of June 10, 1929 was reconsidered and the application was approved subject to the conditions now suP:p:ested by the Comptroller. .demorandum dated 1,ovember 25th irom Counsel, recommendinr- that the Board Obtain the views of the Treasury Denartment on a question raised by the Federal deserve Bank of Atlanta whether Stone :Tountain Lemorial coins are lawful ):.oney of the United States within the meaninr: of Section 16 of the Federal Reserve Act requiring Federal .deserve banks to maintain reserves in gold or lawful money against their deposit liabilities. Upon motion, a letter to the Secretary of the Treasury, submitted with Counsel's memorandum, was annroved. ._..emorandum from Counsel dated Eovember 16th, submitting draft of letter to the Attorney k;eneral of the United States, regarding a recent opinion of the United States District Court for the iestern District of South Carolina that the provisions of Section 22 (a) of the Federal deserve Act, forbidding any member bank to make a loan or grant any gratuity to a Bank :xaminer and a _39 forbidding any Bank Examiner to accept any loan or gratuity from any bank examined by him, are not applicable to State Bank Examiners; the Department Of Justice having transmitted the opinion to the Board öith advice that it has been considered very carefully on the question whether an appeal should be taken to the United States Supreme Court and that the Solicitor General regards the Government's case as not strong enouoh for that purpose. The letter submitted by Counsel stated that if this means the particular case Is considered too weak to be made a test case, the Board has no disposition to question the judgment of the Department of Justice, but if it means that the Department is inclined to accept the decision as establishing a correct Interpretation of the law, the Board would appreciate being advised of the fact in order that it may consider the advisability of recommending to Congress the enactment of an amendment eliminating any doubt as to the applicability of the provisions of Section 22 of the Federal Reserve Act to State Bank Examiners. After discussion, upon motion, the letter to the Attorney General, submitted by Counsel, was approved, Governor Young voting "no". nemorandum from Counsel dated November 12th, recommending publication in the next issue of the Federal Reserve Bulletin of (1) the Board's recent rulin3 permitting the purchaser of goods under bankers acceptance credits Covering domestic shipments to draw bills having a maturity consistent with the usual creiit time prevailing in the relative trade; (2) notice of the amendments to Regulation "3" which have been adopted by the Board effective January 1, 1930; and (3) the Board's recent ruling as to the riht of National 11/26/29 -7- banks to invest trust funds in a revolving pool of real estate mortgages. The Assistant Secretary reported that inasmuch as the ruling last referred to was made at the request of the Comptroller of the Currency, the matter of its publication was taken up with him and as he has serious doubt as to the advisability of its publication in the form proposed, he requests that it not be included in the next issue of the Bulletin in order that he may have further time to consider it. The Assistant Secretary also called attention to the fact that at least one change in the amendments to Regulation J has been suggested to the Board, in view of which fact it might be desirable to postpone any announcement of the amendments until they are definitely in final form. After discussion, upon motion, inclusion in the Bulletin of a statement regarding the Board's ruling on bankers acceptances was approved, but publication of the other matters was ordered postponed. The Governor then presented a memorandum dated November 23rd from the Chief of the Division of Bank Operations, submitting a comparison of brokers loans made by New York City weekly reporting member banks since the Board began publishing brokers loan figures. Ordered circulated. The Governor then presented as special order of business a revision prepared by Mr. Cunningham of the proposed letter to all Federal Reserve banks on the subject of special rates on commodity paper, submitted by him at the meeting on August 10, 1929. The Governor advised the Board of question in his mind as to the desirability of discriminating, at this time, in favor of agricultural and livestock paper as against other forms of business paper, and submitted draft Of a proposed letter to all banks advising that the Board is prepared to approve Preferential rates on all forms of secured commercial paper eligible for redisCount. A general discussion ensued as to the advisability of the establishment _8_ 11/26/29 of preferential rates and the classes of raper to which they should be applicable if estaulished. At the conclusion of the discussion, the Governor and Li'. Cunningham, as a srecial committee, were requested to prepare a further revision of the proposed letter and submit it to the Board at a later meeting. In accordance with the directions of the Board at the meeting yesterday, the Governor submitted draft of a letter to the Federal eserve Agent at San Fran- cisco, regarding the request made of him by the United States Attorney at Los Angeles, for an expression of opinion as to whether at this late date it would be advisable for the Department of Justice to prosecute in connection with allaCed irregularities in certain transactions between the former Pacific Southwest Trust and Savings Bank of Los Angeles and S. C. Lewis and Julian Petroleum Corporation; the letter sating that the Board feels it should not express an Opinion in the matter and suggesting that the Federal Reserve Agent advise the United States Attorney that the System has no information regarding the alleged irregularities other than