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A meeting of the Federal deserve Board was held in the office of the Federal Reserve Board on Thursdaw, Yovomber 7, 1929 at 12:30 p.m. PiE3ENT: Governor Young Mr. Platt Mr. Hamlin Mx. Miller 1:127. James Mr. Cunningham McClelland, Asst. Secretary The Governor stated that special order of business for the meeting would be consideration of the review of credit and business developments during October, for publication in the next issue of the Federal Reserve Bulletin, which has been revised by the Director of the Division of Research and 3tatistics along lines suggested at the meeting of the Board on November 4th. He stated that copies of the revision have been furnished the individual members of the tr Board. After discussion, upon motion, the review was approved in its revised form, 1.1r. Janes voting "no". The minutes of the meeting of the Federal Reserve Board held an November 6th were then read and approved, as amended. Telegrams dated November 7th from the Chairman of the Federal Reserve Bank of Richmond and November 6th from the Chairman of the Federal Reserve Bank of St. Louis, both advising that their boards of directors at meetings on the dates stated made no changes in the banks' existing schedules of rates of discount and purchase. dithaut objection, noted with approval. 1 Memorandum from Counsel dated November 6th on letter dated November 4th from the Federal Reserve Agent at Boston, advising that LI*. Francis R. Hart, whom the 3oard on October 31st authorized to serve at the same time as director 11/7/29 -2- of the Old Colony National Bank, as director and officer of the Old Colony Trust Company and as director of the American Trust Company, all of Boston, Massachusetts now desires permission to serve also as officer of the Old Colony National Bank; Counsel stating that he knows of no reason why Mr. Hart's request should not be granted and sees no reason for a formal application. Upon motion, service by hr. Hart as director and officer of the Old Colony National Bank, as director and officer of the Old Colony Trust Company and as director of the American Trust Company, all of Boston, was approved. Memorandum from Counsel dated November 5th, with reference to application for surrender and cancellation of 450 shares of stock in the Federal deserve Bank of New York, standing in the name of the Midtown Bank of New York City, which merged, at close of basiness October 21st, into the Prudential Bank of New York City, a nonmember; Counsel stating that, in his opinion, the Midtown Bank may properly be considered to have liquidated within the moonily: of the Federal Reserve Act and the application for cancellation of its Federal Reserve bank stock may properly be approved by the Board, out suggesting that the Federal Reserve Agent be advised that before he pays over the proceeds of the stock to the Agent named in the application, he should obtain a resolution from the ucard of directors of the merged bank authorizing him to do so. Upon motion, cancellation of the stock in question, in accordance with Counsel's suggestion, was approved. Memorandum from Counsel dated November 6th with reference to organization papers of the International American Banking Corporation, proposed to be organized under Section 25 (a) of the Federal deserve Act, which were submitted to the Board in September, 1928; Counsel stating that on October 1, 1923, the Board -3- 11/7/29 addressed a letter to Mr. Julius Spiegel, the principal organizer, requesting information as to the particular character of business proposed for the corporation, and also as to the qualifications and experience of the organizers, and that no reply was received to this letter or to another addressed to Mr. Spiegel on January 21, 1929. In his memorandum, Counsel suggested the desirability of makin-: some disposition of the papers of this proposed corporation and submitted draft of a letter to Mr. Spiegel advising that in the absence of immediate advice to the contrary, the Board will consider that approval of the organization papers of the proposed corporation is no longer desired and they will be filed without action and the matter considered closed. After discussion, upon motion, the letter submitted by Counsel was approved and ordered transmitted. Memorandum dated November 4th from the Director of the Division of Hesearch and Statistics, submitting report of an investigation into certain phases of future contracts on various commodities made at the instance of Mr. James on request of Mr. D. Coker, Director of the Federal Aeserve Bank of Richmond. Upon motion, the report submitted by Dr. Goldenweiser was referred to Mr. James with power to furnish a copy thereof to Mr.,Coker if he deems it advisable. It Was understood that the report would be mimeographed and furnished to the members of the Board for their information. Matter ordered circulated at the meeting of the Board on October 17th, namely, memorandum dated October 17th from the Chief of the Division of Bank Operations submitting further information requested by the Board on October 10th, regarding the report of the Committee on Redemption of Canadian Currency; together with a revision prepared by Mr. Miller of the proposed statement on -4- 11/7/29 the subject to be issued to the press. After discussion, upon motion, it was voted to approve the report of the committee, including a proposed circular letter to member banks but substituting with same amendment, the revision prepared by Mr. Miller for the press statemant recommended by the committee, all of which are quoted below: "LEpoaT OF CO:III:2T :3 ON IEDHLT2TION OF CANADIAN CUARENCY "The Committee appointed to determine the most efficient and economical means of effecting the redemption of Canadian currency begs to transmit herewith its recommendations: (a) That all Federal Reserve Banks offer their facilities to member banks for the collection and conversion of Canadian currency into United States currency at the current rates of exchange, (b) That the Federal Reserve Banks absorb the cost of shipping Canadian currency from the member banks to their respective Federal Reserve Banks but that they deduct an allowance to cover Shipping charges, if any, fram the Federal Reserve Banks to the points of conversion into United States currency, (c) That all Federal Reserve Banks send a circular, similar to the attached draft, to their member banks stating the terms upon which Canadian currency will be received, (d) That the Federal deserve Board and each Federal Reserve Bank and Branch simultaneously give to the press copies of the attached circular announcing terms under which the Federal Reserve Banks and Branches will receive Canadian currency. w:iith respect to the procedure under Which Federal Reserve Banks and their Branches will handle the collection and conversion of Canadian currency, the Committee suggests that the Federal Reserve Banks and Branches Ship Canadian currency direct to