that which has been furnished to him, and feels that he is in better position than it is to determine the advisability of prosecution. Upon motion, the letter submitted by the Governor was amended and approved. the GovThe Governor then submitted a telegram dated November 22nd from ernor of the Federal Reserve Bank of San Francisco, referring to the ruling of of the Board that the liability incurred by a member bank through the issuance its cashier's check for Federal Reserve exchanr.e purchased should be treated as Money borrowed; the telegram stating that in some member banks transactions arisentry and suR*illg out of the purchase of Federal Reserve funds are shown by book 11/26/29 -9_ gesting that the Board's ruling Should be amplified. The Governor suggested that he be authorized, after consultation with the Comntroller's office, to secure the reaction of the Federal Reserve banks to a ruling that regardless Of how Federal Reserve funds are purchased, by cashier's check, by book entry or otherwise, they Should be treated as obligations for borrowed money and reported as such, Upon motion, the Governor's suggestion was approved. The Governor then submitted the matter referred to him at the meeting on November 22nd, namely, memorandum from Counsel dated November 13th regarding a question raised by the Federal Reserve Bank of Chicago that the recently adopted amendment to Paragraph 6 of Section V of Regulation J affords no Protection to Federal Reserve banks against claims arising out of the failure Of a bank other than the drawee to which checks have been for::arded by the Federal Reserve bank for collection. He stated that, in his opinion, the par- agraph in question should be further amended, but suggested that copies of the letter addressed to the Board by the Deputy Governor of tip Chicago bank and Federal Reserve Counsel's memorandum be forwarded to the Governors of all banks for an expression of their views before any action is taken. Upon motion, the recommendation of the Governor was approved. Letter dated November 22nd from the Governor of the Federal Reserve as to the Bank of New York, advising of an inquiry made by the Bank of Latvia open an account *terms upon which the Federal Reserve bank would be willing to the °for them; the letter stating that the Bank of Latvia has been advised of substance of the terms on which the Federal Reserve bank conducts relations 11/26/29 11 -10- With foreign banks of issue and when formal request for the opening of an account is received, it will be submitted to the directors of the New York bank and to the Board for approval. Noted. Letter dated November 22nd from the Governor of the Federal Reserve Bank of New York, advising that negotiations have just been completed with the Bank of England for the liquidation of the special sterling bill account amounting to aPProximately L3,300,000 which the Federal Reserve bank has been maintaining in London for the past few months. Noted. Memoranda dated November 21st and November 23rd from Counsel, regarding aa( )Pinion against the Federal Reserve Bank of Richmond rendered recently by the United States District Court for the Eastern District of Virginia in the c/e(ee of Vann (receiver for the First National Bank of St. George) v. Federal Reserve Bank of Richmond; Counsel expressing the opinion that it would be ad'llsable for the Federal Reserve bank to settle the case out of court rather than appeal it, and submitting letters on the subject exchanged with Counsel tor the Richmond bank who advises that he can not undertake to determine the (111sstion himself and is submitting it to the Governor of the bank for consider- After discussion, upon motion, Counsel's memoranda were referred to the Governor with power. Memorandum from Counsel dated November 25th, submitting draft of a reply the signature of the Assistant Secretary to a letter addressed to the Iteeident by Mr. A. Y. Fischer of Cincinnati, and referred to the Board through the °ffice of the Secretary of the Treasury, inquiring why municipal bonds are II" eligible for discount at Federal Reserve banks; the proposed reply ad- ,.4 11/26/29 -11- vising of the eligibility requirements of the Federal deserve Act and commenting upon a siu:Testion that in tryin7 to place business an a piper plane consilelation should. ba iven to municipal improvements as a steady source Of production. After discussion, upon notion, it was voted to address a memorandum to the Secretary of the Treasury furnishing information as to the eligibility, requirements of the Federal Reserve Act for use in any reply which he may care to. make to the letter addressed to the President. 2EPOilT5 OF STANDING COMLIITTiMS: ilecommending changes in stock at Federal _ioserve banks as set forth in the Auxiliary Minute 3ook of this date. Aecommendations approved. Dated, November 15th, Recommending action on applic-tions for Ziduciary powers 22nd, as set forth in the Auxiliary hinute Book of this date. Recommendations approved. Dated, November 25th, Aecommending approval of the application of Mr. E. C. Aomfh for permission to serve at the same time as director and officer of the lAami Beach First National Bank of Miami Beach, Fla., as director of the hest Palm Beach Atlantic National Bank of :fest Palm Beach, Fla., and as director and officer of the First National Bank of Miami, Fla. Approved. Dated, November 25th, Zecammending aloproval of the application of Girdler for permission to serve at the same tine as director of the Union Trust Company of Cleveland, Ohio, as director of the Equitable Trust Company of New York, _T. Y., and as director of the Union Nation.al Bank of Pittsburgh, Pa. Aoproved. Dated, 1:ovember 22nd, 25th, Che meetinr: adjourned at 1:00 o'clock. diVNge Assistant 3,..cretar7„ Approved:
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