the Detroit Branch of the Federal deserve Bank of Chicago for conversion and credit, or make such other disposition thereof as conditions in their districts warrant* The Committee believes that it is important that each Federal deserve Bank employ the most economical means of conversion. The Committee also suggests that Federal Aeserve Banks permit member banks to include Canadian currency in their shipments of United States currency provided both kinds of currency are properly segregated within the package. "The Committee believes that the Federal Reserve Banks should not at this time offer their facilities to m3mber banks for the collection and conversion of Canadian coin. "Your Committee has considered the desirability of a possible arrangement with the Canadian Government or the Canadian banks which would provide for the exchange of United States and Canadian currencies at par. • • , ti 11/7/29 -5- "While in theory much may be said in favor of such a plan, it appears to be inadvisable to endeavor to exchange Canadian and United States currencies at par without making similar arrangements to maintain exchange at narity between the two countries, a subject which ;:our Committee does not have under consideration." "CIRCULAR LETTER "Enclosed herewith is a statement which the Federal Reserve Board and the Federal reserve banks and branches have 'given to the press, relatin7, to the conversion into U. S. funds of Canadian paper currency spent in this country. "In accordance with this statement, you may include Canadian paper currency in your shioments of United States currency provided the two kinds of currency are properly segregated within the package. "Credit for such currency will be given for its face value and when the cost of conversion into United States funds is determined, which should generally average less than one per cent, such cost will be charged to your reserve account." "STATEY7NT FOR THE PRESS "The Federal Reserve Board announces that a plan has been worked out and will be put in operation for handling Canadian currency deposited with Federal reserve banks, at a minimum of the actual collection charges incurred by them. "The discount on Canadian currency brought into the United States by travelers has frequently ranged as high as 10 and sometimes even as high as 20 per cent, at places remote from the border line. This is regarded as excessive and has given rise to a feeling of resentment in Canada, especially as United States currency is generally accepted at par in Canada. "The Federal deserve Board has taken the subject up with the Federal reserve banks and they have agreed to offer their facilities to member banks for the collection and conversion of Canadian paper currency into United States currency at the current rates of exchange. The Federal reserve banks will absorb the cost of shipping Canadian paper currency from the member banks to their respective Federal reserve banks but will deduct an allowance to cover the actual exchange charges, and insurance and shipping charges, if any, from the Federal reserve banks to the points of conversion into United States currency. During the past three years the cost of conversion of Canadian currency into United States funds, including both the exchange and the shipping charges, has averaged less than 1 per cent. "The new method which is to be put into effect by Federal reserve banks for handling Canadian currency in the future, will, however, result in such substantial reductions in the cost of collecting 11/7/29 "this currency as to brine it close to par. The Board feels that if member banks cooperate in this matter by extending a similar service to their customers, Canadian tourists traveling in this country will find American merchants willing to accept Canadian currency at or near par." The Lssistant Secretary then reported that, in accordance with the instructions of the Board yesterday, he communicated with President Jonaldson of the Commercial National Bank of ,ashinuton, who advised him that his bank does not wish to submit any further data on the (juestion of classification of certain derosits as 6-overnment denosits, in view of which fact there is no reason why the hoard Should lorr delay transmitting to the Jecretar:7 of the 2reasury the letter submitted with Counsel's memorandum of November 4th, requestin-; the views of the Treasury on the question whether certain derosits of member banks in the Richmond and San "francisco districts mly prorerly be classified as 'deposits of public moneys by the United States in designated denositaries" within the meaning of the Liberty Bond Icts exempting such deposits from reserve requirements. Upon motion, the letter to the Secretary of the Treasury, submitted with Counsel's memorandum, was approved and ordered transmitted. Letter dated November 6th from the Secretary-Treasurer of the South Orange Trust Company, South Orange, N. J., whose application for membership in the System was approved by the ,oard on October 28th, subject to the usual conditions of membership set out in .;:iegulation H; the letter from the South Orange Trust Company stating that the directors of that bank approve and accept the conditions of membership imposed by the board, provided they are correct in their interpretation that the third condition - "Except after applying for and receiving the p3nnission of the federal deserve Board, you shall not acquire an interest in -7- 11/7/29 any other bank or trust com,any, through the purchase of stock in such other bank and trust company" - refers only to purchases made with the intent of obtaining cyntrol of such other bank or trust company and would not affect • their institution in merely buying such shares as an InvestrIent without any thou:ht of enueavoring to secure controlling ownership. Upon motion, the letter was referred to Counsel for preparation of a reply. The Governor then advised the Board that in endeavoring to revise the proposed letter to all 17edera1 eserve banks regarding the regulation adopted by the Board on November 5th covering open market purchases of Government securities by the Federal Reserve banks, he consulted the Board's Counsel who advises him that after further consideration he is of the opinion that there is considerable doubt of the legality of the regulation adopted by the Board. The Governor discussed with the nembers other legal forms of a regulation. At the conclusion of the discussion, he stated that he would endeavor to work out another form of regulation along lines discussed and submit it to the Board later. RETS OF STANDING CO=ITTEES: Dated, November 5th, Recommending action on an application for admission of a state bank, subject to the conditions stated in the individual reports attached to the application, as set forth in the Auxiliary Minute Book of this date. Recommendation approved. The meeting adjaurn9d at 1:30 p.m. Approved: PI?filf-,A Governprw Assistant Secretary.